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These executive summaries were compiled from EMPLOYEE BENEFITS INFOSOURCE database, a source for information on employee benefits and human resources.
Retiree Benefits: Employees Increasingly Willing to Trade Pay for More Benefits, Towers Watson Finds.
Smith, Rhonda; Daily Labor Report; no41 p A5 Mar 1, 2012; journal article
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Abstract :
A late 2011 Towers Watson survey of 3,074 U.S. workers revealed 53 percent would be willing to give up some pay in exchange for better retirement benefits. Fifty-five percent would give up some pay to have a more guaranteed retirement benefit, up from 46 percent in 2009. The desire for more retirement security is strongest among older individuals, women, low-paid workers and those in poorer health. Views toward health care benefits are similar, with 45 percent willing to pass on some pay in exchange for lower and controlled costs, up from 19 percent in 2008. Employers should consider ways to help employees cope with cost uncertainties, possibly offering advisers for financial planning and investment advice, debt control and budgeting consultations and health savings accounts.
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IRS Issues W-2 Reporting Guidance.
Bongiovanni, Kate; Employee Benefit News; v26 no3 p 26 Mar 2012; journal article
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Abstract :
Notice 2012-9, issued by the IRS in January 2012, addresses reporting on the cost of employer-provided health benefits on Form W-2, as required by the Patient Protection and Affordable Care Act. The notice makes clear that employers need not report on some kinds of coverage, including dental and vision benefits under separate policies, wellness programs, onsite clinics and employee assistance programs. Contributions to health reimbursement arrangements, health savings account and health flexible spending arrangements may be included on W-2s but are not required. The notice discusses use of the small employer exception when an agent files the W-2s as well as reporting health FSA costs when the amount exceeds the employee's deferral election. The reporting requirement takes effect with the 2012 calendar year.
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Tax Savings on Health Care for Every Size of Employer.
LeTourneau, Janet; Broker World; v32 no3 pp 56, 58, 60 Mar 2012; journal article
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Abstract :
Providing insurance and health benefits for employees is an obvious plus for the employee and gives the employer a tax advantage. There is considerable variation among types of small businesses in eligibility and who pays what for group insurance premiums and other health care expenses, as well as the source and beneficiary of tax savings. Owners and employees in C corporations can participate in cafeteria plans, health reimbursement arrangements (HRAs) and health savings accounts (HSAs), but participation in these plans and premium reimbursement accounts is restricted for more than two percent shareholders in S corporations, partners in a partnership, limited liability corporations and sole proprietorships. Those operations can, however, benefit from savings on payroll taxes. Payment for individual health insurance premiums through a flexible spending account or HRA is usually permissible but seeking legal advice is recommended.
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Employer and Worker Contributions to Health Savings Accounts and Health Reimbursement Arrangements, 2006-2011.
Fronstin, Paul; EBRI Notes; v33 no2 pp 1, 9-16 Feb 2012; journal article
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Abstract :
According to the EBRI/MGA Consumer Engagement in Health Care Survey, two thirds of workers with a health reimbursement arrangement or a health savings account (HSA) said their employer contributed to the account in 2011, the same proportion as in the years 2006 to 2010. However, the percentage of those whose employer contributed who reported an employer contribution of $1,000 or more dropped to 24 percent, the second year of decline and the lowest percentage since 2006. The percentage of those with employee-only coverage who contributed nothing to their HSA dropped from 28 percent in 2006 to 11 percent in 2011, and the percentage contributing $1,500 or more rose from 21 percent in 2006 to 44 percent in 2011. Contribution levels were steady over the period examined for those with family coverage and those in lower income households.
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Overcoming Employee Objections to HSAs.
Johnson, Whitney R.; Benefits Magazine; v49 no2 pp 24-28 Feb 2012; journal article
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International Foundation of Employee Benefit Plans
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A combination of a high-deductible health plan (HDHP) and a health savings account (HSA) is generally less expensive than traditional health insurance, gives employees more ownership over their health care money and allows for more cost sharing options, but many employees have objections. To those who say they cannot afford an HSA, employers should note that the HSA program is generally the least expensive option available and is often too expensive only when compared to an unrealistic or unsustainable plan. Those who do not want the responsibility of HSA management should be advised that they can control what level of services and spending they want. Objections that the tax savings of an HSA will not help an individual can be countered by explaining that payroll taxes, not just income taxes, are lowered by HSA contributions. Participants who balk at learning new rules should be aware that the benefits of an HSA plan make it worth the effort of learning the rules.
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Link To Full Article
Health Savings Accounts and Health Reimbursement Arrangements: Assets, Account Balances, and Rollovers, 2006-2011.
Fronstin, Paul; EBRI Issue Brief; no367 pp 1-28 Jan 2012; journal article
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Abstract :
The 2011 EBRI/MGA Consumer Engagement in Health Care Survey showed $12.4 billion in health savings accounts (HSAs) and health reimbursement arrangements (HRAs) and 8.4 million accounts in 2011. Average account balances rose 90 percent from 2006 to 2007, rose minimally and hovered through 2008-2009, fell 4.5 percent in 2010 and rose nine percent in 2011. The total and average rollover amounts increased between 2010 and 2011. Men, older individuals and those with higher household income and educational levels tend to have higher account balances and rollover amounts. Analysis by behavioral factors shows smokers have higher account balances while the obese tend to have lower balances. There is negligible difference in account balance by level of exercise and use of health care cost and quality information, and the correlation between balance and rollover amount and consumer-conscious behavior is minimal.
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Employee Benefits: Taking a Long-Term View.
Turner, John; Financial Executive; v27 no10 pp 23-25 Dec 2011; journal article
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Abstract :
All organizations face ongoing financial pressures from rising employee benefit costs, especially for health care, in a weak economy. Companies are forced to make tradeoffs between profitability and staffing, making small changes from year to year, hoping not to damage employee recruitment, retention and morale too much. A long-term strategy for employee health is needed. The critical components in such a strategy are wellness programs, high-deductible plans and health savings accounts, and voluntary benefits. By addressing health improvement, benefit financing and individual benefit choice, a long-term strategic approach incorporating these elements will minimize the need for cost tradeoffs.
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Health Care: Enforcement of 105(h) Rules Still in Place for Self-Insured Plans, Consultant Says.
Daily Labor Report; no224 p A9 Nov 21, 2011; journal article
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Internal Revenue Code Section 105(h) on nondiscrimination favoring highly compensated employees applies to self-insured health plans, John C. Garner of Garner Consulting reminded attendees at an International Foundation of Employee Benefit Plans webinar. This contrasts with an ongoing temporary suspension of enforcement for fully insured plans. However, insured plans that are grandfathered under the Patient Protection and Affordable Care Act are exempt from the rules of Section 105(h). Providing extra benefits for highly compensated employees will result in high excise tax penalties. The restrictions extend to dental plans and vision plans and to employee assistance plans that provide treatment beyond assessment and referral, and to flexible spending accounts but not health savings accounts.
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Health Care Costs: Consumer-Directed Spending Accounts Help Reduce Health Costs, Study Finds.
Hansard, Sara; BNA's Pension & Benefits Reporter; v38 p 1862 Oct 11, 2011; journal article
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Abstract :
A study by RAND Corp., Towers Watson and the University of Southern California found that patients with consumer directed health spending accounts reduced health care costs. While about two thirds of the total reduction in health care costs was due to reduced usage, the remaining third was from reduction in cost of care, primarily due to lower use of brand name medications, less inpatient care and reduced specialist use. A RAND press release said that health savings accounts incentivize employees to manage their health care costs.
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Another State, Wisconsin, Considers Adding High-Deductible Health Plans to the Menu.
Kuehner-Hebert, Katie; Risk & Insurance; v22 no8 p 12 Sep 15, 2011; journal article
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Abstract :
In October 2011, Wisconsin regulators are considering whether to offer state employees the option of a high-deductible health insurance plan linked to a health savings account as over two dozen states have already done. J.D. Piro of Aon Hewitt said that the Wisconsin regulators need to consider not only the cost savings and improved health and access the plan might provide, but also whether it meets federal health reform requirements for minimum health coverage. Jay Savan of Towers Watson says that high-deductible health plans help cut costs, but also provide incentives for participants to invest in their health and engage in healthy behaviors.
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Consumer-Directed Health Plan Employee Education.
LeTourneau, Janet; Broker World; v31 no9 pp 52, 54, 56 Sep 2011; journal article
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Abstract :
Once an employer has decided to offer a consumer directed health plan (CDHP), the process of employee education begins. Employers should make sure all employees have the necessary information to make informed decisions, including details about the plans being offered and detailed medical expense histories for all family members. A comparison worksheet to allow employees to easily compare plans is crucial. A CDHP is not complete without a selection of side account benefits, and employees need to be informed of the differences between a flexible spending account and a health savings account.
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Flexible Benefits: HSA Providers Face New Requirements Under FinCEN Prepaid Access Final Rule.
BNA's Pension & Benefits Reporter; v38 p 1426 Aug 2, 2011; journal article
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The Financial Crimes Enforcement Network (FinCEN) issued a rule in July 2011 addressing prepaid access products including cards used with health savings accounts (HSAs). A modification of the Bank Secrecy Act, the rule requires companies that provide and sell HSA accounts with prepaid access or stored value cards, which many employers issue to employees, to meet data recording requirements. They must capture customer and transaction information and report any suspicious activities. The rule applies to HSA cards but not to cards accessing flexible spending accounts, dependent care funds or health reimbursement arrangements. It affects the providers of the cards but not employers directly.
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Consumer-Directed Health Plan Choices.
LeTourneau, Janet; Broker World; v31 no8 pp 48, 50, 53 Aug 2011; journal article
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Abstract :
Consumer driven health plans (CDHPs) are a broad category that includes insurance plans and side accounts such as flexible spending accounts (FSAs), health reimbursement arrangements (HRAs) and health savings accounts. An HRA with a health FSA is a good option for employers who want to offer high-deductible health plans, want the money they contribute to side accounts to be usable only for medical expenses, want employees to be able to roll over unused funds and/or want the annual limit to be available from the start of the year. Many employers find an HRA to work out better than other arrangements, partly because they are less complicated for employees to understand. Design choices for HRAs include the amount allocated per employee per plan year, the amount of coverage assigned to different types of health care cost and how much of unused funds employers can roll over from year to year.
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Health Care Costs: Health Benefit Costs Taking a Bite Out of Employee Pay, Survey Finds.
BNA's Pension & Benefits Reporter; v38 p 1294 Jul 12, 2011; journal article
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The Financial Executives Research Foundation and Corporate Synergies reported that the rising cost of employee health benefits is cutting into salary increases and bonuses. Survey results show 21 percent of financial executives report trading off health benefits and compensation. Over half report more than a ten percent increase in benefit costs between 2009 and 2011, and 58 percent report employee spending rose more than 20 percent from 2006 to 2011. For 47 percent of the respondents, over one dollar out of every ten goes to health care costs. Cost sharing is the norm, reported by 88 percent, and 42 percent have moved to high-deductible plans or health savings accounts. While other cost-reduction efforts are being made, future health cost increases are likely to be met with lower compensation.
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Health Savings Accounts vs. Health Reimbursement Arrangements.
Carpenter, Anne; Employee Benefit Plan Review; v66 no1 pp 12-13 Jul 2011; journal article
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Abstract :
Health savings accounts (HSAs) and health reimbursement arrangements (HRAs) are the primary examples of consumer driven health plans and have been shown to cut health expenditures by 15 to 20 percent. Both are tax free for the employee but key differences make HSAs more employee friendly, while HRAs are more favorable for employers. HSAs require a high-deductible health plan and allow employees to control invested funds. Only employers contribute to HRAs and get full tax deduction for doing so. Employers control more details in HRAs, and the funds are not portable. Both HSAs and HRAs work with convenient benefit debit cards that permit easy access to funds for approved medical expenses.
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The Impact of Health Reform on HSAs.
Johnson, Whitney R.; Benefits Quarterly; v27 no3 pp 45-52 3rd Qtr 2011; journal article
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International Foundation of Employee Benefit Plans
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The Patient Protection and Affordable Care Act (PPACA) directly changes two aspects of health savings accounts (HSAs), eliminating their use for over-the-counter drugs and doubling the early withdrawal penalty. A number of provisions of the PPACA affect HSAs indirectly. The PPACA does not consider anything that does not support preventive care to be a health plan, so high-deductible health plans (HDHPs) attached to HSAs must include compatible definitions or insurers will stop offering them. HDHPs are also likely to have lower medical loss ratios (MLRs), the proportion of insurance premiums used for qualifying medical expenses, than other health plans, meaning they may not meet the PPACA's minimum MLR requirement. The question of whether HDHPs and, by extension, HSAs can be included in the health care exchanges created by the PPACA is unanswered as of July 2011.
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Link To Full Article
Consumer-Directed Health Plans: Administrative Issues for Flexible Benefit Service Providers.
LeTourneau, Janet; Broker World; v31 no6 pp 48, 50, 52-53 Jun 2011; journal article
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Abstract :
Administering consumer driven health plans (CDHPs) is complex, especially if different types of flex plans are used in combination. Employers need education about pros and cons of CDHPs, and employees need to understand how a CDHP works for the participant. It is useful to anticipate likely questions, such as on relative advantages of health flexible spending accounts, health reimbursement arrangements and high deductible plans. The variations are treated differently for contributions, and they may differ in terms of claims eligibility. Decisions must be made about how and when disbursements are made. Plan documents need to be updated and coordinated. Software systems should handle different combinations of plans, identify allowable expense for each plan, make appropriate reimbursements and generate reports.
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Report "Calls".
Tinnes, Christy; Winters, Brigen; PLANSPONSOR; v19 no3 pp 106-107 Jun 2011; journal article
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Abstract :
Under the Patient Protection and Affordable Care Act, health plan sponsors must report the total aggregated cost of benefits on plan members' W-2 forms for tax years starting on or after January 1, 2011. But IRS Notice 2010-69 made 2011 reporting optional, delaying it until the 2012 W-2 to be furnished in 2013. Sponsors who file W-2s for fewer than 250 participants for 2012 and 2013 are exempt. The entire cost, including the employer's and employee's contributions, must be reported, but not health savings accounts, flexible spending accounts, stand alone dental and vision plans and some other coverage types. Notice 2011-28 applies until supplanted by further guidance.
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Choosing Wisely.
O'Brien, Michael; Human Resource Executive; v25 no4 pp 32, 34, 36-37 May 2011; journal article
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Abstract :
The choices involved in making effective use of a high-deductible health benefit with health savings account can be overwhelming, but offering online decision support tools can make it easier. Tools such as one from Asparity Decision Solutions, SHPS's PlanWise and Aon Hewitt's DecisionDirect enable users to consider local costs for health care, compare available plans based on personal preferences and estimate savings from each choice. Tools should be simple to use but illuminate all facts important to a sponsor, including the employer's contribution. A decision making tool will be used more if it is easy to use and effectively communicated, with a boost from stories of peers' positive experiences.
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Estimated Health Costs for Couples Retiring in 2011 Drops 8 Percent.
Managing Benefits Plans; no13-5 p 15 May 2011; journal article
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Abstract :
According to estimates by Fidelity Investments, a couple aged 65 years will need a reserve of $230,000 for health expenses during retirement, not counting nursing home care. In 2010, the estimated savings needed was $250,000. The drop is an effect of the Patient Protection and Affordable Care Act, which lowered out-of-pocket expenses for prescription drugs, while the Health Care and Education Reconciliation Act eliminates the donut hole gap in the Medicare drug plan by 2020. Many companies are encouraging use of high-deductible health plans with health savings accounts to pay qualified medical expenses. The average Fidelity HSA holder contributed $2,620 in 2010, and 95 percent of account holders carried over a balance going into 2011.
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Interim Guidance Issued on Group Health Insurance Reporting for W-2s.
LeTourneau, Janet; Broker World; v31 no5 pp 62,65, 70, 72 May 2011; journal article
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Abstract :
The IRS issued Notice 2011-28 as interim guidance on reporting the costs of employer-sponsored health benefits, as required by the Patient Protection and Affordable Care Act. Starting with the 2012 Form W-2, to be issued in early 2013, most employers who provide health care benefits must report the aggregate cost of coverage, including the portions paid by the employer and employee. Exceptions include amounts contributed to health savings accounts, health reimbursement arrangements, health flexible spending arrangements, costs covered under a multiemployer plan and COBRA premiums. Various methods of calculating the cost of coverage are available, with the calculated cost reported in box 12 of the W-2 form. Additional and final rules are anticipated.
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Health Savings Accounts: RAND: 'Medically Vulnerable' Use Services as Much as Others in High-Deductible Plans.
Hansard, Sara; BNA's Pension & Benefits Reporter; v38 p 829 Apr 26, 2011; journal article
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According to a RAND Corporation study, people with low incomes or chronic health problems do not cut back their health care any more when enrolling in high-deductible health plans than others who enroll in the plans. However, high-deductible plans did reduce spending across the board, even on preventive services for which the plans waived cost-sharing. The consequences of reduced use of high-value services for high-risk families may be different than those for nonvulnerable families. A letter from 13 consumer and health organizations to Joel Ario, the Center for Consumer Information and Insurance Oversight's director of health insurance exchange, asked for more guidance on catastrophic insurance plans.
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Notice 2011-28: Interim Guidance on Informational Reporting to Employees of the Cost of Their Group Health Insurance Coverage.
Internal Revenue Bulletin; no2011-16 pp 656-663 Apr 18, 2011; journal article
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The Patient Protection and Affordable Care Act added Section 6051(a)(14) to be added to the Internal Revenue Code, establishing an employer's responsibility to provide information to employees on the aggregate costs of covered health care benefits. Most employers must provide cost information on Form W-2 starting with the 2012 tax year. The reporting must cover the aggregate cost of employer-sponsored coverage and has no impact on taxes. The disclosure does not apply to health savings accounts, Archer MSA, flexible spending arrangements, dental care, any coverage that would be taxed and several other exceptions. Employers filing fewer than 250 Forms W-2 for 2011 get transition relief and need not provide the information until tax year 2013.
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The Latest on Coordinating HSAs With FSAs and HRAs.
LeTourneau, Janet; Broker World; v31 no4 pp 48, 50 Apr 2011; journal article
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There are limits on the ways health savings accounts (HSAs), flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs) can interact legally and comply with all the rules. Limited purpose health FSAs and HRAs may cover only certain health needs up to a minimum annual deductible and interact with insurance plans for certain items or daily hospital costs without violating the HSA rule against other insurance. With suspended HRAs, all qualified costs can be paid though no reimbursement can be made for otherwise eligible medical expenses. After a suspension period, employees may not make HSA contributions but can get reimbursed from their HRA. Coverage with postdeductible health FSAs and HRAs starts after a minimum deductible is met, but reimbursements can be made before the deductible hurdle is overcome. Retirement HRAs may be used for certain health purposes but block HSA contributions. It is possible to mix and match plan types, but consumer education is essential.
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A New Burden Falls on Employers.
Berg, Joel; Risk & Insurance; v22 no2 pp 44, 46 Mar 2011; journal article
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Faced with the responsibility for managing their own investments for retirement and their health care funds, employees have shown through litigation that they will not accept shrinking assets without question. Employees are scrutinizing investment performance for 401(k) plans, any plans with employer stock as well as a new focus, health savings accounts not protected by the Federal Deposit Insurance Corporation. Employers should be aware of the broadening range of liability sources and proactively communicate fees, risks and risk management to pension and health plan participants. Plan participants who understand the costs and risks are less likely to take legal action if assets fall due to poor investment performance.
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