Saturday, November 26, 2005

Free Subscription to Healthcare & You       Current Issue Contents US Treasury Issues Clarification To Ease Transition For "First Dollar" Mandated Policies The US Treasury will issue a clarification for companies with health plans that end on Decmber 31st and which are governed by states with so-called "first dollar mandates." Under the ruling, to be issued December 5th, companies with plans ending sometime in 2006 can keep those plans and still qualify for High-Deductible status. Many states with first dollar mandates, that is, providing coverage from the first for such things as maternity will have time to adjust them during the calendar year as the new policies are put into effect. The clarification was needed as many companies were concerned that their programs would not qualify as of December 31st, due to legislative inaction. The full guidance is attached and can be viewed by clicking here. 11:58:15 AM    comment []

Free Subscription to Healthcare & You       Current Issue Contents Proposed Tax Reforms Could Hit Small Firms Harder, Affect Many Owners For small firms in particular, the proposed tax reform proposals put out by a presidential panel threaten employer-sponsored retirement saving plans, industry experts say. While seemingly a long way off, these proposals can not be lightly dismissed. They contain enough attractive non-retirement features so that Congress will be receptive to reforming the tax code. Sources close to this subject predicted President Bush would push tax reform in his State of the Union speech this winter with hearings on the subject in 2006 and there is more than a bare possibility that tax reform legislation of some kind will become law in the 110th Congress. The President's Advisory Panel on Federal Tax Reform panel offered two options--one that would simplify the existing income tax and a second that would move the tax system closer to being a consumption, rather than income, tax. Brian Graff, executive director of the American Society of Pension Professionals & Actuaries, leveled his sharpest criticism at a component of the second package of proposals that would eliminate the immediate deductibility of contributions to retirement accounts at work (no longer 401(k)s, but a new version dubbed "Save at Work"). Graff said the 401(k) industry ought to consider that the tax panel was advocating this change in part because it would mean more tax revenue and enable setting the corporate and income tax rates lower.  While this may be a good thing for larger corporations, many smaller firms with high owner participation, the changes may severely impact retirement plans tied to company programs. The changes could also affect long-time employees who are critical to a small company’s success by preventing them from building a retirement nest egg through tax deferred programs. To keep these individuals, smaller firms would be forced to increase salaries and other benefits. Edward Ferrigno, vice president of the Profit Sharing/401(k) Council of America, said, "There would be fewer people saving for retirement, especially lower and moderate income people." Within minutes after the tax reform proposals were publicly unveiled, the American Society of Pension Professionals & Actuaries put out a statement calling them "devastating to the retirement aims of millions of American workers." In the package are proposals aimed at simplifying the income tax, employer-provided Save at Work plans would replace all existing defined contribution plans. Existing contribution limits and rules for 401(k) plans would be retained, but qualification rules would be simplified. Instead of current non-discrimination requirements, Save at Work plans would apply a single test to ensure that employee contributions are not skewed towards highly compensated employees. "Auto-pilot" type reforms would be included in the new plans. The fear in some industry quarters is that such generous opportunities for the affluent to save by other means could doom the spread of employer plans, which can help less provident workers save for old age. "We are not saying the whole package does not make sense," said Ferrigno. "If people saved adequately on their own—but we know they don't." Also with the potential to be adversely affected are HSAs according to Michael Cannon of the Cato Institute.  According to this leading healthcare advocate, the proposal includes three major changes affecting health care: It would cap the currently unlimited tax exclusion for employer-sponsored health insurance at $5,000 for those with self-only coverage and $11,500 for those with family coverage. Second, it would create what Tax Notes describes as “an equivalent tax break for individual policies” for those without employer-sponsored insurance. Third, it would roll HSAs (and other tax-preferred savings accounts) into “save for family accounts.” (Let’s call them SFFAs.) Unlike HSA contributions, SFFA contributions would be taxed. The end result, according to Cannon, would be a severe limitation on HSAs. 11:57:43 AM    comment []

Free Subscription to Healthcare & You       Current Issue Contents Investment Options For New Retirement Plans Require Careful Handling by HR Managers HR leaders in companies large and small need to acquaint themselves with the rules concerning advise on investing or keeping dollars attached to benefit programs particularly when installing a new Health Savings Account plan. To avoid conflict with ERISA and other regulatory requirements, it is best to offer a variety of options in the Health Savings Account package offered to employees.  In addition, the company should not provide financial advice or suggestions nor permit solicitations of advisory services on company premises except under strict guidelines. HSAs permit a wide variety of investment options, indeed about the only thing an employee can not invest in his diamonds and collectibles,  The Treasury Department has issued guidelines on its websites concerning HSA accounts www.treas.gov. But for many employees, the opportunity to invest in long term options is becoming more and more prevalent, according to www.hsafinder.com's latest survey. Experts agree that Bond mutual funds are an excellent option for long term HSA investment.  Many financial advisors recommend that employees keep only a limited amount of their HSA account in a liquid checking or savings account.   The most frequently cited amount is $4,000 when the account is eligible to keep this amount.  (First year savings are limited to a maximum of $2,100 for single and $5250 for families.) According to Daryl Kulak, the author of the book "Health Insurance Off the Grid - A Wonderful Way to Use Alternative Medicine and Save Money on Insurance Using the New Health Savings Account (HSA),  “A Health Savings Account is an investment. You may not have thought of it that way, but it is.” Surveys by Information Strategies, Inc. shows that most account holders view the account as a retirement vehicle, many calling it “a Medical IRA.” Financial advisors divide investments into two camps --- stable and violatile. A volatile investment would be putting money into a fast-moving stock on the stock market. One day it's up, the next day it takes a dive. The most stable investment is a bank account. The investor gets paid a certain interest rate and that's that. No volatility. And not much benefit either, because the interest rate will be quite small. Kulak recommends a bond mutual fund. Bonds are a special type of investment that are less risky than stocks, but more beneficial than a bank account. By investing in a bond mutual fund, Kulak argue the account holder has a steady rate of growth with no big up's or down's. Some months the investment might go down a little, but it won't be dramatic. And, over time, Kulak believes they will beat that bank account interest by several percentage point. Many HSA custodians are gearing up to offer this type of investment for their HSA account holders. If they don't, Kulak recommends shopping around until one is found There are other options besides a bond fund including a commonly available money market account. He argues that this is the second-best choice. They are  very stable, because an account holder never knows when the need to tap into that money will come up. Healthcare emergencies don't give advance notice. Kulak and many others believe HSAS will change how we think of healthcare. Like many other advocates, he believes they are the key to fixing the current healthcare crisis in America, and they will help your small business, self-employment or individual healthcare situation. 11:57:11 AM    comment []

Free Subscription to Healthcare & You       Current Issue Contents Snow To Bankers: HSAs Are Winners Secretary of the Treasury John P. Snow spoke to a private briefing in Washington October 26th of bankers about the administration’s strong belief that Health Savings Accounts (HSAs) were an excellent vehicle for helping consumers obtain economical healthcare insurance as well as building a cushion towards retirement.  Official Statement After the meeting a statement was issued from the Treasury department that said in part: “Secretary Snow delivered a message on the importance of HSAs as a means of making health care more affordable and accessible to American workers,” says Taylor Griffin, a Treasury Dept. spokesperson. Griffith, who attended the meeting, said that Snow also stressed the importance of the financial service sector’s commitment in helping consumers establish the accounts. “We’ve had great response from the banking community so far,” he adds. “The Secretary hopes we can continue down that path to make [HSAs] more accessible and affordable, and urge the banking community to encourage their growth by communicating the financial benefits of [the accounts] to their customers.”  The main thrust of the Secretary’s remarks were focused on the need for more venues through which consumers could open and more easily use the custodial accounts that are a significant feature of HSAs. Addressed Specific Issues The Secretary specifically addressed the issue of future reporting requirements for custodians.  He pointed out to the audience that his department’s major thrust was to make this program work and to help custodians get “over the hurdle of concern” vis-à-vis regulatory requirements in the future.  “We are doing everything in our power to help custodians provide the best possible products for consumers,” he added. The other keynote speaker at the meeting was Roy Ramthun, Special Assistant to The President for Economic Policy and Advisor on HSAs, Ramthun gave a brief outline of HSAs and their history to date and predicted that 2006 would be a milestone year for them.  He pointed out the announcement in the previous two days of Wal-Mart’s movement towards offering an HSA program to its employees and the fact that other large corporations were also moving in that direction. In his opening remarks, Ramthun detailed how the legislation underlying HSAs was designed to make it relatively easy for banks and other chartered custodial groups to offer accounts to their clients.  In reviewing the legislative agenda for this session of Congress, Ramthun said the administration was seeking to raise the yearly limits on accounts and to offer other inducements to encourage consumers and companies to adopt this form of consumer directed healthcare. The meeting was co-hosted by Information Strategies, Inc, parent of www.hsafinder.com and BISYS, the financial services provider. 11:56:35 AM    comment []

Free Subscription to Healthcare & You       Current Issue Contents Small Firm Managers Digging In On Healthcare Costs Small business managers are putting their foot down when it comes to increasing their healthcare costs. In its latest survey completed in fall, 2005 of 2,100 small business senior managers, ISI for the first time in three years saw a marked change in their healthcare planning. Less than one in five (19%) said they were increasing their healthcare costs versus a year-ago total of one in three (33%).  Most managers (71%) said they were maintaining current costs while 10% said they would reduce costs, down from 15% in 2004. The survey results confirm a long-term trend by business managers to shift the cost of healthcare to employees. More than half of all respondents (54%) said they were requiring employees to shoulder more of the healthcare burden, roughly the same as last year (53%). With 11% indicating they are offering HSAs in 2005 and another 12% indicating they will offer HSAs in 2006, it would appear that the new form of HDHP is taking root within small and medium-size firms. A majority of respondents to the survey are from firms with less than 100 employees but the percentages saying they would hold healthcare costs to current levels in 2006 were almost equal for companies with more than 500 employees polled. There were more than 2,900 respondents to the Fortune/HSAFinder.com survey conducted in late September. Planned Healthcare Expenditures 11:51:59 AM    comment []

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