Today's good idea can bring tomorrow's bad result

Proposals churning through Washington soon may produce some unintended effects on your CEO's pay, your pension and your health insurance.

Some worry that these proposals, which were designed to solve problems, may backfire and make the problems worse. Here are some of the proposals and concerns:

Executive pay

The Securities and Exchange Commission is proposing that every bit of compensation to a company's top five executives be publicly disclosed.

That means public companies for the first time will be required to put a dollar amount on stock options. They also must list retirement benefits, deferred compensation and any perks worth $10,000 or more (it's now $50,000). The proposed rules are open to public discussion until the middle of this month.

Intended consequence: The SEC wants more transparency; other groups hope to rein in executive compensation. A June report titled "The Growth of Executive Pay" said that on average, U.S. companies pay 10 percent of their earnings to their top five executives.

Possible unintended consequence: It could lead to increasing executive compensation. That was the surprise effect of the last rule change, in 1993, which took away a company's tax deduction on any salary over $1 million, said Nell Minow at the Corporate Library in Portland, Maine, a firm that researches corporate governance.

"Suddenly everybody's base pay went up to a million dollars," Minow said, "and that's when companies started shoveling money into stock options and post-retirement pay." She expects new and different creativity around any compensation rules changes.

Her preferred solution: Give shareholders the right to call a vote to replace members of a company's board of directors, which sets executive salaries.

Pension plan funding

Bills in the House and Senate would adjust many of the calculations that determine how much companies must contribute over the years to their pension funds, including interest rate assumptions, mortality tables, and fund-asset valuations.

Intended consequence: Avert more pension-plan failures. The federal organization that assumes the obligations of failed pensions is struggling under the demands of some of the biggest defaults in its history, particularly from the steel and airline industries.

Possible unintended consequence: Companies with pension plans say that if the new rules are too difficult to deal with, they'll consider freezing or terminating their plans, said Shaun O'Brien, assistant director for public policy at the AFL-CIO. A 401(k) plan, where businesses can decide in lean years to put less into employees' retirement accounts -- or nothing at all -- has a lot of appeal, O'Brien said.

His preferred solution: Have the law require companies to make bigger fund contributions in good years, to help carry them through the bad.

Tax advantages for health savings account plans

In President Bush's State of the Union address, he said he wants more tax breaks for health savings account (HSA) plans, a new model of health insurance that carries lower premiums but higher deductibles than standard traditional plans.

Intended consequence: To increase health coverage among the 46 million uninsured Americans.

Possible unintended consequence: Confusion among small employers, said Blaine Bos, chief analyst for the Mercer 2005 National Survey of Employer-Sponsored Health Plans. HSAs are so different that they will be a challenge for small firms without an insurance expert on staff to pick wisely and help employees understand how the plans work, Bos said.

His solution: Vendors need to provide lots of training and support to clients in this market.

Another possible unintended consequence: It won't work. Fifty-five percent of uninsured Americans earn so little that they pay no income tax, so tax breaks are meaningless to them, said Sara Collins, a senior program officer at the Commonwealth Fund.

Also, many low-income workers cannot afford the annual out-of-pocket costs that typically are higher in HSAs than in the more-comprehensive plans. A Columbia University study concluded that HSAs are likely to decrease the number of uninsured Americans by fewer than 1 million.

Collins' preferred solution: Look at approaches that have the potential to reach many people, primarily by opening up group forms of coverage to them. Some states have expanded Medicaid eligibility, for example. Other proposals would let people buy into federal or state employee plans.

What are your workplace issues? You can reach H.J. Cummins at workandlife @startribune.com. Please sign your e-mails; no names will appear in print without prior approval.