It's 2011: Do You Know Where Your Benefits Are?

Sometimes, you get things by a circuitous route. In this case, The Society for Human Resource Management (SHRM) did a study about benefits that used to be somewhat prevalent that have largely disappeared. US News & World Report then did an article about the study. And, Employee Benefit News (EBN) saw it and wrote about it.

Now, you get to see it from me, with my sometimes unique take on it.

How many of these benefits do you think SHRM found that have faded into oblivion? 3? 5? 10? 15? Actually, they found 21 of them. And, employers wonder why morale is low. The frightening thing is that some of these benefits were low-cost or even no-cost. Yet, they are largely gone.

For those of you who like lists (SOA exam takers should be familiar), here they are:

• Traditional pension plans
• Retiree health care coverage
• Long-term care insurance
• HMOs
• Paid family leave
• Professional development opportunities
• Dependent life
• Incentive bonus plans
• Contraceptive coverage
• Casual dress day
• Legal assistance
• Sports team sponsorship
• Executive club memberships
• Relocation benefits
• Help purchasing a home
• Travel perqs
• The company picnic
• Company purchased tickets
• Take your child to work day

At the EBN web site, there is a place to comment at the bottom of the article. One such comment came from an individual who identified herself as Julie A. She said, in pertinent part, "Also, these were the kinds of things we offered to employees when we cared about employee loyalty. Those days are long gone--from both the employee and the company perspective."

So, there you have it, companies don't care about employee loyalty. It shows. Do you know where it shows? It shows in customer service. And, do you know where that shows? It shows in the bottom line.

Consider two companies in similar businesses. Let's call them Delightful and Arrogant, respectively. Delightful, like many of its competitors, has gone through difficult times. But, Delightful believes strongly in both its core business and its employees. It has cut some benefits, but views that keeping its employees engaged and happy will pay dividends in the long run. Arrogant has also gone through tough times. But, Arrogant has a different solution. Arrogant is going to cut expenses bare to the bone, especially in the areas of employee benefits and compensation. They feel strongly that they are so special that revenues will be able to increase while they make their employees unhappy.

Arrogant has a long term client called Loyal. In fact, Loyal, over time, has become Arrogant's single largest client. The Arrogant team servicing Loyal has gone through lots of turnover. Those remaining on the Arrogant team feel overworked and underappreciated. One Friday afternoon, the Arrogant employee who serves as the Account Manager gets a call from a key executive at Loyal. Being burnt out from his horrible week at Arrogant, he elects to ignore the call and figures he will check voice mail on Sunday evening and see what's going on.

In the meantime, the Loyal executive remembers that Delightful has been calling on her. As she really needs an answer to her question, she decides to call her Delightful contact. When he hears his phone ringing at 4:55 PM on Friday, he answers the phone and hears the Loyal executive. Her question is difficult, but she says the matter is urgent. He asks her if she would be available to discuss this any time on Saturday. They agree to a time, he does his research, and when they speak, the Loyal executive is thrilled to have an answer.

The first of the next month, the Arrogant Account Manager and the Delightful Account Manager, among others receive a Request for Proposal (RFP) from the Loyal executive. In fact, she has already determined that Arrogant will not be retaining the business. In the end, Arrogant loses a $50 million per year account and Delightful gains one.

The moral of the story: treat your employees well and it will reflect in the marketplace. Treat your employees poorly and so will they treat your clients. Would you rather spend a little bit more and make a lot more, or would you rather spend a little bit less and make a lot less? You make the call!

What do Employees Really Want?

In a newly published research report by WorldAtWork, Dow Scott (Loyola University Chicago) and Tom McMullen and Mark Royal (both Hay Group), the authors pointed out that the five top concerns in reward fairness are these:

• Career development opportunities
• Merit increases
• Base pay amounts
• Non-financial recognition
• Employee development/training

I don't mean to denigrate the authors, because frankly, this report is well thought out and well done, but duh! 

People don't want to be rewarded for what their managers think is their potential. And, they certainly don't want to be locked into, say, a Tier 5 job (assume larger number is better) because they are too valuable in that role when they are capable of handling a Tier 8 role.

My anecdotal evidence suggests that far too many managers don't get this. Further, my anecdotal evidence suggests that most of those managers do not care if they get it or not. People don't become managers, for the most part, in today's world because they have any managerial aptitude. They become managers because les levres se recontrent le derriere. If you can't work that out, levres are lips and recontrez is a verb meaning to meet. I'll leave the rest to you.

Let's consider those items one at a time and see where they have gone recently.

• Career development opportunities. Many companies have hit promotional gridlock. As the massive generation of baby boomers has reached levels that are all too cluttered, there is currently frighteningly little room for anyone to move up. So, the way to promotion is through finding a new employer.
• Merit increases. Is this an obsolete term? So many companies have had near zero merit budgets for so long that I fear that this term may disappear from the lexicon.
• Base pay amounts. They are not what they used to be. Again, companies have learned that if they put a bigger percentage of compensation into incentive pay and less into base pay that employees do not get the positive effects of compounding for having multiple good years in a row. In many cases (some that I have observed first-hand), it means that new hires (whether entry-level or mid-career) are paid for more in base pay than their peer group who has been around for a while.
• Non-financial recognition. Say what? Today's managers don't seem to understand the value of an attaboy or even a thank you. Saying that a job was well done takes far too much time, apparently. 
• Employee development/training. Twenty-five years ago, companies spent large amounts of money developing their employees. They had budgets that included travel. They believed in the value of face-to-face interaction. I understand that e-learning and interactive learning save immediate dollars, but how do you replace the increase in value that comes from the best training and development opportunities? Answer: you don't!

You know what, I stand corrected. I shouldn't have even suggested denigration of the authors. They make some great points. And, it seems that what to me was 'duh' would actually be an awakening for a whole bunch of employers.

Obama-Boehner Deal Near?

Key people in the Obama Administration say that the President and the Speaker of the House are close to working out a deal to save the country. Obama's Press Secretary, Jay Carney, denies that a deal is close. Boehner's Chief of Staff also denies that a deal is close.

Democrats in Congress don't like the prospects of such a deal as they think it may give up more than the Gang of Six deal. Republicans in Congress don't like it because it includes tax increases.

Maybe it won't save the country.

Speculating on the Effect of the Gang of Six Proposal on Retirement Savings

Just in case you have been in hiding, there is this bi-partisan group of Senators who call themselves the Gang of Six. They don't have matching tattoos, they don't have gang colors, and that we know, they don't carry concealed weapons. The members of the Gang are Saxby Chambliss (R-GA), Tom Coburn (R-OK), Kent Conrad (D-ND), Mike Crapo (R-ID), Dick Durbin (D-IL), and Mark Warner (D-VA). And, over the last few days, the Gang of Six has put together a proposal that from the way it is being touted in some circles as certain to save the world.

It all depends who you listen to. It either cuts taxes or increases taxes. It is either good for millionaires and billionaires or it is bad for the millionaires and billionaires.

All those people we are listening to -- they don't know. I don't even think the Gang of Six (GoS) members know. They have this conceptual plan. They have a summary. It has a lot of vagaries to it, and in my opinion, those vagaries are the clear part of the plan.

The Gang of Six is now rushing with all deliberate speed to get a bill written. This writer will not be surprised if the size of the bill exceeds 1000 pages. In fact, I wouldn't fall flat on my face in amazement if this bill (assuming that it gets written) exceeds 5000 pages in girth. But, it will be important, and it will need to be voted on quickly. Surely, all of the members of Congress will study the bill carefully before voting on it. And, surely, the President will study the bill carefully before signing it if it passes both houses of Congress. Surely, you don't believe either of those statements.

So, why am I blogging about this?

Well, the bill summary says that it is going to close tax loopholes. One of the loopholes that it seems poised to close (I say this based on the published bill summary and on statements from several of the Gang members that they looked to the Simpson-Bowles Commission in this regard) is that oh so evil one for retirement savings.

Yes, retirement savings get various types pf preferential tax treatment under the Internal Revenue Code, and that tax treatment hasn't changed significantly in 5 years. Retirement industry geeks know that workers generally can save on a tax-favored basis $49,000 per year ($54,500 for those born in 1961 or earlier) in defined contribution plans. Of that $49,000, up to $16,500 can be through some combination of pre-tax or Roth in 401(k) plans. The remainder would come from employer contributions (yes, I know that pre-tax and Roth are technically employer contributions) or traditional employee after-tax contributions.

For most participants, this is their current retirement benefit from employer plans. The number of open defined benefit plans continues to decline, especially after the Pension Protection Act of 2006 (PPA) managed to protect no pensions.

So, what do I think is happening to retirement plans? Simpson-Bowles suggested that the $49,000 limit be cut to $20,000. Will GoS follow suit? I think so. According to a recent Mercer survey (the link does not appear to be publicly available and the material is copyrighted, so I will leave it to you to contact Mercer if you would like all the detail), "[A] good retirement savings or pension plan today ranks as the second most important element of the employee value proposition for US employees ... ." 43% are confident that they are doing enough to financially prepare for retirement. And, now to make matters worse, the government is going to take away some of the tax incentives for saving?

Quoting the inimitable Jeff Spicoli from the 1983 classic "Fast Times at Ridgemont High", "Whoa, dude!"

Social Security seems destined to be cut back. Tax-favored retirement savings opportunities appear ready to be cut back. Congress already did its best to kill defined benefit plans. Only through means of wealth accumulation not available to most of us will people be able to prepare efficiently for retirement.

But, there is one alternative. Congress still has a phenomenal retirement program for its Members. It would not, and in fact, could not, exist in the private sector.

So, that is the key to our future retirements. We should all become members of Congress.

Troubling Defined Contribution Case Denied Summary Judgment -- George v Kraft Foods

I had a choice of three paths today: 1) I could opt not to blog; 2) I could blog about Senator Tom Coburn's (R-OK) 614 page proposal to cut $9 trillion from the federal budget over the next 10 years; or 3) I could blog about Northern District of Illinois Judge Ruben Castillo's partial denial of summary judgment on behalf of defendants in George v Kraft Foods. As I did not blog yesterday, I ruled out option #1. As Judge Castillo's decision weighing in at a mere 35 pages seems a far smaller burden on my precious eyes, I selected option #3 over option #2.

So, what's so important about George v Kraft Foods? I find it an interesting case for a few reasons. On the other hand, there is lots of legal wrangling going on there and as I have no formal legal training and offer no legal advice, there are lots of things that I leave out. If you want to know what Judge Castillo said about the oh so compelling concepts of res judicata and collateral estoppel, which I understand can also be referred to as doctrines of claim preclusion and issue preclusion, respectively, I am certain that you will be able to find highly skilled attorneys who will choose to write on these topics.

Here, we do not write about such things. First, we are not qualified. Second, and as important if we are to retain readers, we do not think that most of our readers will find this interesting (if you do, you may be in the wrong place). Here, what we do try to write about are things that regular people can associate with (our definition of regular people is far different from the definition that might be used by the supermarket tabloids, but we like our definition).

This case has been going on for quite a bit of time. As partial background, plaintiffs were participants in defined benefit and defined contribution plans sponsored by Kraft Foods and its successor companies. At some point in time, the Investment Committee for the defined benefit plan(s) elected to change the investment policy to hold 5 years worth of benefit payments in fixed income instruments and the remainder in S&P 500 Index funds. This was done after what appears to have been fairly comprehensive analysis that included the determination that large cap equity investments represent a fairly efficient market, and as such, a passively managed index fund is likely to outperform an actively managed fund in the same asset class, net of fees.

Concurrent to this analysis, the (I understand it to be the same one) Committee maintained a fairly rigorous process of monitoring the investment options available to participants in the defined contribution plan(s). The options made available to participants did not exclusively include passively managed funds. This was the basis for the most interesting of the plaintiff's claims.

Plaintiffs have asserted that the same ERISA standard of prudence applies to defined contribution plans as to defined benefit plans. In this assertion, they are undoubtedly correct. Plaintiffs further assert that Kraft and its Committee violated the ERISA standard of prudence by not offering low-cost, passively managed options in the defined contribution plan when they made that change in the defined benefit plan.

Defendants sought summary judgment. (At this point, we must insert our undereducated legal knowledge to explain.) In a motion for summary judgment, the Judge must consider that a jury will look at all of non-movers (Plaintiffs, in this case) claims in the most favorable light possible and still find no reasonable basis on which to rule in favor of non-movers. In this particular case, Judge Castillo has found that a jury could reasonably find in favor of Plaintiffs, so he denied summary judgment.

Is this a horrible ruling? I don't know. I haven't read all the pleadings of Plaintiffs and Defendants (and I'm not going to). It's the Judge's analysis, though, that bothers me. The Judge's own writing (in his opinion) underscores that Defendants engaged in a truly thorough and rational process of evaluating investment options in each type of plan. Clearly, Defendants do not have the ability to foresee or foretell the future. But, I have seen far lesser analysis from other Committees whose Counsel advised that they were acting prudently.

Defendants argued that "it makes no sense to judge fiduciaries' actions with regard to a defined contribution plan in light of actions taken with a Defined Benefit Plan." Further, Defendants asserted that "the prudence of a defined contribution plan fiduciary in selecting investment options to offer cannot be determined by
looking to his decisions as fiduciary for a Defined Benefit Plan-the two are not enterprises of 'like character and with like aims.'" Defendants finally claimed that while a shift in investments in the defined benefit plan may have made sense for that plan, such same shift may not have been appropriate for the defined contribution plan.

Judge Castillo either does not agree, or does not feel so strongly that a jury could not possibly disagree.

I do not know whether to struggle more with the Judge's ruling or with the arguments put forth by Defendants. There is a good reason for this -- I have not seen all of Defendant's arguments, only the ones cited by the court.

Here are some of my thoughts. A prudent person, when selecting the investment options for a retirement plan, must consider the obligations being supported by those assets. In a defined benefit plan, there is one pool of assets available for one consolidated (over all participants) pool of obligations. A defined benefit plan is assumed to be ongoing, essentially for perpetuity unless there is evidence to the contrary. A defined contribution plan, on the other hand, has as many pools of obligations as it has participants. So, in prudently selecting available investment options in a defined contribution plan, one could argue that there should be options available appropriate for each separate pool of obligations. This necessarily makes the analysis for defined benefit and defined contribution plans different.

While it may still be possible that a reasonable jury would rule against Defendants, I do not find the Judge's analysis to be reasonable.

For plan sponsors, at least those that maintain multiple plans that may have reason to have different investments to cover their obligations, this adds a significant wrinkle. I cannot recall ever having seen a company that sponsored both types of plans consider the investment strategy for its defined benefit plan(s) when choosing available investment options for its defined contribution plan(s).

For the time being, in light of Kraft, perhaps it would be advisable for Committees to specifically document why the DC investment options may not mirror the assets underlying the DB obligations. Frankly, this may mean that for a company that is a sponsor of both types of plans, a DC investment adviser who is not fully schooled in the vagaries of DB plans may not be sufficient. And, conversely, a DB investment adviser will need to be equally competent on the DC side of the spectrum. The number who can handle both is smaller than one may think. I know where you can find a few.

Fee Disclosures Under 408(b)(2) Postponed Once Again

I have to say that government agencies have a tendency to be consistent. Effective dates initially published in regulations are considered aggressive by plan sponsors. And, then they get postponed, and often postponed again and again and again. So goes the progress of these regulations. If you are not familiar, you can find my initial take on them here.

For those who have not been following this particular regulation, these disclosures are the ones that will be provided by fiduciaries (plan sponsors) to plan participants, generally in defined contribution plans. They will now be effective not earlier than April 1, 2012.

I view this as good news in that worthless inevitability is being postponed.

Why worthless? Go back and read my initial take. I consider myself a fairly savvy reader of information about 401(k) investment options, and these disclosures will have little if any value to me other than curing insomnia that I might have at the moment. Fortunately, there are generally electronic disclosure options available to plan sponsors, so the decline in tree population will not be significant.

What Happened to Federal Retirement Policy?

This afternoon, Senator Tom Harkin (D-Iowa) will convene a hearing to determine the role that pensions play in building a strong and vibrant middle class as well as stimulating the economy and fueling job creation. This, not all that long after the National Commission on Fiscal Responsibility and Reform (Debt Commission) proposed that the limitation on contributions on behalf of an employee to defined contribution plans be limited to the lesser of 20% of pay or $20,000. And, finally, to make it a trifecta, the general consensus among politicians who are opening their mouths is that we need to raise the Social Security Normal Retirement Age (SSNRA), cut back on Social Security Cost of Living Adjustments (COLAs), and increase FICA taxes on current workers.

With the Pension Protection Act (PPA) already having done a better job of gutting (rather than protecting) the private pension system than all legislation before it, how will workers ever manage to retire?

Let's look at some facts and some opinions (I'll let you figure out which are which, but I think it will be pretty obvious).

• Americans are living longer -- much longer
• American companies constantly look for ways to legally discharge older workers
• Periods from retirement until death are longer than they have ever been before
• Median savings (outside of qualified retirement plans) among Americans are at modern lows

And, you know what, while it is a commonly held opinion that workers need to work longer (perhaps the same percentage of the period from, say, age 25 to life expectancy that they always have), many companies look for ways to get rid of those older workers. In fact, under the Age Discrimination in Employment Act (ADEA), the protected class consists of people between the ages of 40 and 69. Turn 70, sayonara! From the worker's standpoint, if you always had it in your mind that you were going to retire at age 65 (how could that happen other than that when you started working, you had all kinds of employer-sponsored and government-sponsored plans that specified a retirement age of 65), then it gets tougher and tougher to work at later ages. Your golden years don't seem so golden. 

Oh, yeah, Congress still has the most lucrative retirement plan of all. They don't place the same limits on their plans that they place on yours and mine. They don't get it.

So, the next lovely plan that comes out will probably have some wonderfully constructed name like the Save our Country's Retirement for Employees and Workers who Really Expected The Ideal Retirement to End Most Every Nice Tale. I know -- it doesn't make sense. But, the acronym seems to -- SCREW RETIREMENT.

An Ode to Defined Benefit Plans

In this era of law after law, regulation after regulation, and standard upon standard that each do their best to place another nail in the coffin of US defined benefit plans, I thought it appropriate to pay tribute to them. Will they ironically go the way of Studebaker (if you don't get the connection, you don't know the genesis of ERISA)?

So, with apologies to Sir Elton John (né Reginald Dwight) and Bernie Taupin, and sung to the tune of "Rocket Man", I give you ...

DB Plan

They froze my plan last night, it bites

I got my notice 204(h)

And I'm going to need this plan some day

I miss the olden days, I miss my plan

It's tough with just 401(k)

In such a timeless life

And I'm gonna have to work a long, long time

Till retirement brings me around to find

I'm not the man without any loans

Oh no no no, I want a DB plan

DB plan, so that retirement can be my own

PPA ain't the law to save our plans

In fact, it didn't work

And FASB would have killed it if PPA didn't

All these regulations I don't understand

I'll just work five days a week

A DB plan-an-an-an-an, I need a DB plan

And I'm gonna have to work a long, long time

Till retirement brings me around to find

I'm not the man without any loans

Oh no no no, I want a DB plan

DB plan, so that retirement can be my own

...

Have a good weekend.

Exploiting Casey Anthony Again -- This Time in Your 401(k) Plan

This Casey Anthony trial allows you to see just how warped a brain can be -- my brain, that is. Two days in a row, I am bringing that trial into a benefits and compensation blog. Yesterday, I claimed that I wasn't nuts. Today, I reiterate, still, I am not nuts.

If you read yesterday's blog post (it's just one down in this blog or you can go here), you know that I talked about branding in, perhaps, the oddest way you have ever seen. If you didn't read it and you don't want to read it now, I talked about how the prosecution delivered a much more eloquent case, but the defense effectively branded their case. And, throughout the trial, the defense pounded on it -- virtually everything they did was reinforcement for their brand. They had a far lesser product and they won.

Oh, yeah, if you didn't follow the trial and you didn't read yesterday's post, the brand was "Follow the duct tape."

What on earth, you may wonder, does this have to do with my 401(k) plan?

Your participants have a limited amount of money that they earn every week/2 weeks/half month/month. They have a good bit of that money already allocated to things like mortgage or rent, food, car payments, insurance, clothing, and lots of other things.

It's those other things that we are concerned about. These are the discretionary items -- the ones that your participants spend money on because they want to, not because they have to. Your 401(k) plan competes with those other things for discretionary dollars. And, you know what, many of those other things have strong brands.

Think about some of the most popular places for people to spend discretionary dollars these days. Many have strong brands and these brands (wittingly for them, but unwittingly for participants) pull the participants' money to them and away from important places like your 401(k) plan. Here are some examples of strong brands that the 401(k) plan competes with:

• Apple with its iPad, iPhone, iTouch, iTunes and other related products (note the branding)
• Nintendo, Microsoft, and Sony with their various interactive gaming consoles Wii, Xbox, and PlayStation
• Victoria's Secret and other retailers and brands targeting women's discretionary dollars
• NASCAR, and all of the brands that adorn the cars and uniforms of its drivers

Each of these brands are proverbially in the faces of your participants every day. If you want your participants to move more of their discretionary dollars to their 401(k) plan, then that plan needs a brand that is similarly in the faces of participants each and every day.

This post is not intended to tell you how to create that brand. It is, however, intended to tell you that if you expect your 401(k) plan to be as top of mind in terms of your participants' dollars as these other strong brands are, then it had better be at least as visible and have at least as strong a brand.

So, find ways to advertise your plan. Create a slogan or tagline that fits the corporate culture. Make it desirable and appealing. Make it fun. Yes, make it fun. 

Run contests. Let your employees help in creating the 401(k) plan brand. Give prizes. They don't have to be big ones. You will be amazed at the results. I almost promise you.

HR People and Consultants Can Learn From the Casey Anthony Trial

I know. You read the subject line of this post and the only reason that you made it into the body of the post is you were curious to see just how I have lost my mind. 

I'm not nuts. I swear to you that I have, in fact, not lost my mind. This trial was an exercise in communications. Two teams of attorneys and their various witnesses were communications consultants. They were each communicating to twelve people. And, unlike, you, me, and tens or hundreds of millions of other Americans, those twelve people didn't have any additional communications consultants -- all the talking head attorneys and attorney-wannabes on the various television and radio networks. These twelve clients, if you will, were held captive, largely in front of the communications consultants, for six weeks. They literally lived and breathed this trial.

Let's get back to benefits and compensation -- human resources issues. If you look at the HR press these days, you can find survey after survey about things like employee engagement, dissatisfaction with managers, cuts in benefits that are untenable to employees, workforce reductions, and many more. I say that the companies who score particularly low in these surveys suffer from the same malady as Linda Drane Burdick and Jeff Ashton, the two lead prosecutors in the Casey Anthony case.

Let's consider. [WARNING: There may be lots of cliches in here]

You only get one chance to make a first impression. In the Casey Anthony trial, there were lots of first impressions. There were the opening arguments. There were the beginnings of testimony by witnesses, both fact witnesses and expert witnesses. I heard a litany of legal experts say what a great job the prosecution did of wrapping up the case. I heard that Linda Drane Burdick put the nail in the coffin. Let's go from the courtroom back to the corporation. The jurors (the employees) were so disengaged by then that they already had one foot out the door. 

Consider this. The prosecution put forth more than 400 items of circumstantial evidence. The jury deliberated for about 11 hours. In reality, though, the jury deliberated for less than 6 hours. I say this because they all returned for the second day of deliberation dressed differently. They had their verdicts. They just wanted to be sure.

Let's reconsider. 400 items. 349 minutes of deliberation. That is less than 53 seconds per item of circumstantial evidence. 

Their minds were made up long before the closing arguments. The fact is that once a manager or consultant (prosecuting attorney) has failed to keep an employee (juror) engaged (on their side), that employee (juror) is likely lost.

The defense did not have a great case. The prosecution told us so. They told us that their experts were more believable. They told us that only Casey Anthony had a motive to kill Caylee. But, the case was lost by then.

If you didn't follow the trial at all, you may get a bit lost now, but I will try to tie it together (for all I know, you may be lost already, but I hope not).

The prosecution delivered a long and eloquent opening statement. Nobody quotes from it. Nobody remembers it. Whatever they said, they didn't link everything to their opening statement.

Jose Baez, the lead defense attorney, is not experienced. He began practicing law in 2005. To my understanding, this was his first murder case. His opening statement was not eloquent. But, as hokey as this is going to sound, Jose Baez did something different and, in my opinion, it stuck with the jury because, ultimately, he built his defense around it. He said. "Follow the duct tape."

From a communications/HR/marketing perspective, do you know what he did, on Day One, and thereafter, and constantly? He branded the defense. The defense's brand was simple: Follow the duct tape. The jury could understand this.

The prosecution case was all-encompassing, or overarching if your game of choice is Buzzword Bingo. It went from here to there to everywhere. They presented evidence upon evidence, all sadly circumstantial. But, they didn't have a theme. They didn't have a brand. Their first impression got lost and they didn't reinforce it. 

Much like many modern managers, they knew they were right, and therefore, the messages they were delivering didn't matter. The facts were so compelling that during the defense's closing, prosecutor Jeff Ashton could assuredly snicker.

A friend of mine went through an acquisition recently. Her company was acquired by another company. And, as she told me, right from the get-go, it was all about the new company. It was never about her ... or her colleagues from the old company. That was all ancient history. She got lost on the first impression ... and so did the acquisition.

OK, smart guy. You've written paragraph on paragraph, what would you have done differently [speaking to self]?

This was a circumstantial case. Everybody knows this. So, of the 400+ pieces of evidence, many (let's say 100) pointed to Casey Anthony as the killer with a very high degree of certainty -- for the sake of argument, let's say 95%. Frankly, though, a 95% likelihood that Casey Anthony murdered her daughter probably should constitute reasonable doubt.

So, what should the prosecution have done differently? I have an opinion, but you already knew that, didn't you. The prosecution needed to brand it's case as "The Sum of All Parts." In their opening statement, they should have said that this was a circumstantial case (I think they did). They should have said that the jurors (employees) were about to hear 400+ pieces of evidence that each, with a high degree of certainty, tie the murder to Casey. Of them, maybe 100 of those 400+ would each tie to Casey with about 95% certainty.

So, let's explain, in our opening statement, to the jurors how the Sum of All Parts works. 95%. That's 1 in 20. That is the same as me asking you to pick a number that I have in my head between 1 and 20 and guessing correctly. That's reasonable, isn't it? It might happen.

OK. So you got the first number correct. Now do it again. Hmm. That's pretty tough, isn't it? Now, let's see you do it 100 times in a row. Is it reasonable to think that you could do that 100 times in a row. We're going to bring on an expert later to show you just how difficult it is to do that 100 times in a row. That means that the likelihood that someone else could have done this is so small (it's a number with a decimal point followed by approximately 130 zeroes before you get a non-zero digit) that it fails to constitute reasonable doubt.

Back to my brand -- the Sum of All Parts. 

So, you start out with a brand, or a message, if you prefer. You explain in the beginning how it is going to work. And, you enforce it. And, you reinforce it. And, you make it believable.

If your brand relates to a wellness program, sell it on Day One. And, keep the message going. Don't let it leave the minds of your employees (jurors). Don't confuse them with a can of stink (if you're not familiar with the trial, that won't make sense) or with the pay raises that you plan to give when the company returns to profitability. 

Look at all the most powerful brands. They never leave their messages. Coke has been "the real thing" for years. UPS asked us "what can Brown do for you?". In it's most golden years, FedEx told us "if it absolutely positively has to be there overnight." Nike just gave us its swoosh.

Linda Drane Burdick and Jeff Ashton gave the jurors lots of powerful evidence, but it wasn't tied together. Jose Baez didn't give the jurors a whole lot, but he did give them a brand. In my opinion, that brand sat in their subconscious and he didn't let it go. Way back in May, he asked them to "follow the duct tape" and that was his case. It planted reasonable doubt that the prosecution, having the means to overcome, unwittingly chose not to.

So, Casey Anthony walks. And, if you (the employer) don't communicate any better to your jurors (employees), so will they.

Accounting for Pension Buy-Ins

Over the last several years, so called pension buy-ins have become fairly popular in Europe. Just recently, the first one in a US qualified defined benefit plan was completed. The questions beg:

• What is a pension buy-in?
• How does the plan sponsor account for such a transaction? [NOTE: the author is not an accountant and does not provide accounting advice, but has drawn upon writings from and conversations with several large accounting firms.]

Briefly, here is how a pension buy-in works (from the standpoint of the plan sponsor). The plan purchases a contract from an insurer. When a benefit payment comes due for a participant covered by the buy-in, the plan pays that amount to the participant and the insurer pays an equal amount to the plan. Economically, this feels a lot like a buy-out contract where the plan purchases annuities from an insurer and the insurer pays all future benefits. The two contracts are probably priced the same as the insurer bears the same risk in each case. In the typical buy-in arrangement, the plan sponsor has the right to convert from a buy-in to a buy-out at no additional cost.

Buy-outs tend to generate what is know as settlement accounting under ASC 715 (previously FAS 88). In order for a transaction to be a settlement, it must satisfy a three-prong test:

1. The action must be irrevocable.
2. The action must relieve the plan sponsor of primary responsibility for the obligation being settled.
3. With respect to the plan sponsor, the event must eliminate significant risks related to the obligations and assets used to effect the transaction.

Buy-ins, as currently structured should not generate settlement accounting, despite the visually identical economics. Here is why.

• Typically, the action is not irrevocable as the contract often can be undone.
• Because the insurer could become insolvent and because the plan will own the contract, neither the plan nor the plan sponsor has eliminated significant risks with respect to the obligations and assets.

So, for accounting purposes, the plan is left with the same obligations it had before and a sizable asset of a type not previously considered in the accounting literature. We then ask how should this new-fangled asset be valued. After consideration of the thoughts of accounting professionals, we conclude that there are two options. First, the contract can be valued (essentially as an obligation), but using the rate at which such asset could be sold. The accounting profession seems to me to think that the current (at the measurement date) PBGC rates for single-employer pension annuities may be an appropriate discount rate. Second, and perhaps more intuitive to me, both the asset and the associated obligation would be valued at the discount rate at which such obligation could effectively be settled.

Under the first approach, the asset will likely exceed its associated obligation. Under the second approach, they will be identical. 

"I see", said the blind man.

So, there you have it. If my reading of the tea leaves is correct, it goes like this. A buy-out generates settlement accounting. A buy-in with the same economics does not, but it does give the plan sponsor a choice of two methods of accounting one of which will produce a smaller annual pension expense than the other.