Analysis: 6.3 Million People with Pre-Existing Conditions Would Be at Risk for Higher Premiums under the House’s Health Bill
Take a look at this interesting article from Kaiser Family Foundation about how people with pre-existing conditions will face higher premiums on their health insurance due to the passing of the AHCA.
A new Kaiser Family Foundation analysis estimates that 6.3 million people — 23 percent of 27.4 million non-elderly adults with a gap of several months in insurance coverage in 2015 – could potentially face higher premiums under the House’s American Health Care Act (AHCA), due to pre-existing health conditions.
The bill, which passed the House earlier this month, allows states to waive community rating in the individual insurance market. Insurers in states with such waivers could vary premiums by health status for an entire plan year for enrollees with a gap in insurance of 63 or more consecutive days in the past year.
People with pre-existing conditions would likely face large premium surcharges under an AHCA waiver, according to the analysis, as insurers would be unable to decline coverage based on a person’s medical history, a practice that was permitted in nearly all states before it was prohibited by the Affordable Care Act in 2014. An earlier analysis from the Foundation estimated that 27 percent of non-elderly adults have a condition that would have led to a coverage refusal in the pre-ACA market.
The new analysis also identifies a second group of people who could be at risk of higher premiums: those with pre-existing conditions now buying their own insurance. It finds that an estimated 3.8 million adults, or about 25 percent of all adult enrollees in the 2015 individual insurance market, had a pre-existing condition that could subject them to higher premiums under an AHCA community rating waiver if they don’t maintain continuous coverage.
The AHCA allocates $8 billion over five years to states with community rating waivers, resources that can be used to help reduce premiums or pay out-of-pocket medical expenses for people rated based on their health status. However, the House bill does not require states to set up an alternate source of coverage for people who face higher premiums based on their health. It is uncertain how many states would waive community rating under the AHCA.
See the original article Here.
Source:
Author (Date). Analysis: 6.3 million people with pre-existing conditions would be at risk for higher premiums under the house's health bill [Web blog post]. Retrieved from address https://www.kff.org/health-reform/press-release/analysis-6-3-million-people-with-pre-existing-conditions-would-be-at-risk-for-higher-premiums-under-the-houses-health-bill/?utm_campaign=KFF-2016-The-Latest&utm_source=hs_email&utm_medium=email&utm_content=52062246&_hsenc=p2ANqtz-_VsXEz5DH19yz9a0M6hl4QfqXSaABYhLLADcvZymz30D-94xqDepLSsy4AGwu-LbtONEahQvbbjampBln3kkIlrAgSlw&_hsmi=52062246
6 Actions Employers Can Take to Boost Retirement Savings
Preparing your employees for their retirement has become a major responsibility for employers. From education to offering the right program for your employees to start saving, employers now more than ever must be prepared for everything involved with retirement. Take a look at this great article from Benefits Pro on what you can do to prepare yourself and your employees for retirement by Marlene Y. Satter.
Lots of people point to self-indulgent millennials or debt-beleaguered GenXers or negligent boomers as the reason for the retirement crisis and the cause of their own hardships.
But a Morningstar study instead points the finger at employers, and their disinterest in working harder to improve retirement plans so that they elicit the best response from employees.
A blog post from the Center for Retirement Research at Boston College highlights the study and points out that employers could improve retirement outcomes for their workers—if they were sufficiently interested in doing so—based on research already in hand.
Employers who offer 401(k)s to their workers made some progress, mostly, along the path of automatic enrollment, the blog post notes, during the early 2000s, with notable success: “Today,” it says, “nearly 90 percent of automatically enrolled employees stay where they are put, while only about half of workers sign up to save when 401(k) enrollment is strictly voluntary.”
But progress along those lines has ground to a halt, it points out, and because of the huge variations among 401(k) plans there are plenty of cracks in the private system through which employees are all too ready to fall—and employers apparently too ready to let them.
The Morningstar report points out that even when companies do use auto-enrollment, plans aren’t designed well enough to encourage an adequate level of savings—or, in fact, actually discourage it.
The report, titled “Save More Today: Improving Retirement Savings Rates with Carrots, Sticks, and Nudges,” highlights a number of ways in which plan features actually work against employees saving enough to actually retire on—but the flip side of that is that those features can be tweaked so that they work for the employee’s benefit, and turned into those carrots, sticks and nudges.
And it doesn’t even have to be expensive, since many employers are concerned about the outlay for a retirement plan and are often reluctant, at best, to add to it.
Here are 6 ways employers can encourage their employees to save more for retirement—and at limited, or no, additional cost.
6. Auto-enrollment.
If a company’s plan doesn’t have automatic enrollment, it should, since the results are so outstanding.
Lots of people fail to sign up, if “voluntary” enrollment is required, due to procrastination, preoccupation or other human failings—but if it’s an automatic feature, they get swept up and are saving for retirement almost before they know it.
Says the report: “[P]articipation rates are significantly higher in plans with automatic enrollment (compared to voluntary enrollment schemes).” It adds, “[E]arly research by Madrian and Shea (2001) noted a 48-percentage-point increase in 401(k) participation among new employees after the adoption of automatic enrollment.”
That’s a small action to have such a large effect.
5. Automatic reenrollment.
The marked effect of auto-enrollment on participation has a corollary: existing eligible employees aren’t usually included when the feature is added to a plan.
And this is not unusual.
In fact, the study cites two others that find the inclusion of “reenrollment”—adding existing employees to a plan—is “relatively uncommon,” with the studies finding only 15 percent or 12 percent of plans offering that opportunity.
However, adding “reenrollment” when an auto-enrollment feature is added can significantly boost the participation of existing employees.
4. Higher default savings rate.
An aggressive default savings rate will get employees saving more from the very beginning—and although employers say that workers will be reluctant to accept a rate of anywhere from 6–8–10 percent rather than the more common 3 percent, that’s contrary to study findings.
In fact, says the study, “Roughly half of investors tend to accept the initial default savings rate regardless of level, up to 6 percent using empirical data and up to 12 percent based on the online survey.”
And that’s not all: it adds that “Participants who reject the default rate tend to select higher savings rates, on average, as default rates rise,” which means they are saving even more.
This can be particularly important since, the report says, many employers are more concerned with the participation rate than the savings rate—but the savings rate is what will save employees come retirement.
3. Mandatory auto-escalation.
Automatic escalation, the study reports, “is commonly offered in conjunction with automatic enrollment (e.g., 62 percent of plans offering automatic enrollment also offered automatic escalation according to Aon.”
But only a third to a half of plans actually offer it, despite its benefits—and 62 percent of those who do provide it on an opt-in, rather than an opt-out, basis.
That design is poor on two counts: not only does it not “sweep” everyone into an automatic increase in savings, people who have to opt in don’t always keep doing so.
Just 11 percent, the report says, stay in the plan when it is opt-in, compared with 68 percent who do so when it is opt-out.”
And then there’s the issue of whether the auto-escalation rate is set high enough. Since workers will often accept whatever the default is, setting the rate higher rather than lower would push them to save more and better prepare them for retirement.
2. Matching contributions.
Matching contributions are a thorny issue, since driving up the participation rate will require more in contributions.
As a result, employers might not only be reluctant to boost the participation rate too much, they’re not all that anxious to increase their matching contributions either.
But again, a tweak can change employee behavior without a large increase in cost.
One option is to stretch the match out further; for instance, matching 25 percent of the first 8 percent of employee deferrals instead of matching 50 percent of the first 4 percent employee deferrals. Another option is moving to a discretionary match approach.
1. In-plan advice.
Plans that provide employees with advice can also have a marked effect on savings behavior, with higher recommended savings levels from in-plan financial advisors.
In fact, 90 percent of participants who engaged an in-plan advice solution increasing their savings rates—by about 2 percentage points on average.
“Additionally,” the report says, “higher savings recommendations result in higher implemented savings levels (i.e., more is better).”
This is one area in which it’s not clear whether opting in or having to opt out is more effective.
Perhaps it’s that those who are willing to save more seek out guidance on how much to save.
See the original article Here.
Source:
Satter M. (2017 May 15). 6 actions employers can take to boost retirement savings [Web blog post]. Retrieved from address https://www.benefitspro.com/2017/05/15/6-actions-employers-can-take-to-boost-retirement-s?ref=hp-top-stories&page_all=1
More Employers View HSAs as Part of Retirement Strategy
Did you know that more employers are starting to use health savings accounts as a tool for retirement? Find out more from this interesting read from Employee Benefits Advisor on how employers are utilizing HSAs in their retirement program by Paula Aven Gladych.
The health savings account market is continuing its massive growth — as well as its increasing importance to the retirement industry.
According to a survey conducted by the Plan Sponsor Council of America, more than 75% of plan sponsors “view the HSA as part of their retirement benefits strategy.”
Nearly 60% of the respondents believe HSAs should replace flexible spending accounts, and nearly three-fourths of employers think that HSAs should be open to all employees, not just those enrolled in a high-deductible health plan, according to the survey. The PSCA received 255 responses to its survey, with 181 of plan sponsors saying they sponsor an HSA for their employees.
HSAs are medical savings accounts that employees and employers can use to pay for qualifying healthcare expenses, now and into the future. It is widely acknowledged that healthcare expenses are one of the largest expenses people face in retirement, so this is one more tool individuals can use to save for their futures.
Made possible by the Medicare Modernization Act of 2003, the accounts allow employees to set money aside pre-tax. Any money that isn’t spent down in a given year can be invested, just like a retirement plan. That money can be used to pay for current and future healthcare expenses.
HSAEnrollment in employer-sponsored HSA/high-deductible plans more than doubled from 5% in 2005 to 11% in 2015, but in spite of that, 6.2 million of the 22.5 million people eligible to participate in an HSA did not contribute to it, according to the PSCA survey.
In 2016, the PSCA created an HSA committee to focus on health savings accounts and their impact on employee retirement readiness and to evaluate and improve their integration with defined contribution retirement plans.
“Absent legislative action that would curtail HSA tax preferences, HSA accounts are here to stay,” says PSCA Executive Director Tony Verheyen.
According to survey respondents, about 80% of employees are eligible to participate in an employer-sponsored HSA plan, with an average account balance of $3,161. Forty percent of employers said that fewer than 25% of their participants use up their entire HSA balance each year and 35% of plans said that 26-50% of their participants use their entire balance every year.
“So many employers participating in the survey do perceive the HSA to be a vehicle for employees to accumulate savings,” the report found.
Two-thirds of employers who sponsor a health savings account program for employees say they contribute a set dollar amount to each account based on the high-deductible health plan coverage tier an employee has chosen. More than 80% of the employers who sponsor an HSA say they contribute some money to the plan. Forty percent of plans say they front load contributions at the start of the year, while 30% contribute some amount every payday.
More than half of those surveyed said they cover the cost of HSA maintenance fees for active employees and 6% said they pay them for terminated employees. Only 21% of surveyed employers expressed concern about the fiduciary liability of sponsoring an HSA-high-deductible health plan.
The Plan Sponsor Council of America is made up of employee benefit plan sponsors who work together to help improve and expand upon the employer-sponsored retirement plan system.
See the original article Here.
Source:
Gladych P. (2017 May 9). More employers view HSAs as part of retirement strategy [Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/news/more-employers-view-hsas-as-part-of-retirement-strategy
Preexisting Conditions And Continuous Coverage: Key Elements Of GOP Bill
Do you suffer from a preexisting condition? Take a look at this article by Michelle Andrews from Kaiser Health News and find out how the passing of the AHCA will impact your health care.
Before he was diagnosed with head and neck cancer in 2015, Anthony Kinsey often went without health insurance. He is a contract lawyer working for staffing agencies on short-term projects in the Washington, D.C., area, and sometimes the 90-day waiting period for coverage through a staffing agency proved longer than the duration of his project, if coverage was offered at all.
When Kinsey, now 57, learned he had cancer, he was able to sign up for a plan with a $629 monthly premium because the agency he was working for offered group coverage that became effective almost immediately. The plan covered the $62,000 surgery to cut out the diseased bone and tissue on the left side of his face, as well as chemotherapy and radiation. His share of the treatment cost was $1,800.
If the American Health Care Act, which the House recently passed, becomes law, people like Kinsey who have health problems might not fare so well trying to buy insurance after a lapse.
The Republican bill would still require insurers to offer coverage to everyone, including people who have preexisting medical conditions, such as diabetes, asthma or even cancer. But it would allow states to opt out of the federal health law’s prohibition against charging sick people more than healthy ones. In those states, if people have a break in coverage of more than 63 days, insurers could charge them any price for coverage for approximately a year, effectively putting coverage out of reach for many sick people, analysts say. After a year, they would be charged a regular rate again.
Coming up with a figure for how many people have preexisting conditions that could put them at risk for facing unaffordable health insurance premiums has been the subject of debate, with estimates ranging from 133 million on the high end to 2 million on the low end.
What we know is that before the Affordable Care Act, known as Obamacare, insurers in the individual market frequently charged people more if they were sick. According to a 2009 survey of individual market insurers by America’s Health Insurance Plans, a trade group, 34 percent of coverage was offered at higher-than-standard rates, while 6 percent of those offers included waivers that excluded coverage for specific conditions.
But some health policy analysts suggest that it’s not only people who have a gap in coverage who could be affected if a state seeks the health law waiver. There could be consequences for anyone with a preexisting condition, even those who have maintained continuous insurance coverage. That’s because the bill opens the door for insurers to set rates for people based on their health. For example, those without a health condition could be offered discounted premiums.
“If you have a preexisting condition, you’re going to be put into the block of business with the sicker risk pool,” said Sabrina Corlette, a research professor at Georgetown University’s Center on Health Insurance Reforms.
Requiring people to maintain continuous coverage is the Republicans’ preferred alternative to Obamacare’s individual mandate that requires people to have insurance or pay a fine. But there are many reasons people may have a gap in coverage, especially if they’re sick, say consumer advocates.
“If they’re diagnosed with cancer and going through a grueling treatment, they might move closer to their caregiver or the cancer center,” said Kirsten Sloan, vice president for policy at the American Cancer Society Cancer Action Network. “They may quit their job for that reason, or they may lose their job.”
Once people have a gap in coverage they may really be in a bind if the available coverage is unaffordable. To address this, the Republican bill requires states to set up a high-risk pool or reinsurance program or participate in a federal risk-sharing program.
State high-risk pools, which were available in 35 states before the ACA passed, have been widely criticized, however, as inadequate for people with expensive health care needs. Premiums were often extremely high, and there were frequently lifetime or annual limits on coverage. Some plans excluded coverage for as long as a year for the very conditions people needed insurance.
Still, Thomas Miller, a resident fellow at the American Enterprise Institute, says high-risk pools offer a reasonable solution for the 2 million to 4 million people in the individual market he estimates have preexisting conditions but would otherwise be medically uninsurable or offered such high-cost coverage that they couldn’t afford it. The $130 billion over nine years that the bill sets aside to use for high-risk pools or other individual market activities, along with an additional $8 billion over five years for states that get waivers from ACA community-rating requirements, “could be adequate” to meet the need, he said.
Besides, he argued, the higher rates would last for only a year.
“Once you’ve paid up, you graduate back to the regular market,” Miller said. “It’s not like being sentenced to the Gulag.”
Kinsey said he plans to keep his coverage up to date from now on, but he doesn’t think it’s fair to charge sick people higher rates even if they have a break in coverage.
“It would be problematic,” he said. “I’m not in favor of that.”
See the original article Here.
Source:
Andrews M. (2017 May 16). Preexisting conditions and continuous coverage: key elements of GOP bill [Web blog post]. Retrieved from address https://khn.org/news/preexisting-conditions-and-continuous-coverage-key-elements-of-gop-bill/?utm_campaign=KFF-2016-The-Latest&utm_source=hs_email&utm_medium=email&utm_content=52062246&_hsenc=p2ANqtz-90h4NOm7X9KLzIv7cYUNaGbi_qAFjmLW8NHmH89fiCT1u4SVQ8G95MFvTb3ljYlm3XiY20qWwsBfqH8PKOCwaULkf-ug&_hsmi=52062246
Employee Expectations Changing the Workplace
Do you know what benefits your employees are looking for? Take a peek at this great article from Employee Benefits Adviser about how employers are starting to customize their employee benefits programs to fit each individual employee by Nick Otto.
If employers want to retain and attract talent, they’ve got to start thinking about one big benefit trend: Customization.
“It’s not about just medical, dental and vision anymore,” Todd Katz, executive vice president, MetLife said Monday following the release of MetLife’s 15th annual U.S. Employee Benefits Trends Study.
Nearly three-fourths (74%) of employees say that having benefits customized to meet their needs is important when considering taking a new job, and 72% say that having the ability to customize their benefits would increase their loyalty to their current employer.
Workers say benefits customization is even more important than the ability to work remotely. In fact, more than three-fourths (76%) of millennials say benefits customization is important for increasing their loyalty to their employers, compared to two-thirds (67%) of baby boomers.
“Today, our lives reflect our preferences,” Katz says. “We choose how our coffee is made, create personalized playlists and decide which apps we have on our phones. In all aspects of our lives, we can make choices to meet our unique needs. The same should apply when it comes to benefits.”
That’s particularly important for driving engagement and loyalty among millennials, he said, who comprise the largest generation in the workplace today. “Customization for them is inherent, and they want to know that their employers understand and are willing to address their specific needs.”
Not only is benefits customization important for employee satisfaction and retention, but so is helping employees with their holistic wellness — both health and financial — needs.
Nearly two-thirds of employees say that health and wellness benefits are important for increasing loyalty to their employer and 53% say the same about financial planning programs.
Every day, employees come to work with financial concerns, and in larger businesses, employees acknowledge that they sacrifice their health and are less productive. Close to a third of workers (30%) say they lay awake at night worrying about money, and 23% admit to being less productive at work because of financial stress.
“Looking across the work force, when you understand what’s on the minds of employees it’d be wonderful if the set of benefits is matched to address what is a drag on the minds of workers and their worries back at home,” Ida Rademacher, executive director, financial security program at The Aspen Institute, noted at MetLife’s symposium in Washington, D.C. on Monday.
She notes there are four elements to helping workers achieve financial well-being:
Financial security in the present: Employees having control over day-to-day and month-to-month finances
Financial security in the future: The ability to absorb a financial shock
Freedom of choice in the present: Financial freedoms to make choices and enjoy life
Freedom of choice in the future: The ability to be on track to meet financial goals
Despite the need for wellness education, many employers are falling short in their offerings.
Only a third of employers (33%) say they are very likely to offer wellness benefits and just 18% currently offer financial planning programs. At the same time, only 36% of employers say wellness benefits and financial planning programs are valuable to their employees, according to the study.
“Employees are looking to their employers to help them with their overall wellness needs, whether it’s through gym memberships to stay healthy or financial education programs to plan for their futures,” says MetLife’s Katz. “As employees have more non-traditional workplace options available to them, it will become increasingly important that employers prioritize holistic wellness to drive employee engagement and loyalty in this new era.”
This may be why retention is the top priority among employers. When asked to rank their top benefits priorities, more employers (83%) chose retaining employees as an important benefits objective than increasing employee productivity (80%) and controlling health and welfare benefit costs (79%). More so, over half of employers (51%) say that retaining employees through benefits will become even more important in the next three to five years.
“Benefits historically were used for attraction and retention, but there now much more strategically important than they have ever been,” added Randy Stram, senior vice president, group, voluntary & worksite benefits at MetLife. “A diverse employee base, uncertainty regulatory environment and the changing digital landscape are adding to the increase complexity of managing benefits for employers.”
See the original article Here.
Source:
Otto N. (2017 April 19). Employee expectations changing the workplace [Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/news/employee-expectations-changing-the-workplace?feed=00000152-1377-d1cc-a5fa-7fff0c920000
Traditional IRA, Roth IRA, 401(k), 403(b): What’s the Difference?
The earlier you begin planning for retirement, the better off you will be. However, the problem is that most people don’t know how to get started or which product is the best vehicle to get you there.
A good retirement plan usually involves more than one type of savings account for your retirement funds. This may include both an IRA and a 401(k) allowing you to maximize your planning efforts.
If you haven’t begun saving for retirement yet, don’t be discouraged. Whether you begin through an employer sponsored plan like a 401(k) or 403(b) or you begin a Traditional or Roth IRA that will allow you to grow earnings from investments through tax deferral, it is never too late or too early to begin planning.
This article discusses the four main retirement savings accounts, the differences between them and how Saxon can help you grow your nest egg.
“A major trend we see is that if people don't have an advisor to meet with, they tend to invest too conservatively because they are afraid of making a mistake,” said Kevin. “Then the problem is that they don't revisit it and if you’re not taking on enough risk you’re not giving yourself enough opportunity for growth. Then you run the risk that your nest egg might not grow to what it should be.”
“Saxon is here to help people make the best decision on how to invest based upon their risk tolerance. We have questionnaires to determine an individual’s risk factors, whether it be conservative, moderate or aggressive and we make sure to revisit these things on an ongoing basis.”
Traditional IRA vs. Roth IRA
Who offers the plans?
Both Traditional and Roth IRAs are offered through credit unions, banks, brokerage and mutual fund companies. These plans offer endless options to invest, including individual stocks, mutual funds, etc.
Eligibility
Anyone with earned, W-2 income from an employer can contribute to Traditional or Roth IRAs as long as you do not exceed the maximum contribution limits.
With Traditional and Roth IRAs, you can contribute while you have earned, W-2 income from an employer. However, any retirement or pension income doesn't count.
“Saxon is here to help people make the best decision on how to invest based upon their risk tolerance. We have questionnaires to determine an individual’s risk factors, whether it be conservative, moderate or aggressive and we make sure to revisit these things on an ongoing basis.”
Tax Treatment
With a Traditional IRA, typically contributions are fully tax-deductible and grow tax deferred so when you take the money out at retirement it is taxable. With a Roth IRA, the money is not tax deductible but grows tax deferred so when the money is taken out at retirement it will be tax free.
"The trouble is that nobody knows where tax brackets are going to be down the road in retirement. Nobody can predict with any kind of certainty because they change,” explained Kevin. “That’s why I'm a big fan of a Roth.”
“A Roth IRA can be a win-win situation from a tax standpoint. Whether the tax brackets are high or low when you retire, who cares? Because your money is going to be tax free when you withdraw it. Another advantage is that at 70 ½ you are not required to start taking money out. So, we've seen Roth IRA's used as an estate planning tool, as you can pass it down to your children as a part of your estate plan and they'll be able to take that money out tax free. It's an immense gift,” Kevin finished.
Maximum Contribution Limits
Contribution limits between the Traditional and Roth IRAs are the same; the maximum contribution is $5,500, or $6,500 for participants 50 and older.
However, if your earned income is less than $5,500 in a year, say $4,000, that is all you would be eligible to contribute.
"People always tell me 'Wow, $5,000, I wish I could do that. I can only do $2,000.' Great, do $2,000,” explained Kevin. “I always tell people to do what they can and then keep revisiting it and contributing more when you can. If you increase a little each year, you will be contributing $5,000 eventually and not even notice."
Withdrawal Rules
With a Traditional IRA, withdrawals can begin at age 59 ½ without a 10% early withdrawal penalty but still with Federal and State taxes. The Federal and State government will mandate that you begin withdrawing at age 70 ½.
Even though most withdrawals are scheduled for after the age of 59 ½, a Roth IRA has no required minimum distribution age and will allow you to withdraw earned contributions at any time. So, if you have contributed $15,000 to a Roth IRA but the actual value of it is $20,000 due to interest growth, then the contributed $15,000 could be withdrawn with no penalty.
Employer Related Plans - 401(k) & 403(b)
A 401(k) and a 403(b) are theoretically the same thing; they share a lot of similar characteristics with a Traditional IRA as well.
Typically, with these plans, employers match employee contributions .50 on the dollar up to 6%. The key to this is to make sure you are contributing anything you can to receive a full employer match.
Who offers the plans?
The key difference with these two plans lies in if the employer is a for-profit or non-profit entity. These plans will have set options of where to invest, often a collection of investment options selected by the employer.
Eligibility
401(k)'s and 403(b)'s are open to all employees of the company for as long as they are employed there. If an employee leaves the company they are no longer eligible for these plans since 401(k) or 403(b) contributions can only be made through pay roll deductions. However, you can roll it over into an IRA and then continue to contribute on your own.
Only if you take possession of these funds would you pay taxes on them. If you have a check sent to you and deposit it into your checking account – you don't want to do that. Then they take out federal and state taxes and tack on a 10% early withdrawal penalty if you are not age 59 ½. It may be beneficial to roll a 401(k) or 403(b) left behind at a previous employer over to an IRA so it is in your control.
Tax Treatment
Similar to a Traditional IRA, contributions are made into your account on a pretax basis through payroll deduction.
Maximum Contribution Limits
The maximum contribution is $18,000, or $24,000 for participants 50 and older.
Depending on the employer, some 401(k) and 403(b) plans provide loan privileges, providing the employee the ability to borrow money from the employer without being penalized.
Withdrawal Rules
In most instances, comparable to a Traditional IRA, withdrawals can begin at age 59 ½ without a 10% early withdrawal penalty. Federal and State government will mandate that you begin withdrawing at age 70 ½. Contributions and earnings from these accounts will be taxable as ordinary income. There are certain circumstances when one can have penalty free withdrawals at age 55, check with your financial or tax advisor.
In Conclusion…
"It is important to make sure you are contributing to any employer sponsored plan available to you so that you are receiving the full employer match. If you have extra money in your budget and are looking to save additional money towards retirement, that’s where I would look at beginning a Roth IRA. Then you can say that you are deriving the benefits of both plans - contributing some money on a pretax basis, lowering federal and state taxes right now, getting the full employer contribution match and then saving some money additionally in a Roth that can provide tax free funds/distributions down the road," finished Kevin.
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7 Questions to Ensure Successful Benefit Technology Purchases
Do you need help figuring out your technology needs for an employee benefits program? Check out this interesting article by Veer Gidwaney from Employee Benefit Adviser about which technology you will need for your employee benefits program.
From quality to data integration, there are many factors to consider when purchasing benefit administration technology. With employers increasing turning to their adviser for guidance, here are some key questions advisers should make sure their client’s tech acquisition teams can answer:
1) How will you ensure data quality is maintained during the migration to the new system? Be it a mistyped entry, or incomplete form, errors are bound to happen in open enrollment, and if they’re not caught during implementation process, errors can go unnoticed for months or longer. This means inaccuracies in carrier files, delays in enrollment processing, and additional back-and-forth between you and your client or the carrier.
Don’t rely on human eyes to scan spreadsheets for potential errors, it’s 2017. Before you take the plunge with a technology partner, understand their data validation and backup data quality check processes to catch and correct errors before they’re entered into your system of record.
2) Will this technology require a printer or a fax machine for my team or my clients?
No benefits or HR platform should require any manual paperwork. It’s time-consuming, and more prone to human error, yet many benefits systems still rely on paper-based processes to run an enrollment or onboard an employee. Take a stand, for your team, your clients, and their employees.
Make sure you see a demo of the onboarding and enrollment process from start to finish before partnering with a technology platform, and expect employees and HR to demand the same expectations based on interacting with any other technology experience in their lives, at home or work. Does it look and feel like a modern experience? Is buying insurance as intuitive as any e-commerce experience an employee would be used to? If not, keep looking.
3) Is EDI with insurance carriers “full-service” or “self-service”?
Managing electronic data integrations (EDI) with carriers is complex and time-consuming, but something that many employers expect to have up and running smoothly to manage eligibility and enrollment ongoing. Any benefits administration technology that requires your team to set up their own EDI files, or interface directly with the carrier is sucking up unnecessary time and resources, and you must factor that time into the cost of partnership.
4) How does the platform partner with insurance carriers and other third-party vendors to make offering and managing benefits easier?
Insurance carriers aren’t going anywhere, so choosing a system that has advantageous relationships and deep integrations with your favorite carriers will save time and money in the long run, for both you and your clients.
Depending on the type of relationship a technology vendor has with the carriers you work with, that could mean internal efficiencies and cost savings like free EDI, automated eligibility management, and low minimum participation requirements on voluntary benefit products. Montoya & Associates has actually been able to streamline standard benefit offerings based on the Maxwell Health Marketplace, which makes implementations faster and easier for their team. Don’t take my word for it: check out a case study, in their own words.
5) How does the platform make it more efficient to manage ongoing employee changes throughout the year?
Routine qualifying life events such as marriage or birth of a child shouldn’t require hours of administrative work for you or your clients. While it’s tempting to ‘check the box’ with low-cost point solutions that handle only eligibility, or quoting, or enrollment, it’s important to consider the cost of wasted hours and the impact that disjointed processes will have on your clients’ experience.
Solving interconnected problems with disparate point solutions will result in disjointed processes, multiple data entry points, and client frustration. Look for solutions that manage all of that data in one place, both during enrollment and year-round.
6) How many team members are typically dedicated full-time to making the platform work at scale? If you have to hire additional full-time team members to complete tasks that could (and should) be automated or streamlined with technology (like EDI, enrollment paperwork, etc.), you should factor that into your decision from a financial perspective.
Implementing technology should streamline processes for your team in addition to your clients. Ask for references on how current clients have made the tool successful, and dig into the processes that any potential technology partner might help you solve to uncover the manual work that might hide below the surface.
7) What sort of technical and implementation support is available? Training on any new process is a time-consuming process that may require some hand-holding. Your technology partner is an extension of your brand and your company, so you need to make sure that they set up both you and your clients for success, initially and throughout the year. Ask about their support structure, and what resources are available to both you and your clients.
Both HR teams and employees should have tools to solve problems on their own, with the ability to get in touch with a live person for technical questions if needed. Certain technology platforms prioritize broker support at the expense of support for HR and employees, or might provide support during initial setup, and charge for support throughout the year. This often results in more time-consuming implementations than necessary and frustration at being unsure of what to do next or how to resolve any issues.
See the original article Here.
Source:
Gidwaney V. (Date). 7 questions to ensure successful benefit technology purchases [Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/opinion/6-questions-to-ask-to-avoid-hidden-benefit-technology-costs
10 Misconceptions About Saving for Medical Care in Retirement
Are you properly prepared for your medical costs during retirement? Take a look at this great article by Marlene Y. Satter from Employee Benefits Advisors to find out what are the top misconceptions people have about medical costs when planning for their retirement.
Retirement isn’t the only thing workers have trouble saving for; the other big gap in planning is health care.
According to a Voya Financial survey, Americans just aren’t ready to pay for the health care they might need in retirement. Their estimates of what they might need are low—when they estimate them at all, that is—and their savings are even lower.
With worries over money woes keeping people up at night—so says a CreditCards.com poll—the only worry that surpassed “having enough saved for retirement” was “health care and insurance.”
And consider, if you will, all the turmoil in the health insurance market these days, what with potential changes to—or an outright repeal of—the Affordable Care Act waiting in the wings, not to mention the skyrocketing costs of both care and coverage.
In light of all this uncertainty, it’s no wonder that the little matter of paying for health care is keeping people awake.
But, considering all that, it’s even more surprising that there are so many common misconceptions about health care, its cost and how to pay for it at large in the general population.
American workers are not just ill prepared for retirement, they’re even more ill prepared for any illness or infirmity that may come along with it.
According to research from the Employee Benefit Research Institute (EBRI), a 65-year-old man would need $127,000 in savings while a 65-year-old woman would need $143,000—thanks to a longer projected lifespan—to give each of them a 90 percent chance of having enough savings to cover health care expenses in retirement.
But that doesn’t appear to have filtered its way down to U.S. workers, who are blissfully (well, maybe not so blissfully) ignorant of the mountain of bills that probably lies ahead.
While demographics play a role, there are smaller differences among some groups than one might otherwise expect. In addition, it’s also rather surprising where Americans plan to get the money to pay for whatever care they receive, and how far they think that money will stretch when it also has to pay for food, clothing, shelter and any activities or other necessities that come along with retirement.
Read on to see 10 misconceptions workers have about how and how much they think they’ll pay for medical care in retirement. As you’ll see, some generations are more prone to certain errors than others.
10. Workers just aren’t estimating how much health care will cost them in retirement.
Perhaps they’d rather not know—but according to the poll, 81 percent of Americans have not estimated the total amount health care will cost them in retirement; among them are 77 percent of boomers. Retirees haven’t estimated those costs, either; in fact, just 21 percent of them have. But that’s actually not that bad, when considering that among Americans overall, only 14 percent have actually done—or tried to do—the math.
And among those who have tried to calculate the cost, 66 percent put them at $100,000 or less while an astonishing 31 percent estimated just $25,000 or less.
9. People with just a high school education or less, and whites, are slightly more likely than those who went to college, and blacks, to have attempted to figure it out.
The great majority among all those demographic groups just aren’t looking at the numbers, with 88 percent of black respondents and 79 percent of white respondents saying they have not estimated how much money it will take to pay their medical costs throughout retirement.
And while 80 percent of those with a high school diploma or less say they haven’t run the numbers, those who spent more time in school have spent even less time doing the calculations—with 81 percent of those with some college and 82 percent of those who graduated college saying they have not estimated medical costs.
8. Millennials are the most likely to underestimate health care costs in retirement.
A whopping 74 percent of millennials are among those lowballing what they expect to spend on health care once they retire, figuring they won’t need more than $100,000—and possibly less.
Not that they really know; 85 percent haven’t actually tried to calculate their total health care expenses for retirement. But they must be believers in the amazing stretching dollar, with 42 percent planning to use general retirement savings as the primary means of paying for health expenses in retirement, excluding Medicare.
GenXers, by the way, were the most likely to guess correctly that the bill will probably be higher than $100,000—but even there, only 28 percent said so.
7. They have surprisingly unrealistic expectations about where they’ll get the money to pay for medical care.
Excluding Medicare, 34 percent intend to use their general retirement savings, such as 401(k)s, 403(b)s, pensions and IRAs, as the primary means of paying for care, while 25 percent are banking on their Social Security income, 7 percent would use health savings accounts (HSAs) and 6 percent would use emergency savings.
That last is particularly interesting, since so few people have successfully managed to set aside a sizeable emergency fund in the first place.
6. Despite their potential, HSAs just aren’t feasible for many because of their income.
HSAs do offer ways to set aside more money not just for medical bills in retirement but also to boost retirement savings overall, and come with fairly generous contribution limits. But people with lower incomes often can’t even hit the maximum for retirement accounts—so relying on an HSA might not be realistic for all but those with the highest incomes.
Yet people with lower incomes were more likely than those who made more to say HSAs would be the main way they’d pay for medical expenses. Among those who said they’d be relying on HSAs to pay for care in retirement, 5 percent of those with incomes less than $35,000 and 14 percent of those with incomes between $35,000–$50,000 said that would be the way they’d go.
Just 9 percent of those with incomes between $50,000–$75,000, 7 percent of those with incomes between $75,000–$100,000 and 9 percent of those with incomes above $100,000 chose them.
5. A few are planning on using an inheritance to pay for medical bills in retirement.
It’s probably not realistic, and there aren’t all that many, but some respondents are actually planning on an inheritance being the chief way they’ll pay for their medical expenses during retirement.
Millennials and GenXers were the most likely to say that, at 2 percent each—but they may not have considered that the money originally intended for an inheritance might end up going to pay for other things, such as caregiving or child care, and indeed much of their own retirement money could end up paying for care for elderly parents. A lot more people end up acting as caregivers—especially among the sandwich generation—and may find that relying on inheriting money from the people they’re caring for was not a realistic expectation.
4. Women don’t know, guess low.
Just 13 percent of women have gone to the trouble of estimating how much health care will cost them during retirement, but that didn’t stop 32 percent from putting that figure at $25,000 or less.
And that’s really bad news. It’s particularly important for women to be aware of the cost of health care, since not only do they not save enough for retirement to begin with—42 percent only contribute between 1–5 percent, the lowest level, compared with 34 percent of men, often thanks to lower salaries and absences from the workplace to raise children or act as caregivers—but their longer lifespans mean they’ll have more years in which to need health care and fewer options to obtain it other than by paying for it.
Men are frequently cared for by (predominantly female) caregivers at home, while women tend to outlive any family members who might be willing or able to do the same for them.
3. Men don’t know, but guess higher.
While the same percentage of women and men have not estimated their retirement health care expenses (81 percent), men were more likely than women (24 percent, compared with 15 percent) to come up with an estimate higher than $100,000.
2. The highest-income households are most likely to have tried to estimate medical cost needs during retirement.
Probably not surprisingly, households with an income of $100,000 or more were the most likely to have tried to pin a dollar figure to health care needs, with 21 percent saying they’d done so.
Households with incomes between $50,000–$75,000 were least likely to have done so, with just 11 percent of them trying to anticipate how much they’ll need.
And just because they have more money doesn’t mean their estimates were a whole lot more accurate—only 38 percent of those $100,000+ households thought they’d need more than $100,000 to see them through any needed medical care during retirement, while 59 percent—the great majority—figured they could get by on $100,000 or even less.
1. Where they live doesn’t seriously affect their estimates, although it will seriously affect their cost of care.
Among those who have tried to anticipate how much they’ll need in retirement for medical care, there’s not a huge difference among how many guessed too low—even though where they live can have a huge effect on how much they’ll end up paying, particularly for long-term care.
While the most expensive regions for LTC tend to be the northeast and the west coast, and the cheapest are the south and midwest, there’s not a great deal of variance among those who estimate they can get by on care for $100,000 or less—even if people live in one of the most expensive regions. Sixty-seven percent of those in the northeast said care wouldn’t cost more than that, while 63 percent of those in the midwest, 71 percent of those in the south and 61 percent of those in the west said the same thing.
When it came to those who said they’d need more than $100,000, 24 percent of those in the west thought they’d need that much; so did 20 percent of those in the midwest, just 18 percent of those in the northeast and 17 percent of those in the south.
See the original article Here.
Source:
Satter M. (2017 April 24). 10 misconceptions about saving for medical care in retirement [Web blog post]. Retrieved from address https://www.benefitspro.com/2017/04/24/10-misconceptions-about-saving-for-medical-care-in?ref=hp-news&page_all=1
The Effects of Ending the Affordable Care Act’s Cost-Sharing Reduction Payments
Take a look at this interesting article by Kaiser Family Foundation and see how the cost-sharing mandate under the ACA will be affected in the AHCA.
Controversy has emerged recently over federal payments to insurers under the Affordable Care Act (ACA) related to cost-sharing reductions for low-income enrollees in the ACA’s marketplaces.
The ACA requires insurers to offer plans with reduced patient cost-sharing (e.g., deductibles and copays) to marketplace enrollees with incomes 100-250% of the poverty level. The reduced cost-sharing is only available in silver-level plans, and the premiums are the same as standard silver plans.
To compensate for the added cost to insurers of the reduced cost-sharing, the federal governments makes payments directly to insurance companies. The Congressional Budget Office (CBO) estimates the cost of these payments at $7 billion in fiscal year 2017, rising to $10 billion in 2018 and $16 billion by 2027.
The U.S. House of Representatives sued the Secretary of the U.S. Department of Health and Human Services under the Obama Administration, challenging the legality of making the cost-sharing reduction (CSR) payments without an explicit appropriation. A district court judge has ruled in favor of the House, but the ruling was appealed by the Secretary and the payments were permitted to continue pending the appeal. The case is currently in abeyance, with status reports required every three months, starting May 22, 2017.
If the CSR payments end – either through a court order or through a unilateral decision by the Trump Administration, assuming the payments are not explicitly authorized in an appropriation by Congress – insurers would face significant revenue shortfalls this year and next.
Many insurers might react to the end of subsidy payments by exiting the ACA marketplaces. If insurers choose to remain in the marketplaces, they would need to raise premiums to offset the loss of the payments.
We have previously estimated that insurers would need to raise silver premiums by about 19% on average to compensate for the loss of CSR payments. Our assumption is that insurers would only increase silver premiums (if allowed to do so by regulators), since those are the only plans where cost-sharing reductions are available. The premium increases would be higher in states that have not expanded Medicaid (and lower in states that have), since there are a large number of marketplace enrollees in those states with incomes 100-138% of poverty who qualify for the largest cost-sharing reductions.
There would be a significant amount of uncertainty for insurers in setting premiums to offset the cost of cost-sharing reductions. For example, they would need to anticipate what share of enrollees in silver plans would be receiving reduced cost-sharing and at what level. Under a worst case scenario – where only people eligible for sharing reductions enrolled in silver plans – the required premium increase would be higher than 19%, and many insurers might request bigger rate hikes.
While the federal government would save money by not making CSR payments, it would face increased costs for tax credits that subsidize premiums for marketplace enrollees with incomes 100-400% of the poverty level.
The ACA’s premium tax credits are based on the premium for a benchmark plan in each area: the second-lowest-cost silver plan in the marketplace. The tax credit is calculated as the difference between the premium for that benchmark plan and a premium cap calculated as a percent of the enrollee’s household income (ranging from 2.04% at 100% of the poverty level to 9.69% at 400% of the poverty in 2017).
Any systematic increase in premiums for silver marketplace plans (including the benchmark plan) would increase the size of premium tax credits. The increased tax credits would completely cover the increased premium for subsidized enrollees covered through the benchmark plan and cushion the effect for enrollees signed up for more expensive silver plans. Enrollees who apply their tax credits to other tiers of plans (i.e., bronze, gold, and platinum) would also receive increased premium tax credits even though they do not qualify for reduced cost-sharing and the underlying premiums in their plans might not increase at all.
We estimate that the increased cost to the federal government of higher premium tax credits would actually be 23% more than the savings from eliminating cost-sharing reduction payments. For fiscal year 2018, that would result in a net increase in federal costs of $2.3 billion. Extrapolating to the 10-year budget window (2018-2027) using CBO’s projection of CSR payments, the federal government would end up spending $31 billion more if the payments end.
This assumes that insurers would be willing to stay in the market if CSR payments are eliminated.
Methods
We previously estimated that the increase in silver premiums necessary to offset the elimination of CSR payments would be 19%.
To estimate the average increase in premium tax credits per enrollee, we applied that premium increase to the average premium for the second-lowest-cost silver plan in 2017. The Department of Health and Human Services reports that the average monthly premium for the lowest-cost silver plan in 2017 is $433. Our analysis of premium data shows that the second-lowest-cost silver plan has a premium 4% higher than average than the lowest-cost silver plan.
We applied our estimate of the average premium tax credit increase to the estimated total number of people receiving tax credits in 2017. This is based on the 10.1 million people who selected a plan during open enrollment and qualified for a tax credit, reduced by about 17% to reflect the difference between reported plan selections in 2016 and effectuated enrollment in June of 2016.
We believe the resulting 23% increase in federal costs is an underestimate. To the extent some people not receiving cost-sharing reductions migrate out of silver plans, the required premium increase to offset the loss of CSR payments would be higher. Selective exits by insurers (e.g., among those offering lower cost plans) could also drive benchmark premiums higher. In addition, higher silver premiums would somewhat increase the number of people receiving tax credits because currently some younger/higher-income people with incomes under 400% of the poverty level receive a tax credit of zero because their premium cap is lower than the premium for the second-lowest-cost silver plan. We have not accounted for any of these factors.
Our analysis produces results similar to recent estimates for California by Covered California and a January 2016 analysis from the Urban Institute.
See the original article Here.
Source:
Levitt L., Cox C., Claxton G., (2017 April 25). The effects of ending the affordable care act's cost-sharing reduction payments[Web blog post]. Retrieved from address https://www.kff.org/health-reform/issue-brief/the-effects-of-ending-the-affordable-care-acts-cost-sharing-reduction-payments/
Millennials, Gen X Struggle With the Same Financial Wellness Issues
Millennials and Generation X have a lot more in common than they think. Check out this great article by Amanda Eisenberg from Employee Benefit News and find out about the major financial issues facing both Millennials and Generation X.
From student loans and credit card debt to creating an emergency fund and saving for retirement, older millennials are beginning to face similar financial well-being problems as Gen Xers.
Financial stress among millennials decreased to 57% from 64% last year, which is more in line with the percentage of Gen X employees who are stressed about their finances (59%), according to PwC’s “Employee Financial Wellness Survey”.
“As much as millennials want to be different, life takes over,” says Kent Allison, national leader of PwC’s Employee Financial Wellness Practice. “You start running down the same path. Some things are somewhat unavoidable.”
Half of Gen X respondents find it difficult to meet their household expenses on time each month, compared to 41% of millennial employees, according to PwC.
Seven in 10 millennials carry balances on their credit cards, with 45% using their credit cards for monthly expenses they could not afford otherwise; similarly, 63% of Gen X employees carry a credit card balance, especially among employees earning more than $100,000 a year, according to the survey.
“The ongoing concern year after year — but they don’t necessarily focus on it —is the ability to meet unexpected expenses,” Allison says. “It’s stale but there are reoccurring themes here that center around cash and debt management that people are struggling with.”
With monthly expenses mounting, employees from both generations are turning to their retirement funds to finance large costs, like a down payment on a home.
Nearly one in three employees said they have already withdrawn money from their retirement plans to pay for expenses other than retirement, while 44% said it’s they’ll likely do so in the future, according to PwC.
Employees living paycheck to paycheck are nearly five times more likely to be distracted by their finances at work and are twice as likely to be absent from work because of personal financial issues, according to PwC.
The numbers are alarming, especially because Americans are already lacking requisite retirement funds, says Allison.
“Two years ago, the fastest rising segment of the population in bankruptcy is retirees,” he says. “I suspect we’re going to have that strain and it may get greater as people start to retire and they haven’t saved enough.”
Employers committed to helping their employees refocus their work tasks and finances should first look to the wellness program, he says.
“Focus on changing behaviors,” says Allison. “The majority of [employers] use their retirement plan administrators. You’re not going to get there if you don’t take a holistic approach.”
Meanwhile, employees should also be directed to build up an emergency fund, utilize a company match for their 401(k) plans and then determine where their money is going to be best used, he says.
They can also be directed to the employee assistance program if the situation is dire.
“It’s intervention,” Allison says. “At that point, it’s too late.”
See the original article Here.
Source:
Eisenberg (2017 April 27). Millennials, gen x struggle with the same financial wellness issues [Web blog post]. Retrieved from address https://www.benefitnews.com/news/millennials-gen-x-struggle-with-the-same-financial-wellness-issues