2013 Inflation Adjustments
Source: United Benefit Advisors
By: Chadron J. Patton
Following recent announcements by both the IRS and the Social Security Administration, we now know most of the dollar amounts that employers will need to administer their benefit plans for 2013. Many of the new numbers are slightly higher than their 2012 counterparts. For instance, the annual 401(k), 403(b), or 457(b) deferral limit will increase from $17,000 to $17,500; the Section 415 limit on annual additions to a participant's account will go from $50,000 to $51,000; and the annual compensation limit will increase from $250,000 to $255,000. (The annual retirement plan catch-up contribution limit -- $5,500 -- will remain unchanged for 2013.)
The annual compensation threshold used in identifying highly compensated employees (HCEs) remains unchanged for 2013 (at $115,000). In identifying HCEs for 2013, employers should consider employees who earned at least $115,000 during 2012 (as well as 5% owners during either 2012 or 2013). This is due to the "look-back" nature of the HCE definition.
The annual limit on IRA contributions (whether traditional or Roth) will increase from $5,000 to $5,500, while the annual limit on IRA catch-up contributions will remain at $1,000.
The maximum contribution to an HSA will increase slightly -- from $3,100 to $3,250 for individual coverage, and from $6,250 to $6,450 for family coverage -- while the maximum HSA catch-up contribution will remain at $1,000. The minimum deductible for any high-deductible health plan (which must accompany any HSA) will also increase slightly -- from $1,200 to $1,250 for individual coverage, and from $2,400 to $2,500 for family coverage.
A new $2,500 limit on employee deferrals to health FSAs will apply for plan years beginning on or after January 1, 2013. This $2,500 limit applies only to salary reduction contributions under a health FSA and not to employer contributions. For this purpose, however, any employer FSA contributions that could have been received in cash are treated as salary reduction contributions.
The Social Security taxable wage base will increase for 2013 -- from $110,100 to $113,700. A question yet to be answered is whether employees will continue to enjoy a temporary reduction in the long-standing 6.2% "OASDI" tax rate. For 2011 and 2012, that rate has been temporarily reduced by two percentage points (to 4.2%), as a way of helping to stimulate the economy. Although there does not appear to be significant sentiment in either of the major political parties to extend this reduction, there is a slight chance that the 4.2% rate will remain in effect for 2013. (In any event, the employer OASDI tax rate will remain at 6.2%.)
The Medicare tax rate has long been set at 1.45% -- for both employees and employers. Beginning in 2013, however, the employee Medicare tax rate will increase by 0.9% (to a total of 2.35%) on wages in excess of $200,000 for single filers or $250,000 for joint filers ($125,000 for married individuals filing separately). Employers must start withholding this additional Medicare tax once an employee's Medicare wages have exceeded $200,000. This additional Medicare tax does not apply to the employer's share.
To obtain a quick reference card listing the 2013 annual benefit plan amounts, please contact Saxon Financial Consulting
Defined Benefits Vs. Defined Contribution
A new report finds that while defined contribution (DC) plans such as 401(k)s cost more per employee hour worked than defined benefit (DB) plans, the DC plans cost less per participant than the DB plans. The average per-participation cost for DB plans is $2.53, compared with $1.46 for DC plans, according to a new report by the Bureau of Labor Statistics.
Leadership and Employee Engagement
By: Peter Freska
I recently climbed Mount Everest! Well, in actuality it was a simulation put together in partnership with Harvard Business School Publishing that I completed with a team. As the outline reads:
“You and four other team members will attempt to summit Mount Everest in this collaborative multi-player simulation. There are five camps or checkpoints along the route to the Summit (top) of Mt. Everest. At each camp, team members analyze information on weather, health conditions, supplies, goals, or hiking speed, and determine how much of that information to communicate to their teammates.”
Now, it is not likely that most of us will ever climb Mount Everest - but that is one of the compelling pieces to this simulation. How many of us will be put into a situation where the decisions of those around us could have life or death consequences? Or more importantly, how many of us might be put in a leadership position with life or death consequences. From squad leader to general, our military leaders understand this position and so does someone that has led a Mount Everest summit. But what about the rest of us? How do we learn to be great leaders? What are the qualities of a great leader?
There are so many questions and so many people with answers. Several years ago I attended a luncheon with keynote speaker, the late-great General Norman Schwarzkopf (Ret.). He explained that with all his military career achievements, he cannot pinpoint the one characteristic that makes a great leader. However, he did say that, “When in charge, take charge.”
In today’s work environment, we have unprecedented opportunity that comes with responsibility. We grew up with our parents and grandparents telling us that we need to carve out our piece of the world. What they didn’t tell us is that we need to know when to change course. Peter Drucker wrote in his article, Managing Oneself (Harvard Business Review, Best of HBR 1999), that, “Success in the knowledge economy comes to those who know themselves – their strengths, their values and how best they perform.” Drucker also outlined the following questions to be answered of oneself:
1. “What are my strengths?”
2. “How do I work?”
3. “What are my values?”
4. “Where do I belong?”
5. “What can I contribute?”
So, what does all of this have to do with employee benefits? PPACA, HIPAA, ERISA and a host of other acronyms flood the over stimulated world we live in. But what are the things that really matter? Credibility of a leader starts with being honest, forward-looking, inspiring, competent, and intelligent (Credibility, Kouzes and Posner, 2011). These are the things that matter. And unless these characteristics are established at the leadership level, employees will not be engaged. My partner, Holly Parsons, wrote in a previous blog that many employees do not feel connected and a recent study found that “only 29% of employees are fully engaged.” How does this affect productivity? To be direct, lack of engagement ruins productivity. This holds true with employee benefits. If they do not see the value, then there is no benefit. If the leadership team views benefits as a necessary evil, or as purely an expense – well, then I would refer them back to the five questions that Peter Drucker asked. I would also direct them to Kouzes and Posner’s book, Credibility. It starts at the top, and in today’s world it also starts with each of us – for leadership is a lifelong process.
As for my Mount Everest experience, it was great! We learned about ourselves, our communication styles and team dynamics. And yes, my Team was the only team that made it to the summit - all together as a “real team.”
Cheat Sheet: What employers need to know about the Affordable Care Act
Source: https://www.insidecounsel.com
By: Alanna Byrne, Mary Swanton
President Obama’s Election Day victory ends, or at least postpones, Republican promises to overhaul or repeal the Patient Protection and Affordable Care Act (PPACA), a hallmark piece of legislation from the president’s first term. This means that, starting on Jan. 1, 2014, employers with more than 50 full-time equivalent employees must either provide health care coverage for their workers or pay a penalty.
In the November feature “Pay or Play,” InsideCounsel provides a look at the key factors that companies should consider when deciding whether to comply with the law—or face a stiff fine for failing to do so.
Does the size of a business matter?
The PPACA applies to all companies with more than 50-full time employees. Employers can choose not to provide coverage, but will pay $2,000 for every worker they do not insure, excluding the first 30 employees.
A General Accounting Office review of several studies on the subject found that larger employers are less likely to drop health care coverage when the new reforms take effect, largely to remain competitive in attracting the best employees. Smaller companies with less than 100 workers, on the other hand, could face a disadvantage on the health care market, as they often can’t get the same deals on insurance as their larger counterparts, so paying the penalty may make sense to them.
How are part-time and full-time workers affected?
Currently, many employers offer benefits only to full-time employees, generally defined as those working 35 or more hours a week. The PPACA, however, has lowered the standard for full-time employment from 35 to 30 hours, leaving companies that rely on part-time employees with a difficult choice to make.
“The problem arises when you have a workforce where your criteria [for receiving health benefits] was 35 hours per week, and now the threshold is 30,” says Patricia Cain, a partner at Neal, Gerber & Eisenberg. “If you have a lot of employees working 30-plus hours but less than 35, your choices are to cut them back to under 30 hours, pay the penalty tax or offer coverage.”
What industries will be most affected by the new reforms?
Unsurprisingly, the hardest-hit industries are likely to be those that have not provided health coverage—or have provided very minimal insurance—to workers in the past, while offering insurance to executives. These include restaurant chains, retail outlets and other businesses in the service sector. A nondiscrimination clause in the PPACA now requires that companies provide the same coverage to all employees at all levels, or face a $3,000 per employee penalty.
Complicating matters for these businesses, the coverage they offer must be affordable, which is defined as coverage that does not cost more than 9.5 percent of an employee’s yearly W-2 wages. “To get out of all penalties, you have to offer [coverage] at 9.5 percent of household income. That’s a pretty low threshold for servers or shift cooks,” says BakerHostetler Partner John McGowan. “The business will incur some meaningful costs it doesn’t have in the budget right now.”
Are there hidden costs?
Ideally, the health care reforms will reduce health care costs by providing affordable preventative care and putting new regulations on health care providers. But the future of health care costs remains murky, and if they continue to rise after 2014, employers may be more likely to drop coverage.
“[The PPACA] mandates certain types of coverage be provided and mandates preventative coverage be provided at no cost, all of which are good for employees. But it doesn’t appear to take an aggressive stand toward lowering costs, and that’s what troubles employers,” says Littler Mendelson Shareholder Steve Friedman.
What role will state-run health care exchanges play?
The PPACA requires everyone to have health insurance, meaning that those employees who don’t receive it from their companies likely will have to seek it on state-run health care exchanges. But officials in some states have signaled their unwillingness to establish and oversee these exchanges, leaving the task to the federal government. And even if states do implement exchanges, some employers, particularly those operating in multiple states, are concerned about the quality and consistency of the programs.
“The big unknown is whether the exchanges will be a viable alternative to employer coverage,” says Michael Tomasek, a partner at Freeborn & Peters. “How good will the quality be? Will they function well? Will they be administered well? We just don’t know that yet. Until we know what the alternative to employer coverage is, it’s impossible for employers to make a rational choice about pay or play.”
Senior Worries
A new report by the Employee Benefit Research Institute (EBRI) finds that a retired couple aged 65 might need $387,000 to cover medical expenses for the remainder of their lives. With Medicare covering only 59 percent of health care costs for seniors, retirees should expect to pay an even larger share in the future because of looming Medicare cutbacks and reductions to employer-sponsored retiree benefits, the EBRI report said.
Training Trends
HR professionals can expect some new training trends to emerge in the new year, according to AMA Enterprise. The group expects executives to demand more transparency from training programs and predicts a higher demand for basic-skills training. Also, companies will turn to training to help boost employee loyalty and morale, the group said.
Five trends in wellness incentives for 2013
Five trends in wellness incentives for 2013
Employers want return of investment for their wellness programs. They want to know what incentive dollars are really being used for. Here are five trends to look for in wellness incentives in 2013.
1. Personalization of incentives
The idea of incentivizing people to participate in wellness programs is one of the few to be embraced with equal enthusiasm across the board.
While the concept held enough innovation and promise to spur health plans and employers to spend over $60 billion last year to motivate consumers to engage in health, incentives have often been primitive in execution. Incentive dollars flow to plan members as reward or encouragement for healthy behaviors, but what consumers do with that money has until now been largely a mystery to employers and health insurers.
A 2009 survey conducted by MasterCard and Harris Interactive found 61% of employees participate in a wellness program if incentives are offered versus only 26% when there is no added incentive. Additionally, 25% of employees reported that being incentivized was actually the driver and the very reason they agreed to enroll in a wellness program at all.
Instead, the answer is to better tailor the incentives to fit the person, and to provide incentives that motivate while driving program ROI. A recent study from the Journal of Economic Psychology shows consumers prefer to be incentivized with cash. Yet the utility of cash (even cash rebated to a paycheck) leads many to decisions that fail to drive long-term engagement, satisfaction and ultimately outcomes.
2. Incentives tailored around health related products and services
Health incentives need to focus on an emotional affinity felt by participants toward earned rewards—a paradigm that has the potential to create the initial embrace of health behavior change and perpetuate it. Yet, today’s healthcare dollars are stretched thin, and employers want to make sure every dime spent on health and wellness programs is targeted to accomplish health goals. They have increasingly offered discounts to fitness clubs, healthy foods, supplements and Weight Watchers as incentives.
3. New focus on analytics
The Patient Protection and Affordable Care Act (PPACA) increases the cap on wellness incentives—now at 20% of an employee’s total health insurance premium cost—to 30% and then 50% by 2014. This provides an opportunity to create an incentive program with influence.
Yet as increasing dollar amounts are being driven towards wellness/incentive programs; understanding exactly how funds are being spent; what they are being spent on; and how the actual spending is impacting outcomes and ROI will be critical to understanding the overall impact and success of wellness incentive programs. To that end, rich new data sets being driven by innovation in payments technology will play a key role over the next 18 to 24 months in determining how funds can better be allocated within programs to achieve results.
4. Deeper integration of wellness incentives into overall care continuum
Through a richer data set of spend analytics tied back into larger Big Data initiatives focused on efficient healthcare dollar allocation, the role of wellness incentives, their impact on behavioral economics, and ultimately their importance within the overall care continuum will be far better understood. Health plans and employers will increasingly have the ability to design and integrate highly targeted incentive dollar programs to reduce costs, and improve outcomes.
5. Continued focus on gamification
The recent gamification of wellness programs, employee challenges and the role that both competition and fun in wellness program engagement will continue, as these wellness tools have proven successful in driving initial and—in many cases—longer term engagement and results. That said, there will be an increased focus in 2013 on the actual currency being offered as rewards.
According to a March 2012 study by Fidelity and the National Business Group on Health, employers on average are spending a $169 per-employee per-year on wellness platforms. Yet they are spending nearly three times that on the actual incentive, or $460 per-employee per-year. The incentive dollars represent the single greatest investment into wellness programs. Until now, these dollars have been limited in their ability to be tangibly measured and evaluated for their effectiveness. This will be a critical area of change in 2013, and one that will fundamentally shift how actual incentive dollars are perceived and utilized across all aspects of healthcare to drive cost reduction.
Exchange Picture
Only 18 states and the District of Columbia announced that they plan to set up their own health care exchange under the health reform law by the Dec. 14 deadline set by the Department of Health and Human Services. The remainder of the states will rely on the federal government to establish and run their exchanges.
Do Employees Understand the Value of Your Benefit Offerings?
David Ortloff, from Dillingham, A UBA Partner Firm
Value is a funny thing. What one person might value, another couldn’t care less about. Either way, you never want to assume value is there -- especially when it comes to how your employees perceive the employee benefit program being offered. After all, your employee benefits costs are likely some of the largest costs on your business ledger, so why spend so much money on something that isn’t valued by the people you receive them?
Many companies out there work hard to find and implement the best employee benefits program that fits the perceived needs of the employees. They utilize the top carriers in the marketplace and acquire quality coverage at the lowest price possible. They do a great job implementing coverage, getting applications and paperwork in to the carriers on time. So far, so good, right? More often than not, companies stop there and give themselves a pat on the back. They don’t take that crucial extra step to ensure their employees actually understand and appreciate the true value in what is being offered.
Are you getting every penny’s worth of value out of your current employee benefits offering?
A number of issues can erode the value of a benefit offering in an employee’s mind. Here are just three all-too-common examples:
1. Poor Communication
a. The positive aspects of a benefits offering aren’t communicated effectively
b. Employees lack an understanding of their coverage options and how the coverage actually works
2. Poor Employee Advocacy
a. Employees don’t feel like anyone is watching out for their best interests with claims issues, etc.
3. Poor Perception of Benefits Offering
a. Organizations don’t have a legitimate comparison of their benefits offering with other employers in a region, employer size or industry.
In studies, employees have been found to have a higher regard for "below average" benefits offerings that have been communicated well, compared with "above average" offerings that aren’t communicated well. With that in mind, imagine how much value could be built in your employees’ minds if the benefits offering is properly communicated? Perception is reality.
Often, creating more value with your employees doesn’t mean spending more. On many occasions, less expensive types of coverage, or even voluntary (employee-paid) coverage can be valued more by employees than the current benefits offering. Many employers simply never stop to ask their employees what types of coverage they value.
Don’t be an employer that provides a quality benefits offering that is perceived as "ho-hum" by your employees. There’s not much value there.
Notice of Exchange Option is Delayed
In an FAQ issued January 24, 2013 by the Department of Labor, the employer mandate to provide employees with a notice of coverages available through the Exchanges is being delayed. The original required distribution date of March 1, 2013 has been delayed until the late summer or fall of 2013.
The Department of Labor FAQ states…..
“The Department of Labor has concluded that the notice requirement under FLSA section 18B will not take effect on March 1, 2013 for several reasons. First, this notice should be coordinated with HHS’s educational efforts and Internal Revenue Service (IRS) guidance on minimum value. Second, we are committed to a smooth implementation process including providing employers with sufficient time to comply and selecting an applicability dates that ensures that employees receive the information at a meaningful time. The Department of Labor expects that the timing for distribution of notices will be the late summer or fall of 2013, which will coordinate with the open enrollment period for Exchanges.”