Healthcare Law Deadlines in Place, Coming Up - - and Delayed

By now, most people have heard about the provision in the Affordable Care Act (ACA) that may impose a penalty on employers who don't provide health insurance to their employees, beginning January 1, 2014. But the ACA has numerous other health plan provisions and deadlines that employers must be concerned about. Below are just three, along with the deadlines attached to them.

Kicked in January 1, 2013:  New $2,500 Cap on Healthcare FSA Contributions Before 2013, there was no tax-law limit on salary-reduction contributions to an employer healthcare FSA (although many plans imposed their own annual limits). Starting in 2013, the maximum annual FSA contribution by an employee is capped at $2,500. After that, the cap will be indexed for inflation.

Coming January 1, 2014:  Group Health Plan Waiting Period Cannot Be More than 90 Days Under the ACA, beginning January 1, 2014, a group health plan or health insurance issuer offering group health coverage cannot apply any waiting period that exceeds 90 days. A waiting period is defined as the period that must pass before an individual is eligible to be covered for benefits under the plan. The U.S. Health and Human Services Department, the IRS and the Employee Benefits Security Administration recently published proposed guidance on how to administer the rules. The guidance states that all calendar days are counted beginning on the enrollment date, including weekends and holidays. If the 91st day is a weekend or holiday, the plan or issuer may choose to permit coverage to become effective earlier than the 91st day, for administrative convenience. An example from the guidance: A group health plan provides that full-time employees are eligible for coverage under the plan. An individual begins work as a full-time employee on January 19. In this case, any waiting period for the employee would begin on January 19 and could not exceed 90 days. Coverage under the plan must become effective no later than April 19 (assuming February lasts 28 days).

Delayed until January 1, 2015:  The Small Business Health Options Program The Small Business Health Options Program, (SHOP) was originally scheduled to provide small employers (defined as fewer than 100 employees) with a marketplace that offers them a variety of health plans beginning on January 1, 2014. Now, the U.S. Department of Health and Human Resources has stated the program will be delayed until 2015. During 2014, employers in most states will be limited to one plan.

 

If you have questions about your company's plan, consult with your employment attorney or employee benefits adviser.

Rethinking Your 401k

It's easy, once your 401(k) plan is in place, to just leave it alone. But doing that could mean it becomes out of touch with the direction you intended. That's why you need to dust it off periodically and make sure it is still in alignment with what you hoped to accomplish when you established the plan.

One framework for approaching this task is described in an insightful research paper, "What's on the Investment Menu? A Recipe for a Better DC Design" issued by the Defined Contribution Institutional Investment Association (DCIIA). A few concepts from the document are introduced below.

For starters, assessing your goals can be facilitated by answering four basic questions, the report's authors suggest:

Have it Your Way "Just like restaurants where there is no one size fits all menu, some have long menus with many choices, whereas others offer only a few set meals, the DC [Defined Contribution] menu structure is a key component of ensuring participants understand the plan objectives and order a meal designed to satisfy their needs." ---From DCIIA.org

1. Is the 401(k) plan the primary retirement savings vehicle? Assuming the answer is yes, you are "more likely" to want to guide participants' investment selections.

2. How much guidance do you want to offer? The advent of Qualified Default Investment Alternatives (QDIAs), including target date funds, risk-based or balanced funds and managed accounts, makes the job of guiding participants easier, if that is your aim.

3. Do you want employees to stay in the plan after they retire or otherwise leave the company? Participants make their own decisions, but by not emphasizing the rollover option you might have an impact on employees' decision.

Many employers are happy to see former employees and retirees roll over their accounts. Yet others are content for them to stay in, assuming they contain a critical mass of assets. Why? They may simply believe those retirees will achieve better outcomes within the company plan, and care about it. An ancillary benefit when former employees and retirees stay in is that maintaining more assets in the plan achieves economies of scale with service providers, reducing per capita costs and/or making more services available.

4. Is it a priority for you to see that your participants achieve an adequate retirement income (as opposed to simply looking at contribution rates)? If so, focus information regarding plan choices on this question: "How does this decision affect our retirement replacement goal?" according to the report.

If you emerge from this review with a strong dedication to employees' financial security in retirement, where does it take you? Among other suggestions, the report proposes creating three tiers of investment menus, available to all participants but divided according to their level of interest in making investment decisions. Employees can focus on the tier that they most closely identify with, and choose from its options. You can choose investments for each tier according to the degree to which you want to guide employees ("guided plans"), versus emphasizing "self-directed choices," which boils down to offering more choices, the report suggests.

The three tiers and some examples of possible investment components:

Tier 1 for "do it for me" participants, who are the least engaged in investment decisions. Investments for this group might emphasize a target-date fund and managed account QDIAs, and perhaps also risk-based funds that allow participants to choose a desired risk level (such as conservative, moderate, aggressive).

Tier 2 "do it with me" participants. This group is willing to play a greater role in fund selection, but still seeks guidance. If you are more willing to guide such participants, their investment options might be limited to five asset classes: U.S. equity, non-U.S. equity, alternative assets, diversified bonds and stable value. If you fall into the "self-directed" plan camp, an expanded set of investment classes might include both small- and large-cap U.S. equities, developed and emerging market international equities, along with the other options offered by "directed" plans.

Tier 3 "Do it myself." Self-directed plans might offer this group a brokerage window for ultimate flexibility, with the caveat that it is only suitable for the most sophisticated investors.

The report offers many more details with respect to the construction of funds within those broad categories, and offers insights on menu design from the world of behavioral finance.

"Done right," the report concludes, "a [defined contribution plan] menu can shape expectations, direct behaviors and help participants feel confident that their retirement plan is secure."

Health Savings Account Limits for 2014

With Health Savings Accounts (HSAs), individuals and businesses buy less expensive health insurance policies with high deductibles. Contributions to the accounts are made on a pre-tax basis. The money can accumulate year after year tax free, and be withdrawn tax free to pay for a variety of medical expenses such as doctor visits, prescriptions, chiropractic care and premiums for long-term-care insurance.

Participating employers can also contribute to accounts, on behalf of their employees.

Here are the 2014 limits for individual and family coverage, which were announced by the IRS in Revenue Procedure 2013-25. They are determined after the IRS applies cost-of-living adjustment rules, and the changes in the Consumer Price Index for the relevant period.

Health Savings Accounts	2014	2013
Self-only coverage annual minimum deductible	$ 1,250	$ 1,250
Self-only coverage maximum out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums)	$ 6,350	$ 6,250
Self-only coverage maximum HSA contribution	$ 3,300	$ 3,250
Family coverage annual minimum deductible (Family coverage can include a spouse and any dependents)	$ 2,500	$ 2,500
Family coverage maximum out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums)	$12,700	$12,500
Family coverage maximum HSA contribution	$ 6,550	$ 6,450

For more information about HSAs, contact your employee benefits and tax adviser.

Beward of Charity Scams after Boston and Central Texas Tragedies

The IRS is warning that after major disasters and tragedies, scam artists impersonate charities to steal money or get private information from well-intentioned taxpayers. Fraudulent schemes may involve solicitations by phone, social media, e-mail or in person.

Scam artists use a variety of tactics including:

• Operating bogus charities that contact people by telephone to solicit money or financial information.
• Using e-mails to steer people to bogus websites to fraudulently solicit funds for the benefit of tragedy victims. Fake websites often imitate legitimate charity sites or use names similar to genuine charities. They may claim affiliation with bona fide charities to persuade individuals to send money or provide personal financial information, which can then be used to steal the identities or money of their victims.

The IRS offers the following five tips to help taxpayers who want to donate to victims of the recent tragedies at the Boston Marathon and a Central Texas fertilizer plant:

1. Donate to qualified charities.  Use the "Exempt Organizations Select Check" tool at IRS.gov to find qualified charities. Only donations to qualified charitable organizations are tax-deductible. You can also find legitimate charities on the Federal Emergency Management Agency (FEMA) Web site at fema.gov.
2. Be wary of charities with similar names. Some phony charities use names that sound like familiar or nationally known organizations. They may use names, logos or websites that are similar to or look like those of legitimate organizations.
3. Don't give out personal financial information. Do not give your Social Security number, credit card and bank account numbers and passwords to anyone who solicits a contribution. Scam artists use this information to steal your identity and money.
4. Don't give or send cash. For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the donation.
5. Report suspected fraud. Taxpayers suspecting tax or charity-related fraud should visit IRS.gov and perform a search using the keywords "Report Phishing."

More information about tax scams and schemes is available at IRS.gov using the keywords "scams and schemes."