A Wild Ride Ahead in 2009

A Wild Ride Ahead in 2009
One thing is certain about the coming year: It probably won't turn out as forecasted. This year certainly didn't! Benefits-related items on the agenda include health reform and issues affecting retirement savings. With money tight, however, proposals will likely be less expansive than once anticipated. By Dallas Salisbury
Writing about the future always carries high risk. One year ago, few would have viewed the events of the last four months possible in a dream, let alone likely to happen in real life.
Neither Sen. John McCain nor President-elect Barack Obama were given much of a chance for their parties nominations, and the carnage of the world financial system was nowhere on the horizon. A housing recession, yes, but a general recession -- and one already in progress last December, as we are now told by the National Bureau of Economic Research -- little chance.
One month ago, help for the auto industry was seen as likely; a one-year delay of the Pension Protection Act enacted this year, as dead; and enactment of Pension Protection Act Technical Corrections this year, as impossible. Yet, here we are in late December and all those widespread predictions have already been proven false.
Now, a new administration and a new Congress are working on a stimulus package that could reach $1 trillion. A huge 2009 deficit seems to have been accepted by most everyone as necessary. Lobbyists and other advocates are busy trying to define their special interests as either essential to economic recovery or defining their competitors' special interests as guaranteed to make things worse.
Human resources is part of the game. Healthcare reforms are being placed in the category of essential. Health-information technology; expansion of SCHIP, the program that covers kids; expansion of COBRA, so those that become unemployed can better afford coverage and keep it longer; and other issues are being negotiated.
Card-check labor-organizing legislation is being fought by some as guaranteed to make things worse, with the "high" wages and benefits of unionized auto workers having become a central focus of the auto-rescue debate in Congress.
Numerous other issues will rise or fall early in 2009, depending on which spin wins relative to the economy.
Healthcare costs continue to escalate relative to general inflation, and they are unlikely to abate in 2009 or the years following. As a result, employers will continue to try new benefit designs that increase the consumer role, while continuing to reduce health promises to retirees.
Pension assets and funding have been on a slide, and liabilities will balloon in 2009 should corporate interest fall to a more normal spread from Treasury rates (as interest rates decline, pension liabilities rise).
Congress is likely to face requests for added extensions, come September of 2009 as plan funding continues to decline.
The move away from defined-benefit pensions is likely to continue in 2009, even as the generosity of 401(k) plans declines with the loss of matching contributions, or the reduction of contributions. The addition of options within, and attached to, 401(k) plans that provide protection of principle and lifetime income streams upon retirement are likely to continue.
And, the government is likely to re-examine regulations issued by the Bush administration that favored equity-investment products at the expense of stable value income products. Low and negative investment returns will also increase the focus on fees in all financial products.
The unemployment rate is now projected to climb throughout 2009, with negative implications for consumption, corporate earnings and, thus, stock prices. The World Bank projects a worldwide recession for 2009, adding to the bad economic news and prospects.
As a result, workers are likely to hold onto the jobs they have, defer retirement until later and look for future opportunities that will provide access to retiree-health insurance. Phased retirement will be of more interest to older workers as a means of cutting back, while keeping a paycheck and health insurance.
One prediction, however, is safe for next year. Human resource executives will be at the center of the storm in 2009.
December 22, 2008
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