International Benefits

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These executive summaries were compiled from EMPLOYEE BENEFITS INFOSOURCE database, a source for information on employee benefits and human resources.

Benefit Plan Risk: A Global Perspective.
Berk, Adam; Simmons, Terry; Benefits Magazine; v49 no3 pp 16-21 Mar 2012; journal article

Availability : International Foundation of Employee Benefit Plans
Abstract : Multinational organizations' benefit plans face unpredictable risks from rising costs, volatile investments and participant longevity. Five steps significantly help in handling these risks, starting with an understanding of the employees needed to achieve strategic goals and how benefits support employee recruitment, retention and engagement. Based on this understanding of business context, organizations can define and design a global benefits strategy. This must be done in accordance with local market practices and regulations. Strong governance is key, with a cross-functional governance committee having global authority for design and implementation. Communications must address all stakeholders, providing necessary information to internal departments and administrators as well as to employees.
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Link To Full Article
QROPS: The New Normal?
Ainsworth, Stephen; Smith, Debra; Benefits & Compensation International; v41 no7 pp 17-21 Mar 2012; journal article

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Abstract : A Qualified Recognised Overseas Pension Scheme (QROPS) is a pension plan set up outside the United Kingdom to which benefits from an internal U.K. plan may be transferred without adverse tax consequences. The arrangement resulted from the 2003 EU Pensions Directive mandating freedom to move pension assets and became part of an effort toward pension simplification in 2006. A third country QROPS market has developed to receive assets. HRMC, the British revenue and customs agency, proposed QROPS amendments in late 2011 that would revise the conditions QROPS must meet and strengthening information and reporting requirements. A revised definition affects New Zealand QROPS, and tax exemptions available to nonresidents of QROPS countries must also be available in their home country, affecting Guernsey and the Isle of Man. QROPS members will have to sign a declaration that they understand tax liabilities.
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The Employee Benefits Landscape in the Baltic States.
Devoland, Nick; Vyas, Sunil; Benefits & Compensation International; v41 no7 pp 3-8 Mar 2012; journal article

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Abstract : After gaining independence from the USSR in 1991, the Baltic countries of Estonia, Latvia and Lithuania were making strong economic progress until the global recession of 2008 hit. Though growth resumed in 2011, unemployment and a shortage of skilled labor are nagging problems in each country, often resulting in emigration. Few employers have resources to pay more than minimum wage, and some resort to handing out undeclared wage supplements. Each country undertook a radical restructuring of the three-pillar state welfare system, but heavy taxes are a serious disincentive for employers to provide any unmandated additional benefits. Group private medical insurance has grown, especially in Latvia. This and other forms of insurance are fairly common among foreign enterprises but rare with national employers. As the global economy improves, the range of benefits and interest in offering them is expected to rise slowly.
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The Implications of the Arab Spring for Compensation and Benefits.
D'Cruz, Warren; Benefits & Compensation International; v41 no7 pp 12-13 Mar 2012; journal article

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Abstract : In the wake of political turmoil and unrest in many Arab countries in the spring of 2011, governments have announced increases in pay and benefits for national workers, mostly those in the public sector. Increases include Oman's 43 percent hike in minimum wage and 100 percent pension increase, a 100 percent increase in federal government workers' salaries in Egypt and in the United Arab Emirates and a 60 percent increase in Qatar, which spread from government employees to other sectors. These pay increases directly affect each country's economy, build inflationary pressure and create an nearly impossible competitive labor market for the private sector. Employees are seeking enhanced benefits, and multinational firms are contemplating leaving. Employers in the Middle East are left to develop realistic compensation budgets and a culture that rewards performance.
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The Reward Balancing Act.
Hatton-Gore, Tony; Benefits & Compensation International; v41 no7 pp 10-11 Mar 2012; journal article

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Abstract : Managing compensation is a challenge involving balancing competing forces on several dimensions. The manager must be attuned to the pull between strategic thinking and operational focus, recognizing the need to build relationships with diverse stakeholders and build various business interests while working with others less aware of the details of compensation management. One must strive to balance serving global principles with market flexibility, keeping an eye on the impact of the local environment on benefits and retirement plans. Some balance point must be found between rewarding the whole organization or concentrating on those at the top. Last, those who are thought leaders and line workers and managers all influence the success of the organization and deserve recognition.
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The Tin Can Buried in the Backyard: How Revised FBAR and New FATCA Information Reporting Rules May Stage a Comeback.
Baker, Mary Burke; Benefits Law Journal; v25 no1 pp 5-23 Spring 2012; journal article

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Abstract : Holding foreign bank accounts is more sophisticated than burying cash in the backyard but involves considerable reporting requirements and potential penalties. The Report of Foreign Bank and Financial Accounts (FBAR) requires anyone with signature or other authority over employees' foreign financial accounts to report holdings annually to the IRS and the Financial Crimes Enforcement Network. Bank accounts, securities accounts, insurance or annuity policies and investment accounts are reportable. Swiss bank accounts, especially with UBS, are under scrutiny by the IRS and Justice Department, though there is a voluntary disclosure initiative. The Foreign Account Tax Compliance Act (FATCA) has similar reporting requirements and enables third parties to identify Americans holding foreign accounts. Though FBAR and FATCA are complex, both involve serious penalties for noncompliance.
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Reporting: Government Unveils Sweeping Guidance on FATCA Reporting, Wins Practitioner Praise.
Bennett, Allison; BNA's Pension & Benefits Reporter; v39 p 293 Feb 14, 2012; journal article

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Abstract : Responding to voluminous comments, the Treasury Department proposed comprehensive rules for implementing the Foreign Account Tax Compliance Act (FATCA). The rules as proposed simplify the demands on foreign banks and foreign retirement plan reporting American-owned accounts to the IRS. Foreign financial institutions must meet several qualifications to be deemed compliant and benefit from the rule revision. The rules retain the objectives of transparency and proper taxation, but raise the de minimis threshold, expand the categories of institutions deemed compliant and give institutions more time to comply with the requirement for detailed information starting in 2017.
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Pensions: Pension Plan Funding Declined Globally in 2011 Despite Record Assets, Study Says.
Brandolph, David B.; Daily Labor Report; no24 p A8 Feb 6, 2012; journal article

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Abstract : A Towers Watson study showed global institutional pension fund assets in 12 countries and Hong Kong rose 3.9 percent in 2011 to a record high. However, a model index of assets to liabilities dropped 4.3 percent, continuing a decline noted when the index started in 1998. The ratio of global assets to liabilities hit a high in 1999. In 2011 it represented 72 percent of global gross domestic product, down from 76 percent in 2010 but better than 2008's 61 percent. Though assets are rising, liabilities are rising at a faster pace. Though defined contribution (DC) pension plans are growing relative to traditional plans, they are also struggling, the report noted, as awareness grows that the plans will not meet participants' needs. DC plan sponsors must attend to risk exposure in default investments, target date funds' underlying strategies and overall cost reduction.
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International Labor: OECD Urges Asia to Overhaul Pensions to Prepare for Rapidly Aging Populations.
Mitchell, Rick; Daily Labor Report; no19 p A7 Jan 30, 2012; journal article

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Abstract : In a January 2011 report, the Organization for Economic Cooperation and Development (OECD) forecasts rapid population aging by 2030, necessitating significant change in pension plans of Asia Pacific nations. Early retirement is a serious trouble spot, with men's retirement age in five of eight non-OECD Asian countries analyzed being 55 years, compared with 65 years for most OECD countries. The average coverage for OECD countries is 63 percent, in contrast with coverage rates of four percent in Pakistan, six percent in India, 17 percent in China and 56 percent in Hong Kong. The steady state contribution rate is not sustainable for the long-term, costing up to 40 percent of an average Chinese worker's earnings to provide the targeted income replacement rate.
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A Global View.
Ward, Judy; PLANSPONSOR; v19 no11 pp 23-26 Jan 2012; journal article

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Abstract : Considering retirement system adequacy, sustainability and integrity, the United States earns a C, according to a Mercer global review, with none of 16 countries evaluated earning an A. To improve, Mercer recommends that minimum pensions for low income individuals be raised, ideally to 25 percent or 30 percent, rather than the actual 18 percent. Mandatory contributions should be adjusted to improve income replacement for middle income earners. Vesting requirements should be reduced with benefits indexed to inflation. Access to funds should be limited before retirement to avoid leakage, and at least part of retirement income should be reserved for distribution as an annuity rather than completely as a lump sum. Comparisons are drawn to pension arrangements and practices in other countries.
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Coming to America.
Patton, Carol; Human Resource Executive; v26 no1 pp 22, 26, 28-29 Jan-Feb 2012; journal article

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Abstract : When companies bring global expatriates to the U.S., family matters can determine the success of the assignment. Offering some kind of spouse assistance program is common to ease the transition, most often including language tuition, cultural orientation, spouse job search assistance and work permit help. Some firms offer help with demands of daily living such as driving lessons and school tuition. A global Mercer survey found 18 percent provide a family allowance averaging $6,088 and 62 percent set an age limit on support for children. Nearly four in ten firms have expanded their definitions to include long-term partners, including 61 percent of European companies. The World Bank sponsors intranet sites for social networking among its global online communities, and GlaxoSmithKline's International Service Center features a volunteer buddy system to support spouses. The period after the initial transfer and settling in can be most problematic, requiring more support.
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ERISA Pension Liability: The Risk of Foreign Affiliates' Exposure to U.S. Pension Liabilities.
Najjar, Alexander E.; Journal of Pension Benefits; v19 no2 pp 51-65 Winter 2012; journal article

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Abstract : Through global investing, many foreign companies have an investment stake in U.S. firms, exposing the offshore entities to the risk of ERISA pension liability. U.S. statutes and regulations permit defined benefit plans and/or the PBGC to seek funding from solvent foreign affiliates that are part of a controlled group. Though the PBGC has been willing to pursue claims in foreign courts, it has met limited success. Numerous hurdles include principles of international law, such as tax treaties, the revenue rule and comity, and rules of statutory construction. The PBGC's best hope may be to act early and proactively when a plan shows signs of funding risk. Foreign affiliates should also carry out due diligence efforts to identify the potential risk of being entwined in a controlled group or appearing to be an alter ego. The relationship between entities must be carefully structured to avoid being pulled into responsibility for U.S. pension liabilities.
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Evacuation and Repatriation Cover in International Private Medical Insurance.
Sucher, Ulrike; Benefits & Compensation International; v41 no6 pp 16-18 Jan-Feb 2012; journal article

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Abstract : The 21st century's armed conflicts and natural disasters have led to an increase in the need for medical evacuation coverage, particularly for those in remote areas or trouble spots. One key factor is the selection of an appropriate form of transport. There is risk involved in the process, especially if using a third-party service provider, and steps must be taken to minimize this risk. Most evacuations are from countries in Africa and Asia with less developed medical services, and the reasons for evacuation are about evenly split between clinical patients and accident victims.
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Health Care Bargains Abroad.
Salter, Jeffery; Kiplinger's Personal Finance; v66 no1 pp 65-68 Jan 2012; journal article

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Abstract : In 2012, consumer advisory service Patients Beyond Borders expects over half a million U.S. residents will get medical care abroad. The five most popular overseas procedures are cosmetic surgery, dentistry, orthopedics, reproductive services and weight loss surgery. Costs can be lower due to lower costs of living in some countries, efficiency can be greater due to the lack of generalists, and some experimental and potentially dangerous procedures are available outside the U.S only. Those considering medical travel should look at Josef Woodman's book Patients Beyond Borders, and they may want to use a broker, although the industry is unregulated so they must be cautious.
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International HR Best Practice Tip: Employment Termination and Reductions-in-Force Outside the United States.
Dowling, Donald C., Jr.; International HR Journal; v21 no1 pp 3-12 Winter 2012; journal article

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Abstract : Inevitably some multinational employers will have to dismiss employees in 2012. The U.S. is the only major employment-at-will jurisdiction, so firing employees in other countries is usually stricter and more complex. Employers must understand the costs of dismissing individuals in each jurisdiction they operate in, first distinguishing a good cause firing from a no cause firing in the jurisdiction. Most jurisdictions recognize only egregious misconduct as good cause, making most terminations no cause. Most disputes are settled out of court, requiring familiarity with settlement and release laws. Reductions in force are rarer and more expensive in other countries than the U.S., and U.S. approaches to them will not work.
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Making Wellness Work in Latin America.
Boyle, Shannon; Benefits & Compensation International; v41 no6 pp 32-35 Jan-Feb 2012; journal article

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Abstract : Firms operating in Latin America are realizing that wellness programs within a global corporate strategy can help them gain recognition as an employer of choice. The top drivers are health care cost reduction and higher productivity. Programs must be sensitive to local demographics and location, segment the population by health needs and design incentives and communications around identified priorities. Metrics must be defined, tracked and reported, though data availability is a challenge. The visible involvement of leadership is especially powerful in Latin American countries, and extended families must be included with employees to maximize results. Firms that set broad expectations but empower local operations to implement their own wellness ideas are enjoying the greatest success.
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Pension Fund Investment: Be Not Afraid of Complexity.
Lace, Crispin; Benefits & Compensation International; v41 no6 pp 41-44 Jan-Feb 2012; journal article

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Abstract : Common themes emerge as best practices in global pension investing. The importance of investment governance is paramount, with the recognition that management is only one aspect of governance and several issues can easily undermine good governance. Global pension investing draws on an increasingly complex yet innovative toolkit. Liability driven investing involves strategies including alternatives and derivatives. While the complexity can prompt aversion, it should be viewed as part of a full set of investment opportunities to be exploited within a sound decision making framework. Regulation will likely have a broader impact with efforts to reduce derivative instruments and the European Union's Solvency II Directive concerning insurers' capital holdings. Wise pension plan fiduciaries realize that investment risk is more than easily quantifiable, conventional metrics.
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Retirement: Pension Planning in a Diverse World.
Southern, Shaun; Lawrence, Stewart D.; Langner, Jaco; Benefits & Compensation International; v41 no6 pp 36-38, 40 Jan-Feb 2012; journal article

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Abstract : A standard approach to pensions across a multinational firm is virtually impossible. Instead, broad policies can be specified, adjusted for local requirements. The relative emphasis on cash or pension depends on the priority of employee attraction, encouraged by cash, or retention, fueled by tenure rewards. International mobility for expatriates presents a special set of challenges for global pension management. Rising longevity makes the need to generate sufficient income over decades more challenging, especially in a volatile economy. The uncertainty is leading to longer work terms and a more age-diverse workforce. Some organizations' pension plans aim to replace a set percentage of preretirement income and must determine how to use a defined benefit or defined contribution approach and how benefits fit into countries' social security schemes. In all cases, clear communication to employees about benefits and their own responsibilities for long-term financial planning is crucial.
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Reward: Inevitably a Move to Centralization?
Cullen, Scott; Benefits & Compensation International; v41 no6 pp 23-27 Jan-Feb 2012; journal article

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Abstract : The trend toward increased globalization makes rewards more efficient, reinforces organizational culture and improves talent mobility, but the most effective centralized rewards programs also have the flexibility to deal with the needs of local markets. A fast growing economy has differing challenges from a slower one. Cultures, particularly power distance and the level of collectivism, differ between countries. Local taxation, laws and national union agreements also vary. Organizations typically use a partially centralized approach such as the global talent pool, in which only top talent is heavily globalized, or the reward philosophy alignment model, in which basic parameters are set globally and implementation is done locally.
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Risk Shifts.
Keefe, John; PLANSPONSOR; v19 no11 pp 48-49 Jan 2012; journal article

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Abstract : The decline of defined benefit pension plans continues, but many plan sponsors are left with high residual risk, still affected by a volatile economy. The option of having an insurance company establish annuities for all participants is expensive for underfunded plans. But moving portions of the plan's liabilities is both feasible and economical. An alternative to annuitization is lump-sum payments. Though they will worsen funding levels for a period, they offer other benefits and will become more advantageous in 2012 because of valuation changes from the Pension Protection Act. The risk transfer market is well established in the United Kingdom but small in the U.S. Pension buy-ins are an effective approach to liability driven investing, providing assurance the plan will cover obligations and freeing assets for other investments.
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Round-Up of UK Employment Law Developments: January-September 2011.
Henderson, Anna; International HR Journal; v21 no1 pp 13-23 Winter 2012; journal article

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Abstract : In April 2011, United Kingdom employers were no longer allowed to compulsory retire employees at age 65. Additional paternity leave rights came into force for parents due or adopting in April 2011. The U.K. implemented a European Union directive giving more rights to temporary agency workers effective October 1, 2011. The first three quarters of 2011 also saw significant case law developments for the Transfer of Undertakings (Protection of Employment) Regulations 2006. Rulings of note also occurred on collective redundancies, expatriate workers, philosophical belief discrimination, the right to legal representation at disciplinary meetings and the carryover of holiday entitlement. In 2011 it was announced that the period to claim unfair dismissal will increase from one year to two in 2012 and that fees would be charged for employment tribunal claims.
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What Reward, Recognition Program Awards Are the Most Valuable?
HRFocus; v89 no1 pp S1-S4 Jan 2012; journal article

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Abstract : The importance of employee recognition was highlighted by a global Towers Watson survey that revealed high employee engagement correlates with 19 percent higher operating income and 28 percent higher earnings per share for organizations. Key factors in employee recognition are senior management support, clear goals and objectives, consistent employee promotion and communications, and incentives and rewards suited to employee groups. Most recognition programs are based on length of service and achievement. Performance awards must be fair and objective with specific qualification guidelines. Other recognition possibilities include parties, bonuses and gifts to boost individual and group morale. Recognition of five to eight percent of a workforce is a tipping point for a meaningful program.
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Why UK Employers Are Abandoning Defined Benefit Pension Plans.
Emptage, David; Benefits & Compensation International; v41 no6 pp 3-4, 6, 8, 10-15 Jan-Feb 2012; journal article

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Abstract : A number of factors have an impact on the prevalence of defined benefit (DB) plans in the U.K. Accounting rules and economic conditions that put focus on pension funding make DB plans less sustainable. As longevity increases, the cost and volatility of DB plans increase. Reductions in interest rates pose difficulties for all pensions. Automatic enrollment for qualified participants, scheduled for phase in beginning in October 2012, may lead to higher pension contributions but will definitely lead to higher administrative costs. The impact of European Union rules on U.K. pensions may be significant, but the U.K. may break away from the EU on this issue.
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A Transatlantic Crisis for Pension Plans: Italy, Ireland, and Greece Are Just the Beginning.
Kraw, George M.; BNA's Pension & Benefits Reporter; v38 p 2274 Dec 6, 2011; journal article

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Abstract : The 2008 financial crisis worsened existing demographic and economic trends to create pension crises in the U.S. and Europe. Governments in rich countries faced with bailing out financially weaker countries like Greece are scrutinizing the social programs of those countries. Artificially low interest rates and continued unemployment have led to disastrous conditions in these countries, and countries like Ireland are using public pension funds to fund their bailouts. Even economically strong countries like Italy are implementing austerity measures. To fix these pension systems, it must be recognized that some retirement promises cannot be kept. Governments must save benefits for the largest number without making their economies worse, and there must be national retirement policies for the U.S. and for the entire European Union.
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Relocation Policies More About Speed, Dexterity.
McCarney, Tim; Canadian HR Reporter; v24 no21 p 20 Dec 5, 2011; journal article

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Abstract : Corporate relocation policies are changing in response to worldwide needs, employee goals and expectations and the global economy. Conventional long-term relocation is giving way to variations including short-term assignments, commuter assignments, local plus and expat lite arrangements and flexpat policies. These vary by length of commitment, candidate attributes, home base considerations, centralized or localized management, visas and permits, tax considerations and compensation management. In some cases, benefits may be scaled back in exchange for an individual's opportunity for career development through global experience. Cost management of relocation remains a top priority, and a PricewaterhouseCoopers survey indicates economic uncertainty is leading 55 percent of chief executive officers to modify their global mobility strategies.
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