Regulatory clarity makes ID protection a more attractive employee benefit

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Identity theft is the fastest growing crime and consumer complaint in America, and benefit industry experts say concerned employees are seeking protection as an employer perk more than ever. New regulatory certainty about how identity theft protection benefits are taxed could increase the popularity of the benefit as an employer offering.

More than 13 million Americans fall victim to identity theft every year, which means every three seconds someone's identity is stolen. Increased concern about the crime has individuals clamoring for identity theft protection benefits. How that benefit would be taxed, however, had been a topic of some debate in the benefit industry, with some employers eager to offer the benefit but concerned about the impact on employee income taxes.

In its Dec. 30 announcement, the IRS said it will allow preferential tax treatment for employer-provided identity theft benefits, despite the absence of a data breach. Generally, all benefits provided to an employee by an employer must be treated as income, unless the Code provides an exclusion. Previous guidance from the IRS created an exclusion for identity protection services, but only after a breach and only for individuals whose personal information might have been compromised.

The IRS’s latest announcement notes that several commenters requested guidance regarding the tax treatment of identity protection services provided before a data breach. According to the commenters, these services are being provided with increasing frequency in order to allow early detection of data breaches and minimize the impact of breaches when they occur. In response, the IRS has concluded that its previous guidance should be extended.

“The IRS will not assert that an individual must include in gross income the value of identity protection services provided by the individual’s employer or by another organization to which the individual provided personal information (for example, name, social security number, or banking or credit account numbers). Additionally, the IRS will not assert that an employer providing identity protection services to its employees must include the value of the identity protection services in the employees’ gross income and wages. The IRS also will not assert that these amounts must be reported on an information return (such as Form W-2 or Form 1099-MISC) filed with respect to such individuals,” the guidance states.

Any further guidance on the taxability of these benefits will be applied prospectively, it adds.

“This guidance is welcome news for employers that want to offer identity protection services to employees as part of their data security strategy. They may now offer these services without increasing their (or their employees’) federal tax liability.  However, employers should be mindful of state and/or local tax laws as they may differ from federal tax law,” according to Tzvia Feiertag, a senior associate in the Labor & Employment Law Department of the global law firm Proskauer.

The preferential tax treatment does not apply to cash received in lieu of identity protection services or to proceeds received under an existing identity theft insurance policy, the guidance says.

Why planning for retirement matters

Planning for retirement is a bit of a numbers game. It's not just about deciding when you plan to retire, but also estimating how many years you plan to live in retirement. You also have to figure in the cost of healthcare during retirement which could include long-term care.

According to numbers from the National Retirement Planning Coalition, there's been a significant increase in the life of a 65-year-old over the past generation.

In 1980, the average life expectancy for a 65-year-old man was 79.1 years and for a female it was 83.3 years. In 2010, that number increased by over 3 years.

While 3 years may seem small, it can have a financial impact on those living in retirement.

An example from the from the National Retirement Planning Coalition shows a 21 percent increase.

$50,000 of annual expenses in retirement

  • 14 years in retirement = $700,000
  • 17 years in retirement = $850,000

The example above does not include the cost of healthcare in retirement which can drive up the cost. The Insured Retirement Institute (IRI) and Health View Services estimate the cumulative health care expenses for a 65-year-old man in 201 was $370,000 and for a woman $417,000. That does not include the cost of long-term care.

The majority of workers today depend on individual account plans, defined contribution plans and individual retirement accounts to save for retirement.

Technology, interaction, variety: What Millenials look for in a benefits package

Millenials are thinking differently about their company's benefit packages. Understanding what this growing generation in the workforce is looking for could help with your company's recruiting efforts.

A Millenial is someone born after 1980 and the first generation to come of age in the millennium. Pew Research reports this group will number 75 million this year. That's greater than Generation X and Baby Boomers.

But not all Millenials in the workforce are signing up for a benefits package. The Society for Human Resources Management found that just under half of all Millenials consider their overall benefits package to be very important.

Those that find the benefit package important are likely to offer up these answers when asked about employee benefits, according to

"I want choice and variety."

Millennials are accustomed to having access to what they want when they want, especially when it comes to information. They want choices and are often offended by a one-size-fits-all approach. Overall, they look for a well-rounded array of benefits, which may mean that a mix of employer-paid products with supplemental and voluntary products will play an increasingly important role for many employers.

"I want customization and control."

Personalization is highly important to millennials. When they’re offered benefits, they expect those benefits to be tailored to their needs. And, they want control over how they spend their money. While giving them plenty of options puts them in the driver’s seat, too many options may paralyze them. Try to strike a healthy balance by considering a choice of plan designs within a product category, or perhaps core/buy-up options.

"I want true simplicity."

Employee benefits shouldn’t be complicated, and communication is the key. Millennials are looking for simple, clear, easy-to-follow steps, which includes systems that are easy to use. It will be to your advantage to recommend working with a carrier who embraces simplicity and offers varying enrollment strategies. This gives you flexibility in recommending the one that’s likely to be most effective.

"I want interaction and collaboration."

Social is the name of the game for the millennial generation. Peer networks play a huge role in decision-making. Employers would be wise to offer ways their employees can interact and network to get information. Blogs are an important way millennials build trust, gather information and connect. Promote them with your clients. They work.

"I want technology, not paper."

Clearly, the biggest difference between millennials and other generations is their use of technology … and their expectation that technology also be important to others with which they interact. They want to use tools that make benefits easier, such as apps and online portals. And they want alternatives to paper. They trust technology.

If it's On-site, It's Alright

Source: United Benefit Advisors, LLC

During this period of health care reform, most employers are looking at ways to control health care costs while still maintaining a healthy workforce and providing excellent medical services to their employees. One of the ways to accomplish this goal is by having an on-site clinic or one that’s nearby. A survey conducted by the National Association of Worksite Health Centers (NAWHC) revealed that 95% of the companies surveyed said they met their goals -- at least partially -- of increasing employee satisfaction and productivity with an on-site clinic. When you consider such a high percentage was achieved, it makes having an on-site clinic a no-brainer; right? Especially when that same survey also found that more than 80% reported that access to care was improved by their clinic and increased participation in worksite health programs was increased by 75%. Even more amazing is that nearly 70% said the clinic improved their health and 64% said reduced medical costs were achieved.
How can such huge percentages be possible with such a seemingly easy solution? The answer is in the way employees use the clinic. In an article on Employee Benefit News titled What’s the Value of Onsite Clinics?, researchers at the NAWHC discovered that, rather than going to the emergency room (which can be expensive) for something that’s not an emergency, employees went to their employer’s on-site clinic. This was also a great time saver for employees in that they didn’t have to take as much time off work for a minor, unscheduled medical issue. Furthermore, it appears that on-site clinics are a better way to get employees to use and benefit from preventive health care and management programs for certain health conditions. As such, the clinic can be a terrific central focal point for where work-related health programs are hosted.

Most on-site clinics provide basic services such as minor care, preventive screenings, and wellness programs. A few also provide behavioral health services and more than 30% can even handle primary care. According to the NAWHC, the latter service is expected to grow. Another statistic that’s predicted to increase is the number of employers that have on-site or nearby clinics.

That’s because these clinics are being examined by employers of all sizes. It’s not just large employers who can benefit from them. In fact, the NAWHC survey found that the number of employers that manage the clinic themselves is more than 35% and they utilize nurse practitioners and physician assistants to provide medical services.

Health care reform has caused employers to take a second look at having an on-site clinic and it appears that these employers like what they’re finding. Clinics can be an invaluable resource that provides great ROI in curtailing health care costs, reducing employee absenteeism, and creating heightened satisfaction among employees

HHS Formally Moves To Close Loophole Allowing Plans Without Hospital Benefits

The Obama administration took another step to close what many see as a health-law loophole that allows large employers to offer medical plans without hospital coverage and bars their workers from subsidies to buy their own insurance.

“It has come to our attention that certain group health plan designs that provide no coverage of inpatient hospital services are being promoted,” the Department of Health and Human Services said in proposed rules issued late Friday.

Under the new standard, companies with at least 50 workers “must provide substantial coverage of both inpatient hospital services and physician services” to meet the Affordable Care Act’s threshold for a “minimum value” of coverage,  the agency said .

As  reported previously by Kaiser Health News, insurance analysts were surprised this summer to learn that HHS’ online calculator for determining minimum value approved plans without inpatient benefits.

Responding to aggressive marketing by consultants, numerous lower-wage employers had already agreed  to offer the low-cost plans for 2015 or were considering them.

Because a calculator-approved plan at work makes employees ineligible for tax credits to buy more comprehensive insurance in the law’s online marketplaces, consumer advocates feared the problem would trap workers in substandard coverage.

Large employers aren’t required to offer the “essential health benefits” such as hospitalization, physician care and prescriptions that the law orders for plans sold to individuals and smaller employers.

But few expected the official calculator to approve insurance without inpatient benefits. Meeting the minimum-value standard spares employers from penalties of up to $3,120 per worker next year.

HHS also proposed granting temporary relief to employers that have already committed to calculator-approved plans without hospital coverage for 2015. It also would allow workers at those companies to receive tax credits in the marketplaces if they choose to buy insurance there instead.

For 2016, no large-employer plan will meet the minimum-value test without inpatient benefits, HHS proposes.

“A plan that excludes substantial coverage for inpatient hospital and physician services is not a health plan in any meaningful sense and is contrary to the purpose” of the minimum-value standard, the agency said.

“Minimum value is minimum value,” said Timothy Jost, a consumer advocate and Washington and Lee University law professor who welcomed the change. “Nobody ever imagined that minimum value would not include hospitalization services.”

This KHN story can be republished for free ( details ).

Calculator-tested plans lacking inpatient coverage, designed by Key Benefit Administrators and others, have drawn strong interest from large retailers, restaurant chains, staffing companies and other lower-wage employers seeking to control costs, benefits consultants say. Typically the coverage costs half as much as major-medical insurance including hospital benefits.

The American Worker Plans, an Illinois-based benefits consultant, helped dozens of staffing firms with a total of about 20,000 employees to provide such plans for 2015, said Jon Duczak, the company’s senior vice president. Almost all of them have already signed deals to offer the coverage, he said. 

HHS’ move to disallow the insurance “is something I do applaud,” he said. “We were offering a product like this [only] because our clients were asking for it. We needed not only to satisfy our clients but to retain our business.”

Edward Lenz, senior counsel for the American Staffing Association, said the trade group has no problem with requiring hospitalization to meet the minimum-value standard for 2016. But it will seek more leeway for employers that had moved to implement plans without inpatient benefits for 2015.

“Many employers were well along the road” to committing to such plans but delayed signing contracts after Kaiser Health News reported that the administration might move against them, he said. Rather than punishing such companies for their caution, HHS should allow them to temporarily offer such coverage next year, he said.