Categories

401k

When can we adopt a Safe Harbor Plan to utilize either a Safe Harbor non-elective contribution or a Safe Harbor matching contribution?
When an employee terminates employment, are they able to keep their money in our plan?
Our plan offers participant loans and hardship distributions. Must a participant elect to take a loan prior to requesting a hardship distribution?
What is the difference between a Roth IRA and a Roth 401k?

Cafeteria Plans

How does pre-tax savings work for me?
Can participants change their section 125 elections during the plan year?
What is an FSA?

COBRA

What plans are subject to COBRA?
What plans are not subject to COBRA?
What are the two mandatory items that must be sent by an employer to its employees regarding COBRA?
Within what time period does the Qualified Beneficiary have the option of electing COBRA?
What are the premium payment deadlines regarding COBRA coverage?

HIPAA

Who is eligible for a guaranteed issue individual/family health insurance plan (HIPAA)?

Medicare “D”

What is Medicare “D”?
What is Medicare prescription drug coverage (Medicare Part D)?
Who can get Medicare prescription drug coverage?
How much does it cost?
When can I get Medicare prescription drug coverage?
How does Medicare prescription drug coverage work?

Wellness

What can an employer do to reduce healthcare costs?
Does Wellness really work?
How much does it cost?
If it doesn’t cost, then why aren’t all employers doing Wellness?

401k

When can we adopt a Safe Harbor Plan to utilize either a Safe Harbor non-elective contribution or a Safe Harbor matching contribution?

For existing plans, Safe Harbor plans are only adopted prior to the end of the current plan year but made effective for the beginning of the next plan year. A 30-day notice announcing the Safe Harbor provision must be provided each year to all plan participants prior to the beginning of the new plan year.

There are exceptions for newly established 401k plans and plans that are terminating. Your retirement plan provider will assist in implementing this plan design change.

When an employee terminates employment, are they able to keep their money in our plan?

In accordance with the IRS, if their balance is over $1,000, they are able to keep their money in the plan. If their balance is under $1,000, you may elect, with the assistance of your retirement provider, to cash them out or establish and transfer their account to an IRA.

Please keep in mind, if they are able to keep their funds in your plan, you are required to provide these former employees with all plan announcements concerning changes to the plan such as investments, plan conversion to another carrier or plan terminations.

Our plan offers participant loans and hardship distributions. Must a participant elect to take a loan prior to requesting a hardship distribution?

A participant should exercise the plan loan feature prior to requesting a hardship distribution. They must exhaust all financial avenues prior to requesting a hardship distribution.

We recommend reviewing your plan document and obtaining the required documentation when a hardship distribution is requested.

What is the difference between a Roth IRA and a Roth 401k?

A Roth IRA is a contribution to an account outside of your 401k plan. These accounts are typically established with a mutual fund company, brokerage account or another financial institution. Your contributions are made with post-tax dollars that grow tax deferred. There are limits as to the amount you may contribute. You should also consider your tax filing status and income to determine if you are eligible to make Roth IRA contributions. Distributions can be made at any time, subject to tax and penalty if not a ‘qualified distribution’.

A Roth 401k is a contribution made to your company’s retirement plan. It is paid to the plan through salary deferrals with post-tax dollars and grows tax deferred. Whether you direct a portion or all of your salary deferral to pre-tax dollars and/or post-tax dollars, the total limit remains as one dollar limit. Typically you are able to defer more in the Roth 401k than a Roth IRA and there are no income restrictions.

Distributions may be made only after: separation from service, death, disability, age 59-1/2, financial hardship and termination of the plan. Your retirement plan may not allow for some of these options.

Please consult your tax advisor to determine if you are eligible for the Roth IRA and consult your plan administrator if your plan allows for Roth 401k contributions. They should provide you with the most updated contributions limits and full disclosure of the features of these accounts.

Cafeteria Plans

How does pre-tax savings work for me?

If you are contributing to your company-sponsored group health or dental plan, you may pay this expense prior to your paycheck being taxed. When you pay for company-sponsored employee benefits on a pre-tax basis, you reduce your taxable income. The result is more spendable income for you.

Can participants change their section 125 elections during the plan year?

Elections cannot be changed during the period of coverage and is known as the irrevocability requirement. There are some "permitted change in election events" allowed by the IRS, such as marriage or divorce.

What is an FSA?

An FSA is a pre-tax benefit allowable under IRS section 125. The plan allows eligible employees to set aside a specific pre-tax dollar amount for unreimbursed medical, dental and dependent care expenses. Anyone who has predictable out-of-pocket medical, dental, or dependent care expenses should consider opening an FSA. Participants should budget carefully. Unused funds are forfeited at the end of the plan year.

COBRA

What plans are subject to COBRA?

Virtually all group health plans maintained by employers for their employees are subject to COBRA's provisions, to include group health plans of corporations, partnerships, tax exempt organizations, state and local governments. This also includes Health Care Spending Accounts.

What plans are not subject to COBRA?

Small Employer Plans:
Small employer plans are entirely exempt from COBRA. If all employers maintaining the plan normally employed fewer than 20 employees on a typical business day during the preceding calendar year, the plan falls within the "small employer plan exception"

The Federal Government's Group Health Plan:
The Federal government's group health plan is not subject to COBRA. However, a separate law, the Federal Employees Health Benefits Amendments Act of 1988 requires the Federal government to offer its employees continuation coverage effective January 1, 1990.

Certain Church Plans
Certain church plans also are not subject to COBRA. The IRS has concluded that a plan for employees of an institute of higher learning under church auspices was a church plan, and that plan was accordingly not subject to COBRA.

What are the two mandatory items that must be sent by an employer to its employees regarding COBRA?

The initial notice and the qualifying notice are the most two important COBRA notices. They communicate to plan participants and to qualified beneficiaries their COBRA rights and obligations generally (the initial notice) and with reference to a specific qualifying event (qualifying event notice). The mishandling of these notices (either because the notices are not delivered or their content is deficient) is a significant source of litigation and liability for plans.

Within what time period does the Qualified Beneficiary have the option of electing COBRA?

A qualified beneficiary may elect COBRA coverage at any time within 60 days after the date plan coverage terminates, or, if later 60 days after the date of the notice to the qualified beneficiary from the plan administrator. The 60-day period permits a qualified beneficiary to "adopt a wait-and-see approach to continued coverage, and then elect if and when medical care is required during the election period. If the plan administrator has not sent the notice of qualifying event, the election period remains open. The 60 day period is a minimum.

What are the premium payment deadlines regarding COBRA coverage?

A plan may not require any payment until 45 days after the qualified beneficiary's initial election. If a qualified beneficiary fails to make the initial premium payment within the 45-day period, the plan administrator may terminate the COBRA coverage. Thereafter, payments are due on the first of each month, subject to a 30-day grace period.

HIPAA

Who is eligible for a guaranteed issue individual/family health insurance plan (HIPAA)?

To qualify for a HIPAA guaranteed issue plan, you must meet the following:

1. You have had creditable coverage for a minimum of 18 months with the last coverage being under a group plan.
2. You are not eligible for Medicare, Medicaid or group coverage.
3. You have not had a lapse in coverage of more than 62 days.
4. You have exhausted any COBRA or State Continuation plans available to you.

Medicare “D”

What is Medicare “D”?

Medicare’s prescription drug coverage is known as Part D and began in January of 2006. Enrollment in Part D is optional and is available in two ways (1) Have original Medicare Parts A&B and apply for an approved stand-alone prescription drug plan or (2) join a Medicare Advantage Plan that offers the drug coverage. Careful consideration is necessary to decide which of these plans is the best choice for you.

What is Medicare prescription drug coverage (Medicare Part D)?

Medicare prescription drug coverage is insurance that covers both brand-name and generic prescription drugs at participating pharmacies in your area.

Who can get Medicare prescription drug coverage?

Everyone with Medicare is eligible for this coverage, regardless of income and resources, health status, or current prescription expenses.

How much does it cost?

Rates can vary, but most individuals can find a Part D plan for $25-$35 per month.

When can I get Medicare prescription drug coverage?

You may sign up when you first become eligible for Medicare (three months before the month you turn age 65 until three months after you turn age 65). If you get Medicare due to a disability, you can join from three months before to three months after your 25th month of cash disability payments. If you don't sign up when you are first eligible, you may pay a penalty. If you didn't join when you were first eligible, your next opportunity to join will be from November 15, 2010 to December 31, 2010.

How does Medicare prescription drug coverage work?

There are two ways to get Medicare prescription drug coverage. You can join a Medicare prescription drug plan or you can join a Medicare Advantage Plan or other Medicare Health Plan that offers drug coverage. Whatever plan you choose, Medicare drug coverage will help you by covering brand-name and generic drugs at pharmacies that are convenient for you.


Generally you will pay a monthly premium, which varies by plan, and a yearly deductible. You will also pay a part of the cost of your prescriptions, including a copayment or coinsurance. If you have limited income and resources, and you qualify for extra help, you may not have to pay a premium or deductible. You can apply or get more information about the extra help by calling Social Security at 1-800-772-1213 (TTY 1-800-325-0778) or by visiting www.socialsecurity.gov on the web.

Wellness

What can an employer do to reduce healthcare costs?

Implement a Wellness Plan to identify individuals with high risk for disease. Intervention can then prevent the disease from manifesting, thereby reducing claims and premiums.

Does Wellness really work?

We have clients where we installed a Wellness Plan and their healthcare cost has not increased since. Depending on the size of your company and the type of coverage, this may also be a possibility for you.

How much does it cost?

Without Wellness, healthcare costs have been increasing anywhere from 5% to 50%. Wellness reduces that trend and actually saves healthcare costs. There is an initial fee for an onsite health screening that is about the same cost for one month’s cable TV. Experience shows that for each dollar invested in Wellness, there is a savings of approximately four dollars.

If it doesn’t cost, then why aren’t all employers doing Wellness?

We don’t know.