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Benchmark
Benefit Consulting keeps clients up-to-date on the latest happenings in
the world of employee benefits.
If you do not see a topic that you are interested in reading
about and would like to receive more information, e-mail us and we will
provide you with the latest news, rulings, or regulations.
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Treasury
releases Health Savings Account guidelines
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National Small Business Association
http://www.nsba.biz/content/332.shtml
Dec 29, 2003
Health Savings Accounts (HSA), recently
passed through the Medicare Prescription Drug bill have been the subject
of much discussion since President Bush signed the bill on December 8,
2003. The Treasury Department and Internal Revenue Service issued last
week a comprehensive guide to using and implementing HSAs.
Effective January 1, 2004, HSAs will offer millions of people a new
option to pay for qualified medical expenses. Under the law, any
individual covered by a high-deductible health plan can establish an HSA.
Both employers and employees may contribute to these tax-free accounts
which will be treated as belonging to the individual. Owners of an HSA
can carry the account from job to job and, contrary to Flexible Spending
Arrangements (FSAs), unused funds will roll-over at the end of the year.
Additionally, these accounts allow for increased contribution rates for
people between the ages of 55 and 65 to prepare for increased medical
expenses beyond retirement age. NSBA has been actively lobbying on
behalf on HSAs, formerly known as Medical Savings Accounts (MSAs), and
is pleased to see this important, additional option for those seeking
affordable health care.
The document released last week by Treasury outlines who can have an HSA,
how to establish them and the basic rules for contributions and
withdrawals from HSAs. Though a majority of the rules are similar to the
guidelines implemented for use of MSAs, the new guidelines also address
issues specific to HSAs such as the FICA exemption of employer
contributions to an employee’s HSA.
These rules will be supplemented later in 2004 based upon requested
public comment. Treasury and the IRS are asking interested parties to
submit comments pertaining to preventative care and the relationship
between HSAs and FSAs or Health Reimbursement Accounts (HRAs). Complete
rules (Notice 2004-2) can be found on the Treasury’s Web site at http://www.treas.gov/press/releases/reports/1061notice20042.pdf.
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Provision in Medicare bill will lower
health care costs
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National Small Business Association www.nsba.biz/
Oct 17, 2003
The Medicare Prescription Drug and
Modernization Act, (H.R. 1) is making headlines as conferees missed
their targeted date of reaching a compromise. Yet, this doesn’t signal
an end to the debate as members remain optimistic. The National Small
Business Association has been monitoring debate on a measure that would
implement Health Savings Accounts (HSAs).
Following the initial passage of a bill introduced by House Ways and
Means Committee Chairman Bill Thomas (R-Calif.), the measure was
included into the Medicare bill currently in conference. HSAs would
significantly help small business employees secure and afford health
care through expanding and improving upon current legislation called
Medical Savings Accounts (MSAs). As is, MSAs are highly restrictive,
exclusive and set low limits on the number of people allowed to
participate.
HSAs would allow for both employer and employee annual contributions and
allow much greater employee participation in HSAs than is currently
allowed through MSAs. This language would allow annual tax-preferred
contributions of up to 100% of the annual deductible of the employee’s
health insurance program. Furthermore, the measure would reduce the
minimum deductible eligible to participate in HSAs to $1,000, and would
stipulate that up to $500 of the unused HSA could be carried forward to
the next year.
As Republicans and Democrats alike are faced with increasing numbers of
uninsured, it is important to note that in 2001, 73% of participants in
MSAs, even with all the restrictive rules and regulations, were newly
insured. With more flexible rules, HSAs could significantly help the
problem of uninsured citizens.
While conferees on the Medicare bill have been meeting on a regular
basis for the past several weeks, there are a plethora of other
high-profile conference committees wading through tense negotiations –
many of these committees share members.
Even with the increase in workload and rapidly evaporating number of
days available to legislate, Senate Majority Leader Bill Frist (R-Tenn.)
is hopeful, “Everyone knows we’re going to finish… I can’t say
exactly when, but we’ve made substantial progress.”
NSBA encourages members to support inclusion of Health Savings Accounts
in the Medicare bill as an effective way to reduce the ranks of
uninsured in the United States.
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Pension
Rule Proposal Draws Criticism
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Dow
Jones News Service
April 10, 2003
Washington
--- House lawmakers, middle-aged workers and even a group of large
employers on Wednesday urged the Treasury Department and the Internal
Revenue Service to change proposed pension rules. The agencies are
holding a two-day hearing on the rules, which are designed to give
companies guidance on converting traditional defined-benefit pension
plans into cash-balance plans.
Reps.
George Miller (D-Calif.), Bernie Sanders (I-Vt.) and Rahm Emanual
(D-Ill.) urged the Treasury Department to rewrite the proposed rules to
ensure that middle-aged workers can opt to stay in their current
plan. They and consumer groups, such as the AARP, argue that older
workers are hurt by a conversion to a cash-balance plan because
typically their last five years of salary --- usually the peak of a
person's earnings --- aren't included in the conversion.
Miller,
Sanders and Emanuel on Tuesday introduced a bill in the House that would
require Treasury to drop its proposal. Under a traditional
defined-benefit plan, benefits are based on a combination of pay and
years with a company. The amount a person qualifies for under such
a pension usually sharply increases toward the end of a career.
Under a cash-balance pension plan, benefits accrue evenly through a
person's career, which makes the plans more attractive to younger
workers. Among Georgia firms, Delta Air Lines said late last year
that it would convert to a cash-balance plan over a seven-year period
for those it employed at that time. The carrier said those hired after
June 30 would be covered under the cash-balance plan, except for pilots.
Companies generally favor the rules, although they object to some
provisions.
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Emory 200,000
Cancer Patients Are Uninsured
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Associated Press
April 9, 2003
One in 10 people diagnosed with cancer under age 65 --- a total of about
200,000 patients --- are uninsured, according to an Emory University
study released Wednesday. Cancer patients without insurance use
half as much cancer services and pay nearly 2 1/2 times more in
out-of-pocket costs than insured patients, according to the study
published in the journal Health Affairs. One in five Hispanic
cancer patients --- about 80,000 --- are uninsured. "We
really do have an incomplete war on cancer," said Kenneth Thorpe,
chairman of the university's department of health policy and management.
"We develop new ways of treating cancer but we don't have as much
attention as delivering the services to patients who have
cancer." Dr. Harold Freeman, director of the Ralph Lauren
Cancer Center in New York, said: "It's a complex system when you
have a complex disease. It's worse, though, when you don't have
insurance or don't have education and if you are culturally
different." Many insured patients find out too late they
don't have enough coverage. The uninsured seek treatment late because
they know they will face difficulty with the health system, said
Freeman, a past national president of the American Cancer Society.
Study authors said reforms are needed to
provide insurance coverage to cancer patients so they can receive
earlier treatment that could increase their survival chances. Costs that
patients can't cover on their own or through insurance ultimately are
transferred to insured patients and taxpayers, Thorpe said. Freeman was
a past chairman of the President's Cancer Panel, which recommended
similarly in 2001 that immediate medical coverage should be provided to
the uninsured. Although some state coverage exists for uninsured
breast and cervical cancer patients, that represents only about 15
percent of those newly diagnosed. "For the rest of the 85
percent, there really is nothing else," Thorpe said.
> ON THE WEB: Health Affairs: www.healthaffairs.org
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Pension
In Trouble?
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THE
MOTLEY FOOL - PERSONAL FINANCE
April 9, 2003
Traditional pension plans have been in the news a lot lately. A survey
released last week by consulting firm Wyatt Watson found that only 37%
of large pensions are fully funded, i.e., have enough money to cover
their future obligations. That's a steep drop from 84% in 1998.
So, given all this doom and gloom, can you count on your pension in
retirement? Now is the time to find out.
PENSION BASICS
Employers who offer defined-benefit plans contribute a portion of each
employee's paycheck to the pension fund. Professional institutional
investors usually manage that money on behalf of the fund, though many
pensions handle the investing duties in-house.
How much an employee will receive in retirement depends on the person's
salary history, number of years of service, and the plan's formula. For
example, the plan might stipulate that for each year an employee has
worked for the company, he will receive 1.5% of the average of the final
three years' salaries. For example, if the person earned $28,000,
$30,000, and $32,000 for the three years before he retired, and he
worked for the employer for 10 years, then he could expect $4,500 a year
in retirement. He would receive it till his dying day, and in most
cases, the amount will not be adjusted for inflation.
Generally, only full-time employees are eligible for the pension plan,
and only after they have "vested" in the plan (that is, spent
three to seven years with the company, depending on plan rules). If an
employee leaves before becoming vested, she cannot take her
defined-benefit money with her.
LEARN ABOUT YOUR PLAN
Your resident human resources guru is the first person to ask about your
defined-benefit plan. She can provide information about the vesting
schedule and contact information for the plan administrator.
One of the first documents to review is the "summary plan
description," which you should have received when you became
eligible for the plan. That will contain all kinds of tidbits about how
the plan operates, how benefits are calculated, and how you can get your
grubby little hands on the money.
Also, each plan must file Form 5500 (or 5500-C/R for smaller companies)
with the Department of Labor each year and issue an annual report.
Though reading these documents sounds about as fun as playing strip
solitaire, it will at least give you an idea of the health of your
pension plan.
While you're on the horn with your administrator, trying to probe the
plan's health status, request an estimate of the actual benefit you'll
receive in retirement.
IS YOUR PLAN UNDERFUNDED?
Determining whether a pension has enough money requires many
assumptions, such as future rates of return, future benefits, future
number of employees, and who will win the Super Bowl. So, to some
extent, it's no more than a rough guess.
If you work for a publicly traded company, you probably already know if
your pension is underfunded, since many of these companies have
announced the health status of their pensions. It should also be
mentioned in the company's annual report. Otherwise, ask the
pension administrator directly.
It's not the end of the world if your pension is underfunded. As long as
your company is fundamentally strong, the difference should be made up
eventually, through company contributions and/or a healthy rebound in
the stock market.
What's most important is the overall financial health of the company
offering the plan. If the company goes bankrupt and the plan is covered
by the PBGC, then the plan is insured. However, that's no guarantee that
beneficiaries will receive the same amount they would have had
otherwise, and more benefits can't be accumulated. (Not all plans are
covered by the PBGC, so find out if yours is. Also, pensions offered by
government entities don't need the PBGC, since their authority to raise
taxes backs their plans.)
For more on monitoring your pension plan, read the Department of Labor's
What You Should Know About Your Pension Rights. http://www.lnksrv.com/m.asp?i=865482
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