What's the best combination of spending/saving with an HSA?

Health savings accounts (HSAs) are changing the way many people are planning for retirement. Do you know much about HSAs and what they can offer? Continue reading to learn more about them.


The old adage, “You need to spend money to make money,” is applicable to many areas of life and business, but when it comes to retirement, not so much. Particularly for people who are enrolled in retirement accounts, like the 401(k) or IRA.

After all, the more you’re able to fund these accounts on a yearly basis, the sooner you’ll be able to accrue enough money to retire to that beach condo or cabin in the backcountry.  But in recent years, a newcomer has entered the retirement planning picture offering a novel new way to save money: By spending it.

The health savings account (HSA) has the potential to influence the spending/saving conundrum many young professionals face: Do I spend my HSA money on qualifying health care expenses (which can save me up to 40 percent on the dollar) or do I pay out of pocket for the same expenses and watch my HSA balance grow?

What many people don’t realize is that yearly HSA contributions are tax-deductible. So if account holders aren’t factoring in doctor co-payments, prescription drugs and the thousands of over-the-counter health products that tax-advantaged HSA funds can cover, they may be missing an opportunity to save in taxes each year.

By maximizing their contributions and paying with HSA funds as opposed to out-of-pocket, HSA users can cover products they were going to purchase anyway with tax-free funds, while using whatever is rolled over to save for retirement.

Spending more to save more. Who knew?

Here’s some food for thought that savvy employers should consider sharing with employees of all ages.

Facts about health savings accounts (HSAs)

HSAs were created in 2003, but unlike flexible spending accounts (FSAs) that work on a year-to-year basis, HSAs have no deadlines and funds roll over annually. HSAs also feature a “triple tax benefit,” in that HSA contributions reduce your taxable income, interest earned on the HSA balance accrues tax free, and withdrawals for qualifying health expenses are not taxed.

Account holders can set aside up to $3,500 (2019 individual health plan enrollment limit) annually and $7,000 if participating in the health plan as two-person or family, and these funds can cover a huge range of qualifying medical products and services.

HSAs can only be funded if the account holder is enrolled in an HSA-qualified high-deductible health plan (HDHP). If the account holder loses coverage, he/she can still use the money in the HSA to cover qualifying health care expenses, but will be unable to deposit more funds until HDHP coverage resumes. The IRS defines an HSA-qualified HDHP as any plan with a deductible of at least $1,350 for an individual or $2,700 for a family (in 2019 – limits are adjusted each year).

Despite their relatively short lifespan, HSAs are among the fastest growing tax-advantaged accounts in the United States today. In 2017, HSAs hit 22 million accounts for the first time, but a massive growth in HSA investment assets is the real story. HSA investment assets grew to an estimated $8.3 billion at the end of December, up 53 percent year-over-year (2017 Year-End Devenir HSA Research Report).

However, while HSAs offer immediate tax benefits, they also have a key differentiator: the ability to save for retirement. HSA funds roll over from year to year, giving account holders the option to pay for expenses out of pocket while they are employed and save their HSA for retirement.

If account holders use their HSA funds for non-qualified expenses, they will face a 20% tax penalty. However, once they are Medicare-eligible at age 65, that tax penalty disappears and HSA funds can be withdrawn for any expense and  will only be taxed as income. Additionally, once employees  turn 55, they  can contribute an extra $1,000 per year to their HSAs, a “catch-up contribution,” to bolster their HSA nest eggs before retirement. When all is said and done, diligently funding an HSA can provide a major boost to employees’ financial bottom lines in retirement.

What’s the best HSA strategy by income level?

HSAs have immediate tax-saving benefits and long-term retirement potential, but they require different savings strategies based on your income level.

Ideally, if you have the financial means to do so, putting aside the HSA maximum each year may allow you to cover health expenses as they come up and continue saving for retirement down the road. But even if you’re depositing far below the yearly contribution limit, your HSA can provide a boost to your financial wellness now and in the future.

I’ve seen this firsthand. Before we launched our e-commerce store for all HSA-eligible medical products, we extensively researched the profiles of the primary HSA user groups through partnerships with HSA plan providers.

We then created “personas” that provide insights on how to communicate with different audiences about HSA management at varying points in the account holder’s life cycle, and these same lessons can be just as vital to employers.

The following contribution strategies are based on these personas and offer insights that could help employees get their HSA nest egg off and growing. These suggestions offer a means of getting started.

As employees receive pay raises and promotions, they may be able to increase their HSA contributions over time, but this can be a way to get their health care savings off the ground and then adjust to life with an HSA.

Disclaimer: These personas are for illustrative purposes only and in all cases you may want to speak with a tax or financial advisor. Information provided should not be considered tax or legal advice.

1. Employee Type: Millennials/Gen-Z with an income between $35-75k/year

For the vast majority of young professionals starting out, health care is not at the top of their budget priorities. However, high-deductible health plans have low monthly premiums, and by contributing to an HSA, an account holder can cover these expenses until the deductible is exhausted. For this group of employees, starting off small and gradually increasing contributions as income increases is a sound financial solution.

Potential Contribution Range: $1,000-$1,500

2. Employee Type: Full-Time HDHP Users Enrolled with an income between $35-60k/year

With many companies switching to all HDHP health plan options, a large contingent of workers find themselves using HDHPs for the first time. For this group, it’s all about finding the right balance between tax savings and the ability to cover necessary health expenses. Setting aside money in an HSA will allow workers to reduce how much they pay in taxes yearly by reducing their taxable income, while being able to pay down their deductible with HSA funds at the same time.

Potential Contribution Range: $1,000-$1,500

3. Employee Type: Staff with Families with an income between $75-100k/year

Low premiums from an HDHP plan are attractive for these employees, but parents will have far more health expenses to cover and more opportunities to utilize tax-free funds to cover health and wellness products. With more opportunities to spend down their deductible with qualifying health expenses and the resulting tax savings, parents should strive to put the family maximum contribution ($7000 for 2019) into their HSAs.

Potential Contribution Range:$4,000-$6,900

4. Employee Type: Pre-Retirement Staff with an income between $100-200k/year

Employees who are in their peak earning years have the greatest opportunity to put away thousands in tax-free funds through an HSA. So whenever possible, they should be encouraged to contribute the largest possible allocation to their HSA on a yearly basis. Additionally, employees age 55 and over can contribute an extra $1,000 to their HSA annually until they reach Medicare age at 65 to fast-track their HSA earnings.

Potential Contribution Range: HSA Maximum ($3,500 individual, $7,000 families for 2019)

What else should employers know about HSAs?

Employers can help employees get the most out of HSAs. Here are some tips:

  • Employers should consider contributing to their employees’ accounts on an annual basis. Employer contributions to an HSA are tax-deductible, and this has the added bonus for employees of making it easier to max out their contributions annually.
  • Remember: Employer and employee contributions cannot exceed the yearly HSA contribution limits ($3,500 individual, $7,000 family for 2019), so make this information clear to employees during open enrollment.
  • If employees are still on the fence about HSAs, remind them that deductible expenses can be paid for with HSA funds, and yearly HSA contributions are tax-deductible for employees as well.

SOURCE:
Miller, J (2 July 2018) "What's the best combination of spending/saving with an HSA?" [Web Blog Post]. Retrieved from https://www.benefitspro.com/2018/06/08/whats-the-best-combination-of-spendingsaving-with/


How to help millennials tackle 2 major financial pain points

Researchers say 65 percent of millennials reported being stressed about their finances. Read to find out why millennials are the most reluctant to face their financial struggles head on.


Stress. Shame. Confusion. Embarrassment.

That’s what comes to mind for millennial employees when they think about their personal finances. It’s draining employees’ ability to stay focused on the work at hand and maximize their creativity and productivity. According to a 2017 PWC Employee Financial Wellness Survey, 65 percent of millennials reported being stressed about their finances. Additionally, approximately one-third of employees report being distracted by personal finance issues while at work, with almost half of them spending three hours or more each week handling these matters during the work day.

While employee financial stress is not new, it’s particularly strong among millennials. This group is experiencing many firsts. They are the first generation to face such a large student loan debt crisis. They are the first to need to save enough money to fund retirements that may be the longest in human history. These are no small challenges.

With millennials set to comprise 50 percent of the global workforce in less than two years, it is essential that employers help this group garner the tools necessary to experience financial calm, clarity, and confidence in the face of these challenges. But first, we need to understand why millenials are reluctant to address their financial concerns head-on.

Millennial employees are distracted by money shame

Millennials tend to be a pretty outspoken group. So why are they not speaking up more about their financial stress and the degree to which it distracts them at work?

A big part of this is overarching “money shame.” After years of schooling and higher education, it frankly can feel embarrassing to admit one is struggling with money issues. This is particularly true if the money issues are due to student loan debt – a kind of “good debt” that was supposed to make their lives better. Many millennials are wondering how they can feel so bad (financially) when they “did all the right things” (educationally). As an employer, you need to recognize this money shame is causing your millennial employees to hold back asking for help.

How employers can help their millennials overcome money fears

Employers can help their millennial employees overcome their money woes by providing financial wellness education around the two areas causing the most financial stress for millennials: student loan debt and saving for retirement.

Both of these topics can be extremely overwhelming so baby steps are key. A good introduction to both of these topics could be an educational video laying the groundwork for the big concepts that need to be addressed to help ease employees into the reality of dealing with each of these vital issues.

With regard to student loans, the education here is trickier, as some employees will have government loans, some may have private loans and some may have a combination of both. Providing basic educational lunch-and-learn type lectures to review the role of budgeting in finding the extra funds to accelerate debt paydown, and to discuss various options for consolidation, income based repayment plans and other options can help give employees a sense of relief that they have some tools and information they can use.

When it comes to retirement, many 401k and 403b providers offer onsite education for plan participants. Instructing these providers to focus heavily on these three points can go a long ways towards helping millennials understand how to make smart choices here:

1. The mathematical impact of saving early (i.e. a dollar saved and invested for your retirement in your mid 20s is four to five times more valuable than a dollar saved in your mid 40′s due to the power of compounding).

2. It’s not enough to save for retirement; wise investment choices must be made too (and often the smartest and most cost effective decision here is to use target date retirement funds composed of underlying index funds).

3. The extremely positive mathematical implications of contributing to a retirement plan at least to the point of the employer’s match (i.e. that this is literally “free” money and equates to a guaranteed rate of return; if you are matched $0.50 on the $1.00 that’s a guaranteed 50 percent return which you will not get anywhere else!)

While there are very few “sure things” in the business world, investing in reducing millennial employee financial stress and increasing work enjoyment and productivity has the potential to generate positive “human capital” dividends for years to come.

SOURCE:
Thakor M (13 July 2018) "How to help millennials tackle 2 major financial pain points" [Web Blog Post]. Retrieved from https://www.benefitspro.com/2018/07/02/how-to-help-millennials-tackle-2-major-financial-p/


3 questions to ask about paid leave programs

Paid time off policies are offered by employers for numerous reasons, employee wellness being one of them. Continue reading to learn about the 3 key questions to ask about these programs and their costs.


Employers provide paid time away from work policies for a variety of reasons: to attract and retain talent (responding to employee needs and changing demographics); to be compliant with local, state and federal laws (which are proliferating); and to support general employee well-being (recognizing that time away from work improves productivity and engagement).

While offering paid absence policies delivers value to both employees and the employers, employers recognize the need to balance the amount of available time with the organization’s ability to deliver its products and services.

To help employers balance paid time away drivers, here are three key questions to ask to get a handle on the costs and benefits of paid leave.

1. Do you have a complete picture of the costs associated with your employees’ time away from work?

A challenge for many employers is getting a handle on the cost of time away from work and the related benefits. If an employer cannot quantify the costs of absence, it may not be able to define management strategies or to engage leadership to adopt new initiatives, policies or practices related to paid and unpaid time away programs.

Ninety percent of employers participating in the 2017 Aon Absence Pulse Survey reported they hadn’t yet quantified the cost of absence, and 43 percent of participants identified defining the cost of absence as a top challenge and priority. Though intuitively managers and executives recognize there is an impact when employees are absent from work, particularly when an absence is unscheduled, they struggle to develop concrete and focused strategies to address absence utilization without the ability to measure the current cost and collectively the impact of new management initiatives.

Employers struggle to quantify the cost of absence in the context of productivity loss, including replacement worker costs. According to the Bureau of Labor Statistics in 2017, employers’ cost of productivity loss associated with absenteeism was $225.8 billion, and 9.6 percent of compensation was spent on lost time benefits and overtime.

Employers are expanding their view of absence, recognizing that use of paid and unpaid time away programs are often associated with an employee’s health. As a result, combining data across health and absence programs allows an employer to recognize drivers of absence “work-related value” and define strategies to address not just how to manage the absence benefit, but to target engagement to improve well-being and the organization’s bottom-line.

As an example, musculoskeletal conditions are frequently associated with absence, which is not surprising when 11 percent of the workforce has back pain. It is noteworthy that of those with back pain, 34 percent are obese, 26 percent are hypertensive and 14 percent have mood disorders. The Integrated Benefits Institute reported in 2017 that back pain adds 2.5 days and $688 in wages to absence associated with this condition. It is this type of information pairing that provides employers with the insight to develop strategies to address comprehensive absence.

When absence and health costs are quantified, organizations quickly recognize the impact on the business’s bottom line. As the old saying goes, “we can only manage what we can measure.”

2. What is your talent strategy to improve work-life benefits, inclusive of time off to care for family?

The race for talent is on, and every industry recognizes the huge impact the changing workforce demographics currently has, and will continue to have. The current workforce incorporates five generations, though an Ernst and Young report from 2017 estimates that by 2025 millennials will make up 75 percent of the workforce. As a result, the work-life needs of millennials—and their perspectives around benefits—is driving change, including time away from work policies.

It is worth noting that, per a 2015 Ernst and Young survey, millennial households are two times more likely to have both spouses working. The Pew Research Center reported in 2013 that, among all workers, 47 percent of adults who have a parent 65 years or older are raising a minor child or supporting a grown child. Additionally, a 2016 report from the Center for Work Life Law at the University of California Hastings claimed that 50 percent of all employees expect to provide elder care in the next five years.

In response, employers are expanding paid time off programs for care of family members. The paid family leave continuum often begins with a paid parental policy providing time to bond with a new birth or adoption placement. An elder care policy may follow, and the culmination might be a family care policy covering events like those under the job-protected Family Medical Leave Act. An Aon SpecSelect Survey reported that 94 percent of employers offer some form of paid parental leave in 2017; this is a significant change from 2016 when 62 percent offered this benefit. Two weeks of 100 percent paid parental leave was the norm per Aon’s SpecSelect 2016 Survey, but we are finding that many employers are expanding these programs, offering between 4 to 12 weeks.

Offering paid leave programs on their own may meet immediate needs for both time and financial support, but may be incomplete to help the employee address the full spectrum of issues that could affect success at work. In combination with family care needs—even those associated with a happy event such as a birth—there may be other health, social or financial issues. Employers combining their paid leave programs with a broader well-being strategy deliver greater value, improve engagement and increase productivity.

3. If you’re a multi-state employer, how are you ensuring your sick and family leave policies are compliant across all relevant jurisdictions?

Paid leave is a hot legislative topic lately. Last December saw the enactment of a paid FMLA tax credit pilot program as part of the federal Tax Reform The paid sick leave law club now totals 42 states and myriad municipalities. Both Washington state and Washington, D.C. are ramping up to implement paid family leave laws in 2020, joining the four states and one city that already have some form of paid family or parental leave law.

How are multi-state employers keeping up with this high-stakes evolving environment? The 2017 Pulse Survey saw 70 percent of employers report they are aware they have an employee who is subject to a paid sick leave law. Ten percent of respondents said they did not know if they had anyone subject to such a law. If knowledge is the first step in the process of compliance, deciding on a compliance strategy and then successfully implementing it are surely steps two and three.

With respect to paid sick leave, there are three major compliance options: comply on a jurisdiction-by-jurisdiction level, with as many as 42 different designs and no design more generous than it has to be; comply on a national level with one, most generous design, or meet somewhere in the middle, perhaps with one design for each state where a state- or local-level law is in place, or by grouping jurisdictions with similar designs together to strike a balance between being overly generous and being bogged down by dozens of administrative schemes.

Data analytics can be a key driver in designing a successful compliance strategy—compare your employee census to locations with paid sick leave laws. The ability to track and report on available leave is a requirement in all jurisdictions, and at this point, few if any third-party vendors are administering multi-state paid sick leave.

For paid family leave, the primary policy design issue is how an employer’s FMLA, maternity leave and short-term disability benefits will interact with the various paid family leave laws. So, while there may be fewer employer choices to be made with statutory paid family leave, clear employee communications will be critical to success.

Employers may tackle time away from work program issues individually to meet an immediate need, or collectively as a comprehensive strategy. Such a strategy would include data analytics across health and lost-time programs, absence policies that meet today’s needs for the employer and employee, health and wellness programs targeting modifiable health behaviors, and absence program administration that is aligned to operational goals. The expected outcome for time away from work programs isn’t about the programs themselves: it is about an engaged, productive workforce who delivers superior products/services. How do your programs stack up?

SOURCE:
VanderWerf, S and Arnedt, R (13 July 2018) "3 questions to ask about paid leave programs" [Web Blog Post]. Retrieved from https://www.benefitspro.com/2018/07/05/3-questions-to-ask-about-paid-leave-programs/


12 Ways to Save on Health Care

Managing your money is tough, saving for your health care is pretty rough too. These tips and tricks will assist you in managing your medical finances for the future.


We all know paying for health care is a challenge, with or without insurance, amid rising copays, deductibles, and premiums. But there are ways to hold down the costs that can come in handy now, but also as the Affordable Care Act undergoes whatever transformation (or replacement) the Trump administration comes up with.

The Huffington Post reports that, despite the numerous obstacles to cutting costs on health care for individuals —insured or not — there are also numerous ways to do just that, whether it takes due diligence on the patient’s part or having conversations with doctors, hospitals and insurers — even drug companies — about price.

While such tactics may not exactly amount to haggling, negotiating skills can’t hurt, and determination and perseverance are definite assets when it comes to finding the best prices or convincing medical entities to give you a better deal.

Plenty of other sources have good suggestions for slicing medical expenses, whether for prescription drugs, doctor and dentist visits, or hospital care. In fact,

Here’s a look at 12 strategies and suggestions that can end up saving you beaucoup bucks for care and treatment.

12. Check the internet

You would be amazed at how many tips there are online to help you cut the cost of getting — or staying — healthy.

One of the first things you should do is to check out the internet, where you’ll find not just help from the Huffington Post but also from such prominent sources as Kiplinger, Investopedia, Money, CBS and other news stations — and checking them out can have the advantage of providing you with any new suggestions arising out of changes in the law or in the medical field itself. And definitely compare prices on the Internet for procedures and prescriptions before you do anything else.

11. Skip insurance on your prescriptions

Not all the time, and not everywhere, but you could end up getting your prescriptions filled for less money if you don’t go through your medical insurance.

Costco, Walmart, and other retailers with pharmacies often offer cut-to-the-bone prices on generics, some prescription drugs and large orders (say, a 90-day supply of something you take over an extended period). Costco will even provide home delivery, and fill your pets’ prescriptions, too.

Then there are coupons. GoodRx will compare prices for you, provide free coupons you can print out and take to the pharmacy and save, as the website says, up to 80 percent — without charging a membership fee or requiring a sign-up.

10. Talk to your doctor

And ask for samples and coupons. Especially if you’ve never taken a particular drug before, let your doctor know you want to try out a sample lest you have an adverse reaction to the medication and get stuck with 99 percent of your prescription unusable.

Pharmaceutical reps, of course, provide doctors with samples, but they often give them coupons, too, lest you suffer sticker shock in the pharmacy and walk away without filling the prescription. So ask for those too. Doctors can be more proactive about samples than coupons, but remember to ask for both. After all, it’s your money.

9. Talk directly to the drug companies

So you’ve tried to get a brand-name drug cheaper, but coupons don’t help enough and there’s no generic available (or you react badly to it). Don’t stop there; go directly to the source and ask about assistance programs the pharmaceutical company may offer.

Such programs can be need-based, but not always — sometimes it’s a matter of filling out a little paperwork to get a better deal. The Huffington Post points out dialysis drug Renvela can go for several hundred dollars, but drops to $5 a month if the patient completes a simple form.

8. Haggle

Before you go in for a procedure (assuming it’s voluntary), or when the bills start to come in, talk to both the doctors (is there ever only one?) and the hospital and ask for a discount — or a reduction in your bill for paying in cash or for paying the whole amount. Be polite, but stand your ground and negotiate for all you’re worth.

A CBS report cites Consumer Reports as having found that only 31 percent of Americans haggle with doctors over medical bills but that 93 percent of those who did were successful — with more than a third of those saving more than $100. Just make sure you’re talking with the right person in the office — the one who actually has the authority to issue those discounts. And get it in writing.

7. What about an HMO?

If you’re not devoted to your doctor, opting for an HMO can save you money — although it will limit your choices of doctors and hospitals. Still, coverage should be cheaper.

If you’re generally in good health, choosing a plan — HMO or not — that restricts your choices of doctors and hospitals can save you money. And having the flexibility to go see the top specialist in his field won’t necessarily be your top priority unless you have specific health conditions for which you really need specialized care. In that case, you might prefer to hang on to your right of choice, despite the expense.

6. Ask for estimates

Yes, just the way you would from your mechanic or plumber. Ask the doctor/hospital/etc. what the charge is for whatever it is you’re having done, whether it’s a hip replacement or a deviated septum. You will already have checked out the costs for these things on the Internet, of course, so that you have an idea of standard pricing — and if your doctor, etc. comes in substantially higher, look elsewhere.

And while you’re at it, ask whether the doctor uses balance billing. If so, run, do not walk, in the opposite direction and find a doctor who doesn’t. Otherwise, particularly if the doctor’s fees are high, you’ll find yourself paying the balance of his whole bill once the insurance company kicks in its share.

Normally the doctor and insurer reach an agreement that eliminates whatever is left over after you pay your share and the insurer pays its share. But with balance billing, whatever is left over becomes your responsibility — and you’ll be sorry, maybe even bankrupt. By the way, balance billing is actually illegal in some states under some circumstances, so check before you pay.

5. Network, network, network

Always, always ask if the doctor is in network, and if the lab where your blood work goes and the specialist he recommends and the emergency room doctor and surgeon are also in network. Of course you can’t do this if it’s a true emergency, but if you learn after the fact that you were treated by out-of-network doctors at an in-network hospital, see whether your state has any laws against, or limits on, how much those out-of-network practitioners can charge you.

According to a Kaiser Family Foundation study, close to 70 percent of with unaffordable out-of-network medical bills were not aware that the practitioner treating them was not in their plan’s network at the time they received care.

4. Check your bill with a fine-toothed comb

Not only should you check to see whether your bill is accurate, you should also read up on medical terminology so you know whether you’re being billed for medications and procedures you actually received.

Not only do billing offices often mess up — a NerdWallet study found that 49 percent of Medicare medical claims contain medical billing errors, which results in a 26.4 percent overpayment for the care provided, but they can also get a little creative, such as billing for individual parts of a course of treatment that ought to be billed as a single charge. It adds up. And then there are coding errors, which can misclassify one treatment as another and up the charge by thousands of dollars.

3. Get a health care advocate

If you just can’t face fighting insurers or doctors’ offices, or aren’t well enough to fight your own battles, consider calling in a local professional health care advocate. They’ll know what’s correct, be able to spot errors, and can negotiate on your behalf to contest charges or lower bills.

For that matter, if you call them in ahead of time for a planned procedure or course of treatment, they can advise you about care options in your area and maybe forestall a lot of problems.

2. Go for free, not broke

Lots of places offer free flu shots and screenings for things like blood pressure and cholesterol levels — everyplace from drugstores to shopping centers, and maybe even your place of work.

Senior centers do too, but if you can’t find anything locally check out places like Costco and Sam’s Club, which do screenings for $15; that might even be cheaper than your copay at the doctor’s office.

1. Deals can make you smile

Whether you have dental insurance or not, it doesn’t cover much. So go back to #8 (Haggle) to negotiate cash prices with your dentist for major procedures, and take advantage of Living Social or Groupon vouchers to get your routine cleanings and exams with X-rays. The prices, says HuffPost, “range from $19 to $50 and are generally offered by dentists hoping to grow their practices.”

SOURCE:
Satter, M (2 June 2018) "12 ways to save on health care" [Web Blog Post]. Retrieved from https://www.benefitspro.com/2017/02/07/12-ways-to-save-on-health-care?t=Consumer-Driven&page=6


Who are Benefits for, Anyway?

U.S. employees often decline benefits to them by their employers. Continue reading to find out why your employees may be declining their benefits.


With many Americans living paycheck-to-paycheck, U.S. employees have a significant need for financial protection products to secure their income and guard against unplanned medical expenses. However, employees frequently decline these benefits when they are offered at the workplace. Only two-thirds of employees purchase life insurance coverage at work when given the option, while roughly half enroll in disability coverage and less than one-third select critical illness insurance coverage. Why do so many employees choose not to enroll in benefits?

Is this right for me?

Some employees may opt out of nonmedical benefits because they do not believe these offerings are intended for people like them. In a recent report, “Don’t Look Down: Employees’ Understanding of Benefits and Risk,” LIMRA asked employees whether they thought life, disability, and critical illness products were “right for someone like me.”

While a majority of employees feels that life insurance coverage is appropriate for someone like them, they are on the fence about other coverages. Fewer than half believe they need disability insurance and only 36 percent feel they need a critical illness policy.

It is also noteworthy that a large portion of employees respond neutrally or only slightly agree or disagree with these sentiments, which suggests a lot of uncertainty. Given employees’ poor understanding of these benefits, many simply do not know if the coverage is intended for them.

Role of behavioral economics

Behavioral economics reveals that human behavior is highly influenced by social norms, particularly among groups that people perceive to be similar to themselves. In light of this, LIMRA asked employees if they think most people like them own certain insurance products. Their responses indicate that employees feel very little social pressure to enroll in these benefits.

Only 22 percent of employees think most people like them are covered by critical illness insurance, while 47 percent disagree. Similarly, 38 percent disagree that most people like them have disability coverage (versus only 34 percent who agree). Life insurance is the only product where a majority of employees (60 percent) think most others like them have the coverage.

Employees who believe others like them purchase benefits will tend to be influenced by this peer behavior. This could lead them to take a closer look at the information provided about these benefits and possibly enroll.

However, for the larger group of employees who think others like them do not have coverage, social pressure will discourage them from enrolling. These employees will perceive not having coverage to be the “norm” and assume it is safe to opt out, without giving these benefits proper consideration.

Who should purchase benefits?

If employees do not think insurance benefits are right for them, who do they believe these products are intended for?

Of employees who are offered disability insurance at work, only 38 percent recognize that anyone with a job who relies on their income should purchase this coverage. Troublingly, more than 1 in 5 think disability insurance is only for people with specific risk factors, such as having a physical or dangerous job, a family history of cancer, or a current disability.

Similarly, less than half of employees recognize that critical illness insurance is right for anyone. One in five think this coverage is only for people with a family history of cancer or other serious illness, while 15 percent believe the coverage is for people who have personally been diagnosed with a serious health condition.

Employees have a better understanding of life insurance. Eighty percent of employees recognize that life insurance is appropriate for anyone who wants to leave money to their spouse or dependents upon their death. However, some employees still express uncertainly about this or believe life insurance is only for high-risk individuals.

Confusion about who should purchase insurance benefits is contributing to low employee participation in these offerings. To counteract this trend, educating employees to understand how these products apply to their own lives is crucial. By clearly explaining what the products do and providing examples of how anyone could use them, benefit providers can help employees see the relevance of these offerings and help them make more informed financial decisions.

SOURCE:
Laundry, K (12 July 2018). "Who are benefits for, anyway?" [Web Blog Post]. Retrieved from https://www.benefitspro.com/2018/07/12/who-are-benefits-for-anyway/


A vacation can't undo the damage of a stressful work environment

Researchers say employees experience chronic stress during their workday and vacations aren't helping to fix it. Take a look at why a stress free work environment is critical for productivity.


That easy breezy feeling after taking a vacation slips away pretty quickly when people have to face the same systemic workplace issues that wore them down in the first place, according to the American Psychological Association’s 2018 Work and Well-Being survey.

The Harris Poll surveyed 1,512 U.S. adults who were employed either full time, part time or were self-employed, and found that nearly a quarter (24 percent) say the positive effects of vacation time – such as more energy and feeling less stress – disappear immediately upon returning to work. Forty percent say the benefits last only a few days.

“Employers shouldn’t rely on the occasional vacation to offset a stressful work environment,” says David W. Ballard, head of APA’s Center for Organizational Excellence. “Unless they address the organizational factors causing stress and promote ongoing stress management efforts, the benefits of time off can be fleeting. When stress levels spike again shortly after employees return to work, that’s bad for workers and for business.”

More than a third (35 percent) of respondents say they experience chronic stress during their workday, due to low pay (49 percent), lack of opportunity for growth or advancement (46 percent), too heavy of a workload (42 percent) and unrealistic job expectations and long hours (39 percent each).

However, just half say their employer provides the resources necessary to help them meet their mental health needs. When adequate resources are provided, only 33 percent of the respondents say they typically feel tense or stressed out during the workday, compared to 59 percent of those who say their employer doesn’t provide sufficient mental health resources. When it comes to overall well-being, nearly three-fourths of employees supported with mental health resources (73 percent) say their employer helps them develop and maintain a healthy lifestyle, compared to 14 percent who say they don’t have the resources.

“Chronic work stress, insufficient mental health resources, feeling overworked and under supported – these are issues facing too many workers, but it doesn’t have to be this way,” Ballard says. “Psychological research points the way in how employers can adopt effective workplace practices that go a long way in helping their employees thrive and their business grow.”

Even in a very supportive workplace environment, encouraging vacations can boost morale and performance even more, according to the survey. Upon returning from vacation, employees who say their organization’s culture encourages time off were more likely to report having more motivation (71 percent) compared to employees who say their organization doesn’t encourage time off (45 percent). They are also more likely to say they are more productive (73 percent vs. 47 percent) and that their work quality is better (70 percent vs. 46 percent).

Overall, respondents are more likely to say they feel valued by their employer (80 percent vs. 37 percent), that they are satisfied with their job (88 percent vs. 50 percent) and that the organization treats them fairly (88 percent vs. 47 percent). They are similarly more likely to say they would recommend their organization as a good place to work (81 percent vs. 39 percent).

“A supportive culture and supervisor, the availability of adequate paid time off, effective work-life policies and practices, and psychological issues like trust and fairness all play a major role in how employees achieve maximum recharge,” Ballard says. “Much of that message comes from the top, but a culture that supports time off is woven throughout all aspects of the workplace.”

SOURCE:
Kuehner-Hebert, K (13 July 2018) "A vacation can't undo the damage of a stressful work environment" [Web Blog Post]. Retrieved from https://www.benefitspro.com/2018/07/02/a-vacation-cant-undo-the-damage-of-a-stressful-wor/


Wanted: Female financial advisors to shrink industry gender gap

Recent studies show that just 16 percent of all financial advisors are women, creating a substantial gender gap. Do you want to close the gap?


If you want more female financial advisors, leverage the ones you already have.

That’s among the findings of the J.D. Power 2018 U.S. Financial Advisor Satisfaction Study, which says that despite the fact that women control 51 percent of assets, just 16 percent of all financial advisors are women.

That kind of a gender gap is nothing to be proud of, especially since it also finds that female financial advisors are generally more satisfied and loyal to their firm than their male counterparts.

That said, female advisors have “some unique pain points” that firms looking to better their position in the industry would be wise to correct.

“The wealth management industry clearly recognizes that aligning the gender mix of advisors with the shifting demographics of investors is critical for their success,” Mike Foy, director of the wealth management practice at J.D. Power, says in a statement. Foy adds, “But firms that want to be leaders in attracting and retaining top female talent need to differentiate on recognizing and addressing those areas that women’s perceptions and priorities may differ from men’s.”

The study, which measures satisfaction among both employee advisors and independent advisors, bases its evaluation on seven factors: client support; compensation; firm leadership; operational support; problem resolution; professional development; and technology support.

Considering that even though overall satisfaction with firms is improving, women are “more satisfied and loyal, bigger brand advocates.” The study finds that female advisors’ average overall satisfaction score is 786 among employee advisors—an impressive 59 points higher than among their male counterparts. Among independent advisors, overall satisfaction among women is also higher, at 793, topping their male counterparts by 39 points.

In addition, female advisors also are more likely than male advisors to say they “definitely will” remain at the same firm over the next 1–2 years (68 percent, compared with 56 percent) and are more likely to say they “definitely will” recommend their firm to others (60 percent, compared with 50 percent).

But as far as female advisors are concerned, their firms fall short in a number of areas. Women are significantly more likely than men, the report finds, to say they do not have an appropriate work/life balance (30 percent, compared with 22 percent). And 90 percent of women who do have that balance say they “definitely will” recommend their firm, while only 68 percent of those who do not will do so.

Women are also less likely than men to say they “completely” understand their compensation (60 percent, compared with 66 percent) and less likely to believe it reflects their job performance (60 percent, compared with 68 percent). They’re also less likely than men to believe mentoring programs are effective (44 percent, compared with 53 percent).

The mean tenure for female advisors at their current firms, the study reports, is 18 years, while the mean tenure for male advisors at their current firms is 20 years.

SOURCE:
Satter, M (13 July 2018) "Wanted: Female financial advisors to shrink industry gender gap" [Web Blog Post]. Retrieved from https://www.benefitspro.com/2018/07/12/wanted-female-financial-advisors-to-shrink-industr/


3 ideas to ease the transition to a high-deductible world

With high-deductible health plans rising, employers may not be thinking about the drastic changes happening in the future. Here are some tips to make a transition into a high deductible industry painless.


We’re all familiar with the necessary evils of today’s society: paying taxes, going to the dentist and sitting in rush-hour traffic. Now, there’s another one to add to the list — high deductible health plans (HDHPs). They’re on the rise due to increasingly unmanageable health care costs caused by factors such as increased carrier and hospital consolidation, unregulated pharmaceutical prices, and a lack of financial awareness among medical providers.

In response, prudent employers who want to continue providing health benefits but can’t keep up with the costs are turning to HDHPs to share the financial burden with employees and encouraging those employees to become more disciplined shoppers. This is predictably being met with resistance.

But there’s a more urgent matter at hand: until we find a way to flip the health-care system on its head, we’re anticipating a future where networks get narrower and significantly limit options and deductibles rise to catastrophic heights.

Employers may not be thinking ahead for these drastic changes, which is why brokers can be instrumental in helping clients guide their employees toward the necessary mental and financial preparations. Here are a few ideas to get them started.

1. Shift gears to plan beyond the calendar year.

For most, health care is an infrequent experience that’s handled reactively: you get sick, you go to the doctor, your insurance foots the bill. However, now that employees are on the hook for potentially thousands of dollars, it’s crucial that they plan ahead.

To facilitate this shift in mindset, employers should encourage employees to:

  • Utilize a health savings account (HSA):When it comes to HSAs, people tend to fall into one of two schools of thought: “HSAs are a silver bullet” or “HSAs are a terrible excuse by politicians to allow the existence of HDHPs.” Rarely is a situation so black and white, and this one is no exception. HSAs aren’t the best choice for everyone. Certain demographics can’t afford to juggle the high costs of health care (and life) while also contributing funds to an account. However, it’s important to keep in mind that as costs continue to rise, more people will be pushed above the HSA qualification line and having an account may be the only life raft available when drowning in high deductibles — a trend we’re already starting to see.In an ideal world, the HSA wouldn’t exist. Out-of-control health care costs bear the blame for solutions like HDHPs — and the HSA is our consolation prize. The reason I advocate the utilization of these accounts for long-term planning is because they are the only health care benefit we have that encourages people to think beyond 12 months. Unlike the flexible spending account (FSA), the money in an HSA rolls over every year and grows over time, so it lets people save for years down the road (maybe when the pediatrician bills pile up, or you finally have that major surgery) vs. scrambling to spend their funds before the end of the year. Also, if an employer is contributing to an employee’s HSA, it’s leaving money on the table not to sign up for an account.
  • Shop for the best “deals”:Unless someone is a frequent flyer in the health care system, they might brush off shopping for healthcare since it seems like a lot of effort for a single doctor’s visit. However, considering the fact that the cost of an ACL surgery can vary as much as $17,000, those numbers certainly add up over time. (Even more so if a patient fails to find care that’s in network.) Helping employees understand this concept, and pairing it with an easy-to-use transparency solution, can save them tons of money in the long run — especially if the cost savings from each doctor’s visit are deposited into an HSA for future use.

2. Recognize that options are still available.

I’m not going to try to frame high deductibles in a positive light. It’s not the ideal situation for consumers or employers. But sometimes, just knowing there are options in a seemingly bleak situation can provide temporary relief. Here are some tips for employers to share with employees when they’re frustrated about their HDHPs:

  • Ask questions:Employees shouldn’t be afraid to ask questions. Healthcare is known for being convoluted, so it’s likely they’re not alone in any confusion they experience. They should start with health insurance and take time with the HR manager to understand the specifics of their coinsurance, copays, deductibles, and benefits so they’re aware of all their options, such as free preventive services. Another great place for questions is at the doctor’s office. Asking about and negotiating costs (yes, you can do that!) can have huge payoffs — Consumer Reports found that only 31 percent of Americans haggle with doctors over medical bills but that 93 percent of those who did were successful, with more than a third of those saving more than $100.
  • Stay educated:“Education” can be a tired term for brokers and employers. Employees never seem to read the emails and collateral materials that teams painstakingly curate each year. While disheartening, I think the focus on education is a long but ultimately rewarding process. Consider the 401(k). These plans struggled through the recessions in the early 2000s, but through constant behavioral reinforcement (helped largely by policies such as The Pension Protection Act, which made it easier for companies to automatically enroll their employees in 401(k) plans) and continued efforts by employers, 401(K)s bounced back and hold $4.8 trillion in assets today.The same lesson can be applied to your education efforts as well. That is, eventually the education will stick. So help create a new ecosystem for employees to navigate by getting timely information and resources out there about maximizing HDHPs and utilizing HSAs.

3. Stay optimistic because change is coming.

This point is a bit more abstract. Worrying about health care costs is exhausting, and things are likely to get worse before they get better. However, there’s been a lot of news in the health care space that should bring a glimmer of optimism.

For instance, we heard about the partnering of three industry powerhouses to create a new health care company for their employees. It’s been fascinating to see how much chatter this announcement has already generated and will likely keep traditional employer health care vendors on their toes.

While the trend of employers building coalitions to tackle health care costs is nothing new and it’s too early to tell how successful this initiative will be, the bigger point is that this is a strong signal that change is desperately needed. More and more companies — regardless of what industry they’re in — are starting to realize that they’re all in the business of health care. And as we gain power in numbers, I believe we will build the momentum to create some serious change.

It’s tough to win in today’s health care world, and it’s likely going to get even more challenging over the next few years.  But if brokers and employers can provide the right level of guidance, education, and resources, they can help employees better mentally and financially manage their high-deductible futures.

SOURCE:
Vivero, D (2 July 2018) "3 ideas to ease the transition to a high-deductible world" [Web Blog Post]. Retrieved from https://www.benefitspro.com/2018/02/08/3-ideas-to-ease-the-transition-to-a-high-deductibl/


HSA How-To

Health Savings Accounts can be tricky, employees have the control, employers and insurance companies are there to guide them in the right direction. Here is a how to helping guide to assist your customers to the right HSA plan.


If an employer wants to offer employees pretax payroll deferrals to their health savings accounts, the employer needs to first create a Section 125 plan or cafeteria plan that allows HSA deferrals.

A cafeteria plan is the only way for employers to offer employees a choice between taxable and nontaxable benefits, “without the choice causing the benefits to become taxable,” the IRS says. “A plan offering only a choice between taxable benefits is not a Section 125 plan.”

Here are five things to know about HSAs and Section 125 plans.

1. A Section 125 plan is just one of several ways for employers to help employees with funding their HSAs.

Employers offering HDHPs face the choice of whether and how to help their employees with the funding of the employees’ HSAs. The options include the following:

  • Option 1 – Employee after-tax contributions.Employers are not required to help with the employees’ HSAs and may choose not to. In this case, employees may open HSAs on their own and receive the tax deduction on their personal income tax return. This option allows for income tax savings, but not payroll taxes. A variation on this option is for employers to allow for post-tax payroll deferral (basically, direct deposit of payroll funds into an HSA without treating the deposit any differently than other payroll which may also be directly deposited into an employee’s personal checking account).

    This does not change the tax or legal situation, but it does provide convenience for employees and will likely increase HSA participation and satisfaction.

  • Option 2 – Employee pretax payroll deferral.Employers can help employees fund their HSAs by allowing for HSA contributions via payroll deferral. This is inexpensive and can be accomplished by adding a Section 125 cafeteria plan with HSA deferrals as an option. Employers benefit by not having to pay payroll taxes on the employees’ HSA contributions. Employees save payroll taxes as well. Plus, HSA contributions are not counted as income for federal, and in most cases, state income taxes. Setting up automatic payments generally simplifies and improves employee savings.
  • Option 3 – Employer-funded contributions.Employers may make contributions to their employees’ HSAs without a Section 125 plan if the contributions are made directly. The contributions must be “comparable,” basically made fairly (with a lot of rules to follow). This type of contribution is tax deductible by the employer and not taxable to the employee (not subject to payroll taxes or federal income taxes and in most cases, not subject to state income taxes either).
  • Option 4 – Employer and employee pretax funding.Employers can combine options 2 and 3, where the employer makes a contribution to the employees’ HSAs and the employer allows employees to participate in a Section 125 plan and enabling them to defer a portion of their pay pretax into an HSA. This is a preferred approach for a successful HDHP and HSA program, as it ensures that employees get some money into their HSA through the employer contribution and allows for the best tax treatment to allow for employees to contribute more on their own through payroll deferral.
  • Options for more tax savings.Some employers go beyond these options to increase tax savings even more. Although a number of strategies exist to increase tax savings, using a limited-purpose FSA (or HRA) is a common one. Generally, FSAs are not allowed with HSAs; however, an exception exists for limited-purpose FSAs. Limited-purpose FSAs are FSAs limited to payments for preventive care, vision and dental care. This provides more tax savings and employees use the FSA to pay for the limited-purpose expenses (dental and vision) and save the HSA for other qualified medical expenses.

HRAs can also be used creatively in connection with HSA programs. The HRA cannot be a general account for reimbursement of qualified medical expenses, but careful planning can allow for a limited-purpose HRA, a postdeductible HRA, or other special types of HRAs.

2. There are several benefits for an employer using a Section 125 plan combined with an HSA.

  • Employees can make HSA contributions through payroll deferral on a pretax basis.
  • Employees may pay for their share of insurance premiums on a pretax basis.
  • Employers and employees save payroll taxes (7.65 percent each on FICA and FUTA for contributions).
  • Employers avoid the “comparability” rules for HSA contributions although employers are subject to the Section 125 plan rules.

3. The employer is responsible for administering the Section 125 plan.

For payroll deferral into an HSA through a Section 125 plan, the employer must reduce the employees’ pay by the amount of the deferral and contribute that money directly into the employees’ HSA.

The employer may do this administration itself or it may use a payroll service or another type of third-party administrator. In any case, the cost of the Section 125 plan itself and the ongoing administration are generally small and offset, if not entirely eliminated, by employer savings through reduced payroll taxes.

Another administrative element is the collection of Section 125/HSA payroll deferral election forms from employees. Employers that have offered Section 125 plans prior to introducing an HSA program are familiar with this process.

Unlike other Section 125 plan deferral elections, which only allow annual changes, the law allows for changes to the HSA deferral election as frequently as monthly.

Although frequent changes to the elections create a small administrative burden on the employer, the benefit to employees is significant. Employers are not required to offer changes more frequently than annually.

The full extent of the administrative rules for Section 125 plans is beyond the scope of this discussion.

4. Contributions to HSAs under Section 125 plans are subject to nondiscrimination rules.

A cafeteria plan must meet nondiscrimination rules. The rules are designed to ensure that the plan is not discriminatory in favor of highly compensated or key employees.

For example, contributions under a cafeteria plan to employee HSAs cannot be greater for higher-paid employees than they are for lower-paid employees. Contributions that favor lower-paid employees are not prohibited.

The cafeteria plan must not: (1) discriminate in favor of highly compensated employees as to the ability to participate (eligibility test), (2) discriminate in favor of HCEs as to contributions or benefits paid (contributions and benefits test), and (3) discriminate in favor of HCEs as measured through a concentration test that looks at the contributions made by key employees (key employee concentration test). Violations generally do not result in plan disqualification, but instead may cause the value of the benefit to become taxable for the highly compensated employees or key employees.

The nondiscrimination rules predate the creation of HSAs and how the rules apply to HSA contributions is an area where additional government guidance would be welcome.

5. An employer needs a Section 125 plan to allow for HSA contributions through payroll deferral.

Can an employer allow for HSA contributions through payroll deferral without a Section 125 plan? No, not if the goal is to save payroll taxes. Employers can offer HSA payroll deferral on an after-tax basis without concern over the comparability rules or the Section 125 plan rules. Amounts contributed under this method are treated as income to the employee and are deductible on the employee’s personal income tax return. The lack of any special tax treatment for this approach makes it unattractive for most employers and with just a small additional investment of money and time, a Section 125 plan could be added allowing for pretax deferrals.

Here is an example: Waving Flags, Inc. does not offer health insurance or a Section 125 plan to its employees. Waving Flags does provide direct deposit services to its employees that provide it with their personal checking account number and bank routing number. Maggie, an employee of Waving Flags, Inc., approaches the human resources person and asks to have her direct deposit split into two payment streams with $100 per month being directly deposited to her HSA and the balance of her pay being deposited into her personal checking account. She provides Waving Flags the appropriate account and routing numbers and signs the proper election forms.

Waving Flags is not subject to the Section 125 nondiscrimination rules for pretax payroll deferral, nor is Waving Flags subject to the HSA comparability rules. Waving Flags is simply paying Maggie by making a direct deposit into her HSA. The $1,200 Maggie elects to have directly deposited to her HSA in this manner will be reflected in Box 1 of her IRS Form W-2 from Waving Flags as ordinary income. She will be subject to payroll taxes on the amount. She can claim an HSA deduction on line 25 of her IRS Form 1040 when she files her tax return.

Maggie benefits from this approach by setting up an automatic contribution to her HSA, which often improves the commitment to savings. Most HSA custodians will offer a similar system that HSA owners can set up on their own by having their HSA custodian automatically draw a certain amount from a personal checking account at periodic intervals. Employer involvement is not necessary. Individuals with online banking tools available to them may be able to set it from their personal checking account as well to push money periodically to an HSA.

SOURCE:
Westerman, P (2 July 2018) "HSA How-To" [Web Blog Post]. Retrieved from https://www.benefitspro.com/2018/01/01/hsa-how-to/