Expect to see lots more HSAs

Consulting group Financial Insights predicts that 2007 will be the year health savings accounts (HSAs) take off. In a July report, the Framingham, Mass.-based firm is projecting an almost 10-fold surge in assets in HSAs by 2010, to $48 billion from $5.1 billion last year. But it is taking a confluence of high-profile endorsements and sophisticated new payment and settlement tools to make it happen.

HSAs let consumers, enrolled in high-deductible health plans, set aside pre-tax dollars for future medical, retirement or long-term care expenses. The HSA account holder can invest these funds in a range of choices, and then use them for qualified expenses. The funds roll over from year to year and you can take them with you when you change jobs. The premise is that HSAs give consumers control over their own healthcare management and spending.

For companies, HSAs represent potential cost savings. Premiums for HSA insurance offerings are as much as one-third lower than comparable preferred provider option (PPO) and non-HSA, high-deductible plans, according to a survey by consulting company Information Strategies Inc. But, despite these pluses, adoption to date has been slow.

Two factors are working together to give HSAs a boost. First, financial services companies that maintain HSAs are partnering up with credit card providers to offer debit cards exclusively for HSA transactions, notes Dana Gould, Financial Insights senior research analyst for payments and author of the Financial Insights report. “The HSA card is intended to replace cash and checks at the point of service delivery as a prelude to a more sophisticated system of processing and paying claims,” he says.

A more sophisticated system has been needed to simplify what is now a time-consuming, paper-intensive recordkeeping process. New debit card technology lets providers transmit and receive claims data—in real time—without having to go through a claims clearinghouse. Doctors get their payment immediately, and companies don’t have to maintain file cabinets full of receipts and settlement information.

At the same time, HSAs are also winning endorsements from powerful employers and insurance industry representatives. The nation’s largest employer, Wal-Mart Stores Inc., likes the idea so much it is not only offering an HSA option to all its 1.3 million full- and part-time employees, but it has recently doubled the dollar amount of its contributions to employee accounts.

The family of Blue Shield and Blue Cross benefit providers also intends to reach out to all its 100 million members in 50 states in coming years with HSA options. The Blues have even launched a bank to handle healthcare-related finance operations.

To date, as many as 1,200 financial institutions—mostly banks and insurers—have been established to maintain HSA accounts for consumers. But this year alone, Gould says, that number should double. “It’s an idea whose time has come,” says Gould.

Article found in Benefits

CFOs catch a tax break

The Internal Revenue Service (IRS) recently issued a notice that excludes the CFO from the group of executive officers who are considered covered employees under Section 162(m) of the Internal Revenue Code. Under 162(m), a public company may not deduct more than $1 million of executive pay for each covered employee each year, unless the compensation is performance-based. Besides specifically eliminating the CFO, the IRS also reduced, to three from four, the number of individuals in addition to the company’s CEO who are considered covered employees.

The reason? The disclosure rules upon which the IRS code was based were changed. When Congress first adopted the $1 million cap on executive pay deductions in the 1990s, it based its list on the Securities and Exchange Commission (SEC) rule specifying which executive salaries had to be disclosed by a public company in its proxy. At that time, a company had to list the compensation of its CEO and the next four most highly compensated officers. Last year, however, the SEC changed its disclosure standard to require companies to disclose the pay of not only the CEO, but also the CFO and the next three most highly compensated executives. But while the SEC rule changed, the IRS code cannot change without Congress passing new legislation.

This is good news for companies because instead of having five executives whose compensation is subject to a deduction cap, there are only four, remarks Mark Borges, a principal at Mercer Human Resource Consulting. And at least for the immediate future, CFO compensation is not subject to the same limitations as the other four executives. For CFOs whose companies said they couldn’t pay more than $1 million in base or non-performance linked pay because of the tax code, the news is good. Says Borges: “Some people have said [that] CFOs caught a break.”

Shareholder advocates are not particularly impressed, claiming the law has never really constrained executive salaries because of loopholes. “We filed this under ‘silly changes to a stupid rule’,” says Patrick McGurn, special counsel to Institutional Shareholders Services. “As it is, the rule considers plain vanilla stock options to be performance-based, which means a large chunk of compensation isn’t covered anyway.” But McGurn notes that one of the most interesting aspects of the revision was the elimination of the CFO as a covered employee since in many, if not most, cases the CFO is in fact one of the four most highly compensated executives. Now, he predicts, Congress will probably feel forced to address the rule.

JPMorgan and Lehman Tie for Tops in Fixed Income

JPMorgan Chase & Co. and Lehman Brothers Inc. tied for first place for the quality of their U.S. fixed-income investment services in a new Greenwich Associates survey of 1,300 institutional investors. That stellar attention to detail no doubt helped both of them also win—again in a tie—the No. 1 spot in market share as well.

Deutsche Bank, Goldman Sachs Group and Banc of America Investment Services took third, fourth and fifth place respectively, in terms of market size. When it comes to service, Deutsche and Goldman Sachs shared the third-place slot.

The survey also revealed that hedge funds are the most important focus for fixed-income dealers. Lehman Brothers has built up the biggest share in this segment, followed by Deutsche and JPMorgan, which are essentially tied for second place. Hedge funds also give the highest scores for service to Lehman and JPMorgan, followed at some distance by the Credit Suisse First Boston, Bear Stearns, Deutsche and Goldman Sachs in a four-way tie, says Dev Clifford, Greenwich Associates managing director.

Careers

Wyndham Worldwide Corp. named Christopher Feeney senior vice president and treasurer of the $3.8 billion hospitality company with headquarters in Parsippany, N.J. Feeney joins Wyndham after serving as senior vice president of mergers and acquisitions for Sunrise Senior Living Inc. He has also held various positions with Marriott International Inc., including vice president of mergers and acquisitions. Before joining Marriott, Kelly held positions with Ernst & Young LLP, Ocwen Financial Corp. and the Federal Deposit Insurance Corp.

United States Steel Corp. named William P. McNally controller for the $15.7 billion integrated steel producer’s tubular products and services business, which has headquarters in Dallas. McNally, 58, began his career with U.S. Steel in 1971 as an accounting management trainee at its now-defunct Homestead, Penn., production facility. Over the next decades, McNally held accounting and management positions of increasing responsibility at various U.S. Steel operations until 2002 when he was appointed controller of the corporation’s real estate operations and UEC Technologies LLC. In 2003, he took over the position of controller at the company’s Fairfield Works and Lorain Tubular Operations, which includes U.S. Steel’s seamless tubular operations in Alabama and Ohio.

UGI Corp., the $5.2 billion holding company with propane, utility and energy marketing subsidiaries, based in Valley Forge, Penn., appointed Peter Kelly CFO and vice president of finance. Kelly, 50, replaces Anthony J. Mendicine, who has retired. Kelly most recently served as CFO and executive vice president of Agere Systems Inc. From 2001 to 2005, he assumed the role of executive vice president of global operations for Agere. Prior to joining Agere, he held several senior finance and operations positions with Fujitsu-ICL Systems, Sonae and Texas Instruments throughout Europe and the U.S.

MI Developments Inc. appointed Richard Smith CFO and executive vice president of the $866.5 million real estate operating company, with headquarters in Aurora, Ontario. Smith takes over after the resignation of Robert Kunihiro, who left to pursue other opportunities. Since 2004, Smith had served as vice president of corporate development at Magna International Inc. From 2001 to 2004 he worked at Scotia Capital in the mergers and acquisitions group. He also spent time at the Ottawa offices of Coopers & Lybrand.

FTI Consulting Inc. named Jorge A. Celaya CFO and executive vice president of the $707.9 million global business advisory firm, based in Baltimore. Celaya, 41, will be co-CFO until the third-quarter retirement of current CFO Theodore I. Pincus. From 2003 to 2007, Celaya served as CFO and executive vice president of Sitel Corp. Prior to Sitel, he served as CFO of NPTest Inc. Beginning in 1990, he held various operating and corporate financial management positions with Schlumberger Ltd.

InterDigital Inc. named Scott A. McQuilkin CFO of the $480.5 million designer, developer and provider of advanced wireless technologies and products, based in King of Prussia, Penn. McQuilkin brings 25 years of executive financial management experience. He comes to InterDigital from Metavante Lending Solutions, an affiliate of Metavante Corp., where he served as CFO. Prior to Metavante, he served as CFO at De Lage Landen Financial Services and held numerous senior finance positions at First Union Corp.

Mechel OAO, the $4.4 billion Russian mining and metal company, with headquarters in Moscow, named Stanislav Ploschenko acting CFO, replacing Anton Vishanenko. In his new role, Ploschenko will be responsible for Mechel’s finance department, financial planning, implementation of internal controls, financial policies and operational management of the financial division. He most recently served as Mechel’s deputy CFO and deputy treasurer. Prior to joining Mechel, Ploschenko held various senior positions at Commerzbank AG and Commerzbank ZAO.

Article found in Careers

Who says you can’t get SOX compliance at Bangalore prices?

Capgemini, a European technology consulting and outsourcing services firm, is expanding its business process outsourcing (BPO) portfolio and its operations to pursue opportunities in North America. The North American market represents nearly two-thirds of the global BPO services market, according to a 2006 Gartner study, which pegged BPO spending at $152 billion worldwide.

Specifically, Capgemini is bringing two services to market: procurement services and assurance services for Sarbanes-Oxley compliance. Capgemini has been offering supply and BPO procurement services for some of its big clients in North America, such as TXU Corp. and Hydro One Inc., as part of larger deals, but now Capgemini will offer the procurement service as a standalone proposition. “We will provide both sides of the procurement proposition: the half that is procure to pay or the transaction processing half, and the more value-adding half of procurement BPO services, which is sourcing and category management or strategic sourcing,” says Tony Kelly, Capgemini’s global director for BPO product marketing.

The other new category is in assurance services, which is a focus of Sarb-Ox. “We can’t sign off on the documents. But we do everything else: We support all of the management’s attestation, documentation of design effectiveness, the walk-throughs, the control deficiency assessment, the operational testing, the reporting.” Capgemini provides these assurance services through a shared-service center located in Bangalore, India, with a dedicated compliance unit. As a result, Kelly adds: “The cost basis is lower and the ability to bring to bear a global view to the client is much easier. This is a SOX compliance service delivered at BPO offshore Bangalore rates.”

One of Capgemini’s strengths, notes Forrester analyst Bill Martorelli, is the sophisticated approach that it takes to BPO, wrapping business intelligence and analytics around its portfolio of BPO services so that its value proposition goes beyond mere labor arbitrage. And unlike IBM and Accenture who like to get “multi-tower” relationships with clients, bundling together human resources and information technology services along with finance and accounting BPO, Capgemini is more apt to engage with clients on a smaller level. “Capgemini has taken a more technology-centric vision to BPO,” says Martorelli. “They’ve put together a BPO toolkit, which allows them to integrate more seamlessly with the ERP package at the customer’s location.”

Capgemini, which is based in Paris with revenues of $10.2 billion, is creating a new North American business unit. David Poole, its deputy global BPO leader, will head up the unit.

Article found in Tools

Data encryption meets laser precision

Innovative Routines International Inc. (IRI) is releasing CoSort Version 9, an upgrade to its CoSort database package for high-volume data processing on Unix, Linux and Windows. CoSort V9 adds functionality to prevent privacy breaches by encrypting files with private, personal information (such as name, social security number, credit card number or phone number) down to the field level. While other tools protect data by encrypting entire files or databases, CoSort can apply different protections—anonymization, de-identification, pseudonymization, or filtering—to the specific field, thus rendering data theft futile. CoSort V9 integrates the security functions into SortCL, its data transformation and presentation language. With the built-in encryption and protection functions, CoSort users can process and present data in a number of file formats such as CSV, index, LDIF, text and XML without exposing private information.

With the number of data security breaches rising in 2007 and the costs to companies associated with those breaches rising too, finance executives recognize that data security is too important an area to be left solely to the discretion of the IT department. “In the past, data security has been considered an IT issue. It is absolutely a business issue,” says Gwen Thomas, president of The Governance Institute, a not-for-profit organization that consults in the area of data governance. In the past, the IT people have often taken an all-or-nothing approach to encrypting data. By encrypting all the data, it makes it difficult to share the information and run reports. Field level encryption offers a solution to that approach.

The new version also features a custom dashboard option, which lets executives monitor the data in real time. The dashboard automates and unifies data across multiple departments and business lines and enables executives to monitor data shift marketing, sales or distribution tactics.

IRI, a privately held company based in Melbourne, Fla., does not release revenue figures.

Article found in Tools