How Lucky Are You?

Odds are, most Americans will need long-term care at some point.
By Mike Ashley,  Senior Benefits Consultant, Inc.

It never ceases to amaze me that individuals and many financial planners apply a totally different set of risk management principles to long term care than they do for other types of risk. Life insurance is a sure bet.
As long as the policy is in force, there is a 100% chance that you will qualify to collect at some point.  Outside of that, other risks to our financial well-being require an evaluation of risk vs. reward.

According to the Department of Health and Human Services (2006), 70% of all Americans who reach age 65 need long term care at some point in their lives.

Now, compare this with other risks that people insure for without even giving it a second thought.

• Losing your home to a fire  -  1 in 1200
• Car Accident  -  1 in 240
• Hospital stay costing over $30,000  - 1 in 15

According to the latest Genworth Cost of Care Survey, the current cost in the Kansas City area for a private room in a nursing home is $50,000 per year and is projected to be $254,000 per yr. in 30 yrs. Home health care, for just an aide, is currently $48,000 per year and projected to be $210,000 in 30 years.

If a couple, now age 55 both required 2.5 yrs. of care (avg. length of care) at age 85, the cost would be in the neighborhood of $1,300,000.00.  A lot of people certainly do have sufficient assets to cover this kind of expense. The question is “do you want to”?

Consider that a policy covering the cost of 3 yrs. of care for couple age 55 would run about $2400 per year or $200 per month.  If the $ 1.3 million generated .002 % interest, this would cover the premium, leaving the $1.3 million intact.

We all need a little luck now and then. But you might not want that to be your only long-term care strategy.

User-Friendly Healthcare Information?

That's the Goal.
By SRA Benefits

New rules under the Affordable Care Act (ACA) requires businesses renewing their group healthcare plans after September 23, 2012, to provide consumers with clear, consistent, and comparable information about their health plan benefits.

Specifically, these rules will ensure consumers have access to two key documents that will help them understand and evaluate their health insurance choices:

• Short easy-to-understand Summary of Benefits and Coverage ( or “SBC”); and 
• A uniform glossary of terms commonly used in health insurance coverage, such as “deductible” and “co-payment." 

Who is Responsible for the SBC?
Insurance companies are working hard to prepare the SBC documents to share with their customers, but it is the business owner’s responsibility for distributing them to plan participants (for all insured and self-funded ERISA and non-ERISA group health plan customers, including those that are grandfathered).   Employers should check with their carrier or their advisor to see when their SBC documents will be available.

For self-insured plans, the employer is responsible but may make arrangements for their third party administrator to produce and distribute the SBC.

Key Features

One of the key features of the SBC is a plan comparison tool called “coverage examples” which will illustrate sample medical situations and how they would be covered under the plan.  The examples are meant to help consumers understand and compare what they would have to pay under each plan they are considering.

With the mandated timeframes and notification procedures it will become imperative that employers make their benefits decisions earlier to stay in compliance with these new requirements.   For example: For open enrollment and renewals on or after September 23, SBCs should be available to employers for distribution to their employees no later than 30 days before the start of the new policy year.

Guidelines for both a printed version of the SBC and requirements for electronic access to benefit information are also in place.  Your insurance carrier or advisor can provide more detail.

Penalties Can Be Costly

During the first year, the federal watch dog agencies have indicated they will not impose penalties on issuers and employers that are working diligently and in good faith to comply.  However, businesses that willfully fail to comply may be subject to a fine of up to $1,000 for each failure per enrollee. 

For more information on Summary of Benefits Coverage,  visit: http://www.healthcare.gov/news/factsheets/2011/08/labels08172011a.html

Women's Preventative Healthcare Coverage Now Mandatory

Coverage Began with August 1, 2012 Renewals
By David Wetzler, President and Senior Benefits Consultant

New and/or renewing groups that have a non-grandfathered plan* must now include an expanded line of healthcare coverage at no charge, that includes the following services for women:

• Well-woman visits;
• Screening for gestational diabetes;
• Testing for the human papillomavirus (HPV) as part of cervical cancer screening for women age 30 and older;
• Domestic and interpersonal violence screening and counseling;
• Counseling about sexually transmitted infections;
• Counseling and screening for HIV
• Counseling on breast-feeding, including breast-feeding equipment;
• Counseling on interpersonal and domestic violence;
• FDA-approved contraceptive methods, and contraceptive education and counseling;

Benefits for generic or generic equivalent prescriptions and supplies for these newly covered services will be paid at 100% as well.

Please Note:Religious employers who meet eligibility requirements, such as churches, synagogues, mosques, may opt-out entirely from the contraceptive coverage.  And nonprofit religious employers such as universities, hospitals, and social service organizations who, based on religious beliefs do not currently provide contraceptive coverage in their plans, are eligible for a one-year safe harbor from enforcement of these new guidelines.

Adding these services could result in an increase to the group's premium. SRA Benefits healthcare advisors will work with each client to determine how this change impacts the cost of coverage.

Some carriers are electing to offer this expanded coverage immediately, prior to renewals. Contact your benefits advisor for additional information.

*A grandfathered plan is one that was in existence on March 23, 2010. At least one person must have been enrolled as of that date.  Grandfathered plans are exempt from certain healthcare reform mandates.

Failure to follow 401(k) plan regulations can be costly

Internal process for plan administration is critical.
By David Stofer, Principal, Sageview Advisory Group

A recent decision by a U.S. District Court in Missouri* regarding fiduciary responsibilities for 401(k) plan administration can serve as a warning to others.  The warning? Understand your obligations, establish a process and be diligent in your execution.

The court found the company violated five areas of fiduciary responsibility:

1. Failure to monitor record keeping costs.
2. Failure to negotiate rebates for the Plan from investment companies chosen to be on its platform.
3. Selecting more expensive share classes when less expensive share classes were available.
4. Removing one fund and replacing it with another fund in violation of the Investment Policy Statement.
5. Agreeing to pay the record keeper for the two 401(k) plans an amount that exceeded the market costs for plan services in order to subsidize non-plan corporate services (including payroll and record keeping for the health and welfare and the defined benefit plans.)

Because of the subjective nature of many fiduciary decisions, process is a paramount consideration. In exercising its decision, the Court faulted the company for its lack of process - failing to follow established plan documents, not implementing a full and prudent review of fees and expenses and ignoring issues that should have reasonably been scrutinized.

What steps can you take to reduce your risk of violating the many regulations that exist in regards to 401(k) plan management?

• Work with your financial and/or benefits advisor to make sure you understand the extent of your responsibilities;
• Establish procedures and processes that ensure compliance;
• Consider outsourcing plan management and/or providing other investment options to your employees. New options exist that you may not be familiar with. 

Providing attractive investment options to employees is an important benefit to attract and retain top-notch workers. Knowing your options and being knowledgeable of your fiduciary responsibilities in administering these benefits is fundamental to your success.

*Tussey vs. ABB, Inc.

Supreme Court Ruling Requires Action

Take one issue at a time and stay on track.

By David Wetzler, President and Benefits Consultant

In a 5-4 decision authored by Chief Justice Roberts, the Supreme Court upheld the Affordable Care Act (ACA).  While there are many fine points to the ruling that are still being reviewed, the June 28 ruling makes it clear that the individual mandate is constitutional.

Here are a few things you need to understand about how this impacts many businesses right now.

1. The Medical Loss Ratio rebates will be forthcoming, and many companies will see some kind of financial reimbursement from their carriers.   It will be your responsibility to determine what to do with these funds, keeping in mind compliance guidelines related to your specific situation.
2. The Summary of Benefits and Coverage (SBC) mandate will take effect starting with renewals beginning after September 23, 2012.  
3. The new regulations for reporting aggregate cost of health coverage for the 2012 reporting year on W-2s will take effect in January of 2013.  Employers should begin preparing for this now. 
4. You will need to amend flexible medical spending account plans to comply with the $2,500 cap, applicable for plan years beginning on or after January 1, 2013;
5. Prepare to begin the additional Medicare tax withholding for certain high income earners which is effective in 2013; and
6. For employers with 50 or more full-time employees, you must begin to look down the road to 2014; with an eye on what impact the shared responsibility tax may have on your business and employee population.
7. Health plans must include the the expanded list of no-cost sharing services for Women’s Preventive Health Care.
8. For those businesses with self-insured plans, a Comparative Effectiveness Research Fee as outlined in the Internal Revenue Code (section 4376) will be required.

SRA Benefits has anticipated this moment for many months and is ready to advise companies on what needs to be done in each of these areas to keep ensure compliance.  Contact us today for further information: info@srabenefits.com.

New “Partnership” LTC Policies Help Protect Your Assets

Medicare and Medicaid may not deliver what you think.
By Mike Ashley, Senior Benefits Consultants, Inc.

According to AARP, long-term care (LTC) expenses represent the single biggest threat to your retirement nest egg. This is driven, in large part, by statistics that show 70% of those over the age of 65 will require some sort of "care" in their lifetime. Most care will be received at home or in an assisted living facility. Medicare covers only short-term rehabilitative care in a nursing home or at home leaving a big gap for funding long-term expenses.

Currently, over 50% of nursing home residents are on Medicaid.  It is certainly possible to qualify for Medicaid, but not until you have spent almost every penny of your own money (leaving only $2,000 in Kansas, or $999.00 in Missouri). After that, Medicaid can pay for nursing home care, provided you are in a nursing home that accepts Medicaid.  Forget home care.  And here’s the kicker!  If you qualify for, and receive funds from Medicaid, the state will try to recover these funds from your estate at your death.

The cost to Medicaid of paying for this care has the program teetering on the brink of insolvency.  In an effort to alleviate some of this burden,  and encourage people to take some responsibility for their own care, most states, including Kansas and Missouri, have approved the use of “State Partnership Long Term Care Policies”.  These policies are available from a variety of insurance companies and they must meet certain criteria set forth by the Federal Government.

How do “Partnership” policies work?  If you exhaust your benefits of, lets say, $400,000 and still need care, the “Partnership” policy allows you to exempt $400,000 from Medicaid spend down and still qualify. This is a far better plan than relying totally on Medicaid. Under most projected scenarios, Medicaid will be out of funds in the near future.

Long Term Care Insurance that covers home care, assisted living, and nursing home care is not for everyone. It is, however, important to at least consider it as part of your retirement planning.  Contact your SRA Benefits representative for more information.

Don't use it? Don't lose it!

IRS Open to Comments on FSA Use-or-Lose Rule

by David Wetzler, Senior Business Consultant

It’s a fact. If you never use the muscles in your biceps, they’ll eventually disappear.   Use It or Lose It, as the saying goes.  With a little help from the IRS, however, the Use It or Lose It rule may not be a universal truth.

On May 30, 2012, the Internal Revenue Service issued Notice 2012-40 providing guidance on the $2,500 Health Flexible Spending Account (FSA) requirements. In the notice, the IRS requested comments on whether the "use-or-lose" rule should be modifed in light of the $2,500 limit. 

Currently, employees who participate in FSAs must estimate the amount of money they will need in the coming year to cover healthcare-related expenses not covered by their health plans.  They can stash away a maximum of $2,500 per year to pay for things such as  co-pays, deductibles, eye glasses, braces, etc. -  items not covered under their other insurance plans.  The money contributed to their Flexible Savings Accounts is tax exempt, thereby reducing the employee’s taxable salary.  That’s the good news.  But there’s a downside as well:  the Use-or-Lose requirement. Employees must accurately project what they think they will spend or lose the unspent amount in the account every plan year.

Not only does this rule inhibit employee participation, it creates spending behaviors in the last month of each plan year that may or may not be the best use of an employee’s money.  

So now’s your chance to let the IRS know what you think.  Written comments about the Use-or-Lose Rule are being requested by  August 17, 2012.   Refer to page 10 of Notice 2012-40 to find out how and where to submit your comments. 

For a summary of all the requirements on Notice 2012-40 regarding FSAs, check out Healthcare Reform on the SRA Benefits web site.  And contact an SRA Benefits consultant about how FSAs may be a great addition to your employee benefit plan offerings.