The DOL Audit: Understanding the spectrum of risk
Will the Department of Labor (DOL) audit my plan? The likelihood that the DOL will audit your plan is low, but it can happen. Continue reading to learn more.
Risk is discussed in many contexts in the retirement plan industry. It comes up as a sales tactic; as good counsel from trusted advisors preaching procedural prudence; or, often, in the form of intimidating industry vernacular like fiduciary liability, fidelity bond or the big, bad Department of Labor (DOL).
This DOL paranoia is an underlying motivation that drives the risk conversation with distributors and retirement plan sponsors. Naturally, the question of probability comes up: What is the likelihood the DOL will audit my plan? The answer is low, but it can happen.
When evaluating retirement plans in terms of risk, it’s best viewed as a spectrum. Generally, risk falls into three principal areas of concern.
Lawsuit risk: The likelihood of a fiduciary-based lawsuit for most plan sponsors is very low. However, if this does arise, it will be unpleasant and expensive, both financially and in terms of reputation.
Administrative breach: Upon inspection, most plans will have some kind of operational defect. Typically, these are either an administrative, fiduciary or a document-level defect. If left uncorrected, they are potentially disqualifying. The good news is the IRS has corrective methods in place for the most common errors. Generally, these are relatively inexpensive to correct but will cost clients a little time and money, and likely some aggravation.
DOL/IRS audit risk: It’s usually the administrative breach discussed above that leads to the DOL/IRS investigation or audit. These agencies are not interested in disqualifying plans; they are more interested in correcting them and protecting the participants from misdeeds (intentional or not).
When a DOL audit does happen, it tends to occur because someone invited investigation. This could be the result of a disgruntled former employee, a standard IRS audit that somehow spiraled into a full DOL investigation or a variety of other reasons. So, what can employers and their service providers do to avoid an audit?
The IRS and DOL don’t publish an official list of items that could lead to an investigation, but it’s a good idea to look at your plan’s most recent IRS Form 5500 filings to decrease the likelihood of an audit. This is publicly available information that can signal to government agencies that something might be wrong and they should take a closer look. Some of the more common red flags include:
- Line items that are left blank when the instructions require an answer
- Inconsistencies in the data disclosed on the Form 5500 schedules
- A large drop in the number of participants from one year to the next
- A large dollar amount in the “Other” asset line on the Schedule H
- Having an insufficient level for the plan’s required Fidelity Bond
- Consistently late deposits or deferrals and hard-to-value or non-marketable investments (including self-directed brokerage accounts or employer stock) could be counted as red flags as well.
Plan sponsors should make sure that 5500s are completed with the same care and attention to detail used when filling out IRS 1040, and ensure the plan is being governed properly and in compliance with ERISA. This can be a challenge even for the most well-intentioned plan sponsors, given the complexity of the task and the fact that most employers don’t have the expertise in-house.
Calling in a specialist
But you don’t need to navigate these waters on your own. Instead, you might consider the “Prudent Man” rule, which implies that when expertise is required yet absent, a prudent person outsources the needed expertise. There is a wealth of talented retirement plan specialists and advisors available to help guide you through the audit process or, better yet, steer clear of it altogether.
When considering whether to employ one of these specialists, you will need to evaluate their experience, expertise and training, as well as if they provide services to help the plan sponsor keep the DOL (and the IRS) out of their offices. Some commonly available services include:
- 5500 reviews to help plan sponsors avoid potential audit triggers
- Coaching services to help plan sponsors identify and eliminate some of those difficult-to-value assets like employer stock or self-directed brokerage accounts
- Service provider evaluations to help plan sponsors identify those who will work as a plan fiduciary and put the appropriate guardrails in place on an automated basis
In conclusion, the best way to survive a potential DOL investigation or IRS audit is to avoid one altogether. Committing to best practices for running the plan may mean outsourcing a great deal of the work to specialist retirement plan providers and advisors. Plan sponsors would be wise to consider working with service providers who operate as plan fiduciaries themselves. In this way, you’re more likely to avoid problems and achieve better plan results, leading to better outcomes for everyone.
SOURCE: Grantz, J (7 June 2018) "The DOL Audit: Understanding the spectrum of risk" (Web Blog Post). Retrieved from https://www.benefitnews.com/opinion/dol-audit-understanding-the-spectrum-of-risk?feed=00000152-18a5-d58e-ad5a-99fd31fe0000
Helping Your Employees Protect Against Identity Theft
Are you doing enough to help your employees protect themselves from identity theft? Make sure to take a look at this article by Irene Saccoccio from SHRM on what employers can do to protect their employees from identity theft.
Social Security is committed to securing today and tomorrow for you and your employees. Protecting your identity and information is important to us. Security is part of our name and we take that seriously.
Identity theft is when someone steals your personally identifiable information (PII) and pretends to be you. It happens to millions of Americans every year. Once identity thieves have your personal information they can open bank or credit card accounts, file taxes, or make new purchases in your name. You can help prevent identity theft by:
- Securing your Social Security card and not carrying it in your wallet;
- Not responding to unsolicited requests for personal information (your name, birthdate, social security number, or bank account number) by phone, mail, or online;
- Shredding mail containing PII instead of throwing it in the trash; and
- Reviewing your receipts. Promptly compare receipts with account statements. Watch for unauthorized transactions.
It is important that your employees take the necessary steps to protect their Social Security number. Usually, just knowing the number is enough, so it is important not to carry your Social Security card or other documents unless they are needed for a specific purpose. If someone asks for your employees’ number, they should ask why, how it will be used, and what will happen if they refuse. When hired, your employees should provide you with the correct Social Security number to ensure their records and tax information are accurate.
If your employees suspect someone else is using their Social Security number, they should visit IdentityTheft.gov to report identity theft and get a recovery plan. IdentityTheft.gov guides them through every step of the recovery process. It’s a one-stop resource managed by the Federal Trade Commission, the nation’s consumer protection agency. You can also call 1-877-IDTHEFT (1-877-438-4338); TTY 1-866-653-4261.
Your employee should also contact the Internal Revenue Service (IRS), and file an online complaint with the Internet Crime Complaint Center at www.ic3.gov.
Don’t let your employees fall victim to identity theft. Advise them to read our publication Identity Theft and Your Social Security Number or read our Frequently Asked Questions for more information. If you or an employee suspects that they’re a victim of identity theft, don’t wait, report it right away!
See the original article Here.
Source:
Saccoccio I. (2017 May ). Helping your employees protect against identity theft [Web blog post]. Retrieved from address https://blog.shrm.org/blog/helping-your-employees-protect-against-identity-theft
Is Social Media Putting Employees’ Health, Safety at Risk?
Do your employees know about all of the risks that can come from their social media? Find out how social media can affect your employee's safety and health in this article from Employee Benefit News by Jill Hazan.
The issue of personal online safety has finally crossed over into the healthcare arena — and employers need to step up and learn to best educate employees about keeping them safe.
A recent article in the Journal of the American Medical Association Pediatrics, “Parental Sharing on the Internet: Child Privacy in the Age of Social Media and the Pediatrician’s Role,” highlights how parents who post information about their children on social media put them at greater risk for identity theft. In addition, this trend toward oversharing compromises a child’s protected health information. What might happen when that child applies for a job in the future and a simple internet search reveals health information she would not want an employer to know?
While HIPAA protects the confidentiality of an individual’s medical records, it doesn’t provide comprehensive protections outside the healthcare environment. The laws around the privacy rights of children relative to their parents’ online disclosures are still evolving. The article recommends that pediatricians ask parents about their social media habits to help keep children safe and their data private. It is a natural extension that all primary care providers should be asking patients about social media behaviors, as the issues of identity theft and data privacy are relevant to children and adults alike.
This recommendation is increasingly significant from an employee benefit perspective.
So what should employers do?
Employers routinely provide healthcare benefits to employees. If health plans and physicians are acknowledging and addressing the risks of social media from a privacy and security perspective, shouldn’t employers extend that focus into the workplace? With the continued employer emphasis on wellness, it is incumbent on health plans and employers alike to educate employees on online security and the risks of identity theft.
There are a variety of resources and benefits that employers can access to assist employees in navigating the online world safely. A series of well-structured, engaging seminars on identity theft and online security that combine real-life stories with actionable advice are effective in educating employees and changing behaviors. Online tutorials, like those provided by the Center for Identity at the University of Texas, Austin, can guide employees on setting proper privacy settings on social media sites, such as Facebook, Twitter, LinkedIn and Pinterest.
Identity theft protection plans provide monitoring and restoration services, as well as education to help keep employees and their families secure. EAPs may provide guidance on identity theft and counseling for victims. Comprehensive legal benefit plans provide legal advice and representation for victims of identity theft. Employers may also provide employees access to online data protection tools for use at work and home with features that encrypt communication and block malware and phishing attempts.
Employees need to understand how to navigate the social media and online environment to keep their families safe. Identity theft of a family member affects more than just one person. It can register an emotional, physical and financial toll on the entire family. Employers need to structure a comprehensive approach to managing the health and wellness of employees as it relates to their online behaviors. A program with a combination of employee benefits, from healthcare to identity theft protection benefits, supplemented by onsite employee education, will support the goals of the health plan and, ultimately, the organization’s overall business objectives.
See the original article Here.
Source:
Hazan J. (2017 May 1). Is social media putting employees' health, safety at risk? [Web blog post]. Retrieved from address https://www.benefitnews.com/opinion/is-social-media-putting-employees-health-safety-at-risk?feed=00000152-18a4-d58e-ad5a-99fc032b0000
Photo Credit: HowToStartABlogOnline.net
Half of Mature Workers Delaying or Giving Up on Retirement
Did you know that now more than ever Americans are giving up on their dreams of retirement? Find out about the somber facts facing the older generation of workers in the great article from Benefits Pro by Marlene Y. Satter.
It’s a grim picture for older workers: half either plan to postpone retirement till at least age 70, or else to forego retirement altogether.
That’s the depressing conclusion of a recent CareerBuilder survey, which finds that 30 percent of U.S. workers aged 60 or older don’t plan to retire until at least age 70—and possibly not then, either.
Another 20 percent don’t believe they will ever be able to retire.
Why? Well, money—or, rather, the lack of it—is the main reason for all these delays and postponements.
But that doesn’t mean that workers actually have a set financial goal in mind; they just have this sinking feeling that there’s not enough set aside to support them.
Thirty-four percent of survey respondents aged 60 and older say they aren’t sure how much they’ll need to save in order to retire.
And a stunning 24 percent think they’ll be able to get through retirement (and the potential for high medical expenses) on less than $500,000.
Others are estimating higher—some a lot higher—but that probably makes the goal of retirement seem even farther out of reach, with 25 percent believing that the magic number lies somewhere between $500,000–$1,000,000, 13 percent shooting for a figure between $1–2 million, 3 percent looking at $2 million to less than $3 million and (the) 1 percent aiming at $3 million or more.
And if that’s not bad enough, 26 percent of workers 55 and older say they don’t even participate in a 401(k), IRA or other retirement plan.
With 74 percent of respondents 55 and older saying they aren’t making their desired salary, that could play a pretty big part in lack of participation—but that doesn’t mean they’re standing still. Eight percent took on a second job in 2016, and 12 percent plan to change jobs this year.
Predictably, the situation is worse for women. While 54.8 percent of male respondents aged 60+ say they’re postponing retirement, 58.7 percent of women say so.
Asked at which age they think they can retire, the largest groups of both men and women say 65–69, but while 44.9 percent of men say so, just 39.6 percent of women say so.
In addition, 24.4 percent of women peg the 70–74 age range, compared with 21.1 percent of men, and 23.2 percent of women agree with the gloomy statement, “I don’t think I’ll be able to retire”—compared with 18 percent of men.
And no wonder, since while 21.7 percent of men say they’re “not sure” how much they’ll need to retire, 49.3 percent of women are in that category.
Women also don’t participate in retirement plans at the rate that men do, either; 28.3 percent of male respondents say they don’t participate in a 401(k), IRA or other retirement plan, but 35.4 percent of female respondents say they aren’t participating.
For workers in the Midwest, a shocking percentage say they’re delaying retirement: 61.6 percent overall, both men and women, of 60+ workers saying they’re doing so.
Those in the fields of transportation, retail, sales, leisure and hospitality make up the largest percentages of those putting off retirement, at 70.4 percent, 62.5 percent, 62.8 percent and 61.3 percent, respectively. And 46.7 percent overall agree with the statement, “I don’t think I’ll be able to retire.”
Incidentally, 53.2 percent of those in financial services—the largest professional industry group to say so—are not postponing retirement.
They’re followed closely by those in health care, at 50.9 percent—the only other field in which more than half of its workers are planning on retiring on schedule.
And when it comes to participating in retirement plans, some industries see some really outsized participation rates that other industries could only dream of. Among those who work in financial services, for instance, 96.5 percent of respondents say they participate in a 401(k), IRA or comparable retirement plan.
That’s followed by information technology (88.2 percent), energy (87.5 percent), large health care institutions (85.8 percent—smaller health care institutions participate at a rate of 51 percent, while overall in the industry the rate comes to 75.5 percent), government employees (83.6 percent) and manufacturing (80.2 percent).
After that it drops off pretty sharply, and the industry with the lowest participation rate is the leisure and hospitality industry, at just 43.4 percent.
See the original article Here.
Source:
Satter M. (2017 March 31). Half of mature workers delaying or giving up on retirement [Web blog post]. Retrieved from address https://www.benefitspro.com/2017/03/31/half-of-mature-workers-delaying-or-giving-up-on-re?ref=mostpopular&page_all=1
Financial stress hurts emotional, physical well-being of workers
Did you know that your emotional and physical well-being can take a hit when you are under financial stress? Here is an interesting article from Employee Benefits Advisors about the correlation between financial stress and mental and physical health by Amanda Eisenberg.
Americans aren’t able to save for their financial goals, and that stress is affecting their emotional and physical well-being.
A new study by Guardian Life Insurance found that financial outlook is the most significant driver of working Americans’ overall well-being, constituting 40% of the insurance company’s Workforce Well-Being Index, and money is cited as the No. 1 source of stress for a majority of workers.
“Even among people working full-time with benefits, many still do not have access to adequate insurance coverage or retirement plans,” says Dave Mahder, vice president and chief marketing officer of Guardian’s Group and Worksite Markets business. “And few take advantage of the health and wellness programs available through their employers, which often contain a much broader menu of resources than workers realize.”
Millennials are one of the subsets of employees who do participate in benefits that can help alleviate financial stress, the survey found.
“Millennials want marketing to them,” says Gene Lanzoni, assistant vice president of thought leadership for Guardian Life. “It’s not enough these days to say, “This is someone like you,” to do with your benefit selection. That’s what the challenge is for millennials. It’s not enough of an engaging process for them.”
Half of millennials surveyed in Guardian Life’s “Fourth Annual Guardian Workplace Benefits Study” said they don’t have disability insurance, while a third have yet to sign up for a retirement plan.
They are not the only group of employees struggling to purchase voluntary benefits like disability and life insurance; single working parents are also feeling the heat.
One in three single working parents does not have a retirement plan, compared to 20% of the 1,439 workers surveyed. Similarly, one in four workers doesn’t have life insurance, and one in three workers doesn’t have disability insurance, according to the survey.
“Many of those working parents are struggling to balance work and personal life, and they may not be able to afford some of the protection products,” says Lanzoni. “Some of that discretionary income might not go toward paying a voluntary disability plan.”
To offset expenses, Americans are increasingly turning to debt, whether through loans or credit cards, to temporarily relieve their financial burdens.
Four in 10 Americans have car loans, 32% of workers are carrying a mortgage, 17% have student loans and 12% have home improvement debt, according to the study. Overall, 75% of Americans are carrying debt.
Non-mortgage debt — particularly auto and education loans — contributes to lower financial wellness; those carrying the most total debt, including mortgages and rent, report considerably lower overall well-being, according to Guardian Life’s report.
Employers can also help alleviate the burden by providing education to employees, among other services, says Lanzoni.
The survey found that employer-sponsored voluntary insurance products and college tuition or loan repayment programs help with financial wellness, as well as employee assistance programs that can identify financial, emotional and physical issues that lead to stress.
See the original article Here.
Source:
Eisenberg A. (2017 March 13). Financial stress hurts emotional, physical well-being of workers [Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/news/financial-stress-hurts-emotional-physical-well-being-of-workers?feed=00000152-1387-d1cc-a5fa-7fffaf8f0000
Health Law’s 10 Essential Benefits: A Look At What’s At Risk In GOP Overhaul
Great article from Kaiser Health News about all the changes that could be coming with the ACA overhaul by Michelle Andrews
As Republicans look at ways to replace or repair the health law, many suggest shrinking the list of services insurers are required to offer in individual and small group plans would reduce costs and increase flexibility. That option came to the forefront last week when Seema Verma, who is slated to run the Centers for Medicare & Medicaid Services in the Trump administration, noted at her confirmation hearing that coverage for maternity services should be optional in those health plans.
Maternity coverage is a popular target and one often mentioned by health law critics, but other items also could be watered down or eliminated.
There are some big hurdles, however. The health law requires that insurers who sell policies for individuals and small businesses cover at a minimum 10 “essential health benefits,” including hospitalization, prescription drugs and emergency care, in addition to maternity services. The law also requires that the scope of the services offered be equal to those typically provided in employer coverage.
“It has to look like a typical employer plan, and those are still pretty generous,” said Timothy Jost, an emeritus professor at Washington and Lee University Law School in Virginia who is an expert on the health law.
Since the 10 required benefits are spelled out in the Affordable Care Act, it would require a change in the law to eliminate entire categories or to water them down to such an extent that they’re less generous than typical employer coverage. And since Republicans likely cannot garner 60 votes in the Senate, they will be limited in changes that they can make to the ACA. Still, policy experts say there’s room to “skinny up” the requirements in some areas by changing the regulations that federal officials wrote to implement the law.
Habilitative Services
The law requires that plans cover “rehabilitative and habilitative services and devices.” Many employer plans don’t include habilitative services, which help people with developmental disabilities such as cerebral palsy or autism maintain, learn or improve their functional skills. Federal officials issued a regulation that defined habilitative services and directed plans to set separate limits for the number of covered visits for rehabilitative and habilitative services.
Those rules could be changed. “There is real room for weakening the requirements” for habilitative services, said Dania Palanker, an assistant research professor at Georgetown University’s Center on Health Insurance Reforms who has reviewed the essential health benefits coverage requirements.
Oral And Vision Care For Kids
Pediatric oral and vision care requirements, another essential health benefit that’s not particularly common in employer plans, could also be weakened, said Caroline Pearson, a senior vice president at Avalere Health, a consulting firm.
Mental Health And Substance Use Disorder Services
The health law requires all individual and small group plans cover mental health and substance use disorder services. In the regulations the administration said that means those services have to be provided at “parity” with medical and surgical services, meaning plans can’t be more restrictive with one type of coverage than the other regarding cost sharing, treatment and care management.
“They could back off of parity,” Palanker said.
Prescription Drugs
Prescription drug coverage could be tinkered with as well. The rules currently require that plans cover at least one drug in every drug class, a standard that isn’t particularly robust to start with, said Katie Keith, a health policy consultant and adjunct professor at Georgetown Law School. That standard could be relaxed further, she said, and the list of required covered drugs could shrink.
Preventive And Wellness Services And Chronic Disease Management
Republicans have discussed trimming or eliminating some of the preventive services that are required to be offered without cost sharing. Among those requirements is providing birth control without charging women anything out of pocket. But, Palanker said, “if they just wanted to omit them, I expect that would end up in court.”
Pregnancy, Maternity And Newborn Care
Before the health law passed, just 12 percent of health policies available to a 30-year-old woman on the individual market offered maternity benefits, according to research by the National Women’s Law Center. Those that did often charged extra for the coverage and required a waiting period of a year or more. The essential health benefits package plugged that hole very cleanly, said Adam Sonfield, a senior policy manager at the Guttmacher Institute, a reproductive health research and advocacy organization.
“Having it in the law makes it more difficult to either exclude it entirely or charge an arm and a leg for it,” Sonfield said.
Maternity coverage is often offered as an example of a benefit that should be optional, as Verma advocated. If you’re a man or too old to get pregnant, why should you have to pay for that coverage?
That a la carte approach is not the way insurance should work, some experts argue. Women don’t need prostate cancer screening, they counter, but they pay for the coverage anyway.
“We buy insurance for uncertainty, and to spread the costs of care across a broad population so that when something comes up that person has adequate coverage to meet their needs,” said Linda Blumberg, a senior fellow at the Health Policy Center at the Urban Institute.
See the original article Here.
Source:
Andrews M. (2017 February 21). Health law's 10 essential benefits: a look at what's at risk in GOP overhaul [Web blog post]. Retrieved from address https://khn.org/news/health-laws-10-essential-benefits-a-look-at-whats-at-risk-in-gop-overhaul/
3 Financial Risks That Retirees Underestimate
Are you worried about the risks associated with retirement? If so check out this article from Kiplinger about some of the risks associated with retirement that retirees underestimate by Christopher Scalese
When you think of risk in retirement, what comes to mind? For many, the various risks associated with the stock market may be the first. From asset allocation risk (avoiding keeping all of your eggs in one basket) to sequence-of-return risk (the risk of taking out income when the market is down), these factors become increasingly important once your paychecks stop and you begin drawing from your investments for retirement income.
However, these are only the tip of the iceberg when it comes to key risks that should be considered for retirement planning in today's economy. Here are three areas I commonly see retirees and pre-retirees forgetting to consider:
1. Portfolio Failure Risk
How long can you live off of income from your investments? Is it likely that your investments can provide an income stream you won't outlive? There are many theories, such as the ever-popular 4% rule, which suggests that, if you maintain a portfolio consisting of 60% bonds and 40% equities, you can take 4% of your total portfolio each year. However, studies in recent years have shown this method to have about a 50% failure rate based on today's low-interest rates and market volatility.
Another withdrawal method is guessing how long you'll live and dividing your savings by 20 to 30 years—but what happens if you live 31 years?
If you do not have a written income plan for how to strategically withdraw from your accounts over the duration of your retirement, this may be a significant risk to consider.
2. Unexpected Financial Responsibility Risk
Life is full of surprises, and retirement is no different. Today's retirees are known as the "sandwich generation" with financial pressures coming from all sides—often having to provide for grown children and aging parents at the same time.
Additionally, there are difficult but significant financial planning considerations for the future loss of a spouse. You can expect to lose a Social Security payment and potentially see changes to a pension. Simultaneously, tax brackets will shrink when going from married to single, taking a larger piece of your already-reduced income.
Having a proactive, flexible financial strategy can be essential in helping you adapt to your many changing needs throughout the course of your retirement.
3. Health Care Risk
Beyond the considerations for inflation on daily purchasing power in retirement, rising costs of health care, particularly as Americans continue living longer, require explicit planning to avoid a physically disabling event from becoming a financial concern. From Medigap options to long-term care and hybrid insurance policies, considering insurance coverage for perhaps one of the most significant expenses in retirement may be a pivotal point in your retirement planning.
While these obstacles may seem daunting, identifying and understanding the concerns unique to your retirement goals should be the first step to help overcome them.
See the original article Here.
Source:
Scalese C. (2017 January). 3 financial risks that retirees underestimate [Web blog post]. Retrieved from address https://www.kiplinger.com/article/retirement/T037-C032-S014-3-financial-risks-that-retirees-underestimate.html
IRS may have big ACA employer tax woes, advocate says
IRS may play a big part in your company's ACA tax filing. Checkout this article from Benefits Pro about what the IRS will be looking for in companies ACA filings this year by Allison Bell
An official who serves as a voice for taxpayers at the Internal Revenue Service says the IRS may be poorly prepared to handle the wave of employer health coverage offer reports now flooding in.
The Affordable Care Act requires "applicable large employers" to use Form 1095-C to tell their workers, former workers and the IRS what, if any, major medical coverage the workers and former workers received. Most employers started filing the forms in early 2016, for the 2015 coverage year.
This year, the IRS is supposed to start imposing penalties on some employers who failed to offer what the government classifies as solid coverage to enough workers.
Nina Olson, the national taxpayer advocate, says the IRS was not equipped to test the accuracy of ACA health coverage information reporting data before the 2016 filing season, for the 2015 coverage year. The IRS expected to receive just 77 million 1095-C forms for 2015, but it has actually received 104 million 1095-C's, and it has rejected 5.4 percent of the forms, Olson reports.
"Reasons for rejected returns include faulty transmission validation, missing (or multiple) attachments, error reading the file, or duplicate files," Olson says.
Meanwhile, the IRS has had to develop a training program for the IRS employees working on employer-related ACA issues on the fly, and it was hoping in November to provide the training this month, Olson says.
"The training materials are currently under development," Olson says. She says her office did not have a chance to see how complete the training materials are, or how well they protect taxpayer reports.
Olson discusses those concerns about IRS efforts to administer ACA tax provisions and many other tax administration concerns in a new report on IRS performance. The Taxpayer Advocate Service prepares the reports every year, to tell Congress how the IRS is doing at meeting taxpayers' needs.
In the same report, Olson talks about other ACA-related problems, such as headaches for ACA exchange plan premium tax credit subsidy users who are also Social Security Disability Insurance program users, and she gives general ACA tax provision administration data.
APTC subsidy
The ACA premium tax credit subsidy program helps low-income and moderate-income exchange plan users pay for their coverage.
Exchange plan buyers who qualify can get the tax credit the ordinary way, by applying for it when they file their income tax returns for the previous year. But about 94 percent of tax credit users receive the subsidy in the form of an "advanced premium tax credit."
When an exchange plan user gets an APTC subsidy, the IRS sends the subsidy money to the health coverage issuer while the coverage year is still under way, to help cut how much cash the user actually has to pay for coverage.
When an APTC user files a tax return for a coverage year, in the spring after the end of the coverage year, the user is supposed to figure out whether the IRS provided too little or too much APTC help. The IRS is supposed to send cash to consumers who got too little help. If an APTC user got too much help, the IRS can take some or all of the extra help out of the user's tax refund.
Another ACA provision, the "individual shared responsibility" provision, or individual coverage mandate provision, requires many people to obtain what the government classifies as solid major medical coverage or else pay a penalty.
Individual taxpayers first began filing ACA-related tax forms in early 2015, for the 2014 coverage year. Early last year, individual taxpayers filed ACA-related forms for the second time, for the 2015 coverage year.
Only 6.1 million taxpayers told the IRS they owed individual mandate penalty payments for 2015, down from 7.6 million who owed the penalty for 2014.
But, in part because the ACA designed the mandate penalty to get bigger each year for the first few years, the average penalty payment owed increased to $452 for 2015, from $204 for 2014.
The number of households claiming some kind of exemption from the penalty program increased to 8.6 million, from 8.4 million.
The number of filers who said they had received APTC help increased to 5.3 million for 2015, up from 3.1 million for 2014. And the amount of APTC help reported increased to $18.9 billion for 2015, from $11.3 billion in APTC subsidy help for 2014.
That means the 2015 recipients were averaging about $3,566 in reported subsidy help in 2015, down from $3,645 in reported help for 2014.
Olson says her office helped 10,910 taxpayers with ACA premium tax credit issues in the 12-month period ending Sept. 30, 2016, up from 3,318 in the previous 12-month period.
One of her concerns is how the Social Security Disability Insurance program, which is supposed to serve people with severe disabilities, interacts with the ACA provision that requires people who guess wrong about their income during the coverage year to pay back excess APTC subsidy help.
SSDI lump-sum payment headaches
Some Social Security Disability Insurance recipients have to fight with the Social Security Administration for years to qualify for benefits. Once the SSDI recipients win their fights to get benefits, the SSA may pay them all of the back benefits owed in one big lump sum.
The big, lump-sum disability benefits payments may increase the SSDI recipients' income for a previous year so much they end up earning too much for that year to qualify for ACA premium tax credit help, Olson says in the new report.
The SSDI recipients may then have to pay all of the ACA premium tax credit help they received back to the IRS, Olson says.
So far, IRS lawyers have not figured out any law they can use to protect the SSDI recipients from having to pay large amounts of premium tax credit help back to the government, Olson says.
For now, she says, her office is just trying to work on a project to warn consumers about how accepting any lump-sum payment, including an SSDI lump-sum benefits payment, might lead to premium tax credit headaches.
See the original article Here.
Source:
Bell A. (2017 January 16). IRS may have big ACA employer tax woes, advocate says [Web blog post]. Retrieved from address https://www.benefitspro.com/2017/01/16/irs-may-have-big-aca-employer-tax-woes-advocate-sa?page_all=1
HSAs could play bigger role in retirement planning
Did you know that ACA repeal could have and effect on health savings plans (HRA)? Read this interesting article from Benefits Pro about how the repeal of the ACA might affect your HRAs by Marlene Y. Satter
With the repeal of the Affordable Care Act looming, one surprising factor in paying for health care could see its star rise higher on the horizon—the retirement planning horizon, that is. That’s the Health Savings Account—and it’s likely to become more prominent depending on what replaces the ACA.
HSAs occupy a larger role in some of the proposed replacements to the ACA put forth by Republican legislators, and with that greater exposure comes a greater likelihood that more people will rely on them more heavily to get them through other changes.
For one thing, they’ll need to boost their savings in HSAs just to pay the higher deductibles and uncovered expenses that are likely to accompany the ACA repeal.
But for another—and here’s where it gets interesting—they’ll probably become a larger part of retirement planning, since they provide a number of benefits already that could help boost retirement savings.
Contributions are already deductible from gross income, but under at least one of the proposals to replace the ACA, contributions could come with refundable tax credits—a nice perk.
Another proposal would allow HSA funds to pay for premiums on proposed new state health exchanges without a tax penalty for doing so—also beneficial. And a third would expand eligibility to have HSAs, which would be helpful.
But whether these and other possible enhancements to HSAs come to pass, there are already plenty of reasons to consider bolstering HSA savings for retirement. As workers try to navigate their way through the uncertainty that lies ahead, they’ll probably rely even more on the features these plans already offer—such as the ability to leave funds in the account (if not needed for higher medical expenses) to roll over from year to year and to grow for the future, and the fact that interest on HSA money is tax free.
But possibly the biggest benefit to an HSA for retirement is the fact that funds invested in one grow tax free as well. If you can leave the money there long enough, you can grow a sizeable nest egg against potential future health expenses or even the purchase of a long-term care policy. And, at age 65, you’re no longer penalized if you withdraw funds for nonapproved medical expenses.
And if you don’t use the money for medical expenses in retirement, but are past 65, you can use it for living expenses to supplement your 401(k). In that case, you’ll have to pay taxes on it, but there’s no penalty—it just works much like a tax-deferred situation from a regular retirement account.
See the original article Here.
Source:
Satter M. (2017 January 16). HSAs could play bigger role in retirement planning [Web blog post]. Retrieved from address https://www.benefitspro.com/2017/01/16/hsas-could-play-bigger-role-in-retirement-planning?ref=hp-news
9 reasons why retirement may go extinct
Worried about your future retirement? Check out this great read by Marlene Satter
Retirement as we know it may be set to disappear, as younger people look for ways to finance surviving into old age.
But extinction? Surely not.
However, according to the Merrill Edge Report 2016, that might just be in the offing, as workers change how they plan and save for retirement and how they intend to pay for it.
Millennials in particular represent a shift in attitude that includes very unretirement-like plans, although GenXers too are struggling with ways to pay their way through their golden years.
That’s tough, considering that most Americans neither know nor correctly estimate how much money they might need to keep the wolf from the door during retirement—or even to retire at all.
Here’s a look at 9 reasons why retirement as we know it today might be a terminal case—unless things change drastically, and soon.
9. Ignorance.
Most Americans have no idea how much they might need to retire, which leaves them behind the eight ball when trying to figure out when or whether they can afford to do so.
Of course, it’s hardly surprising, considering how many are members of the “sandwich generation,” who find themselves caring for elderly parents while at the same time raising kids, or even trying to put those kids through college.
With soaring medical costs on one end and soaring student debt on the other, not to mention parents supporting adult children who have come home to roost, it’s hard to figure out how much they’ll need to meet all their obligations, much less try to save some of an already-stretched income to cover retirement savings as well.
8. Poor calculations.
We already know most workers don’t know how much they’ll need in retirement—but it’s not just a matter of ignorance. They don’t know how to figure it out, either.
More than half—56 percent—figure they’ll be able to get by during retirement on a million dollars or less, while 9 percent overall think up to $100,000 will see them through.
And 19 percent just flat-out say they don’t know how much they’ll need.
Considering that health care costs alone can cost them a quarter of a mil during retirement, the optimists who think they can get by on $100,000 or less and even those who figure $100,000–$500,000 will do the job are way too optimistic—particularly since saving for medical costs isn’t one of their top priorities.
7. Despair.
It’s pretty hard to get motivated about something if you think it’s not achievable—and that discourages a lot of people from saving for retirement.
Those who have a “magic number” that they think will see them through retirement aren’t all that optimistic about being able to achieve that level of savings, with 40 percent of nonretired workers saying that reaching their magic number by retirement will either be “difficult” or “virtually unattainable.”
6. Luck.
When you don’t believe you can do it on your own, what else is left? Sheer dumb luck, to quote Professor Minerva McGonagall at Hogwarts after Harry and Ron defeated the troll.
Only instead of magic wands, 17 percent of would-be retirees are sadly (and amazingly) counting on winning the lottery to get them to their goal.
5. The gig economy.
Retirement? What retirement? Millennials in particular think they’ll need side jobs in the gig economy to keep them from the cat food brigade.
In addition, exactly half of younger millennials aged 18–24 believe they need to take on a side job to reach their retirement goals, compared with only 25 percent of all respondents. They don’t believe that just one job will cut it any more.
4. Attitude adjustment.
While 83 percent of current retirees are not currently working or never have during their golden years, the majority (83 percent) of millennials plan to work in retirement—whether for income, to keep busy or to pursue a passion.
The rise of the “gig economy" has created an environment where temporary positions and short-term projects are more prevalent and employee benefits such as retirement plans are less certain. This may be why more millennials (15 percent) are likely to rank an employer’s retirement plan as the most important factor when taking a new job compared with GenXers (5 percent) and baby boomers (5 percent).
Older generations had unions to negotiate benefits for them. Millennials might realize they have to do it all themselves, but they aren’t negotiating for salaries high enough to allow them to save.
And union benefits or not, 64 percent of boomers, 79 percent of Gen Xers and even 17 percent of currently retired workers plan to work in retirement.
3. A failure to communicate.
Lack of communications is probably not surprising, since most people won’t talk about savings anyway.
Fifty-four percent of respondents say that the only person they feel comfortable discussing their current retirement savings with is their spouse or partner. Only 36 percent would discuss the subject with family, and only 22 percent would talk with friends about it.
And as for coworkers? Just 6 percent would talk about retirement savings with colleagues—although more communication on the topic no doubt could provide quite an education on both sides of the discussion.
2. Misplaced confidence.
They won’t talk about it, but they think they do better than others at saving for retirement. How might that be, when they don’t know what others are doing about retirement?
Forty-three percent of workers say they are better at saving than their friends, while 28 percent believe they’re doing better at it than coworkers; 27 percent think they’re doing better than their spouse or partner, 27 percent say they’re doing better than their parents and 24 percent say they’re beating out their siblings.
All without talking about it.
1. DIY.
They’re struggling to figure out how much they need, many won’t talk about retirement savings even with those closest to them and they’re anticipating working into retirement—but millennials in particular are taking a more hands-on approach to their investments.
Doing it oneself could actually be a good thing, since it could mean the 70 percent of millennials, 72 percent of GenXers and 57 percent of boomers who are taking the reins into their own hands better understand what they’re investing in and how they need to structure their portfolios.
However, doing it oneself without sufficient understanding—and millennials in particular are also most likely to describe their investment personality as “DIY,” with 32 percent making their own rules when it comes to investments, compared to 19 percent of all respondents—can be a problem.
After all, as the saying goes, “A little knowledge is a dangerous thing.”
See the original article Here.
Source:
Satter M. (2016 December 7). 9 reasons why retirement may go extinct[Web blog post]. Retrieved from address https://www.benefitspro.com/2016/12/07/9-reasons-why-retirement-may-go-extinct?ref=mostpopular&page_all=1