david foster, jd, clu, chfc presenting: the changing landscape of qualified and non-qualified...
TRANSCRIPT
David Foster, JD, CLU, ChFC
Presenting:
The Changing Landscape of Qualified andNon-qualified Retirement Plans
Executive Compensation / BenefitsIncentive Bonus Plans
Deferred Compensation Programs
Supplemental Disability / Life Insurance
Wealth Management Resources
• Employee Financial Planning– Lunch & Learn educational seminars
– Individual employee financial consulting
– Retirement and college education savings projections
Alpha’s New Services:Financial Services
Executive Long Term Care Programs
Phantom Stock, Stock Options & Stock Appreciation Rights
Retirement and college education savings projections
Estate PlanningEstate Tax Planning
Asset Protection
Trust Planning
• Business Succession Planning– Buy-Sell Agreements
– Exit Planning Strategies
– Management Buy-Out Arrangements
Alpha’s New Services:Financial Services
Planning for Children With Special Needs
Planned Giving Alternatives
Employee Stock Ownership Plans
Family Business Continuation
Qualified Retirement PlansDefined Contribution Plans – 401(k), 403(b), Profit Sharing, SIMPLE Plans, ESOPs
Defined Benefit Plans – Pension Plans, 412(i) Plans
ProductsMutual Funds
Annuities
Managed Investment Accounts
Life Insurance
Disability Insurance
Long Term Care
Alpha’s New Services:Financial Services
Employees rely on employer sponsored retirement plans to meet their retirement goals. We can help by:
Designing and implementing effective, cost-efficient qualified retirement plans
Analyzing plan level administrative services and costs
Providing employee educational seminars
Alpha’s New Services:Total Retirement Solutions
Highly compensated executives may be limited in the amount they can contribute to qualified retirement plans. We can help by:
Designing and implementing nonqualified executive retirement / benefit plans
Reviewing current plans to assure compliance with recent legislation
Providing turnkey programs that reduce human resource time commitment
Alpha’s New Services:Total Retirement Solutions
We provide individual employees with the tools and education they need to meet their retirement goals. We can help by:
Establish goals and review current savings plan
Provide retirement needs calculations
Develop strategies to reach their retirement goals
Educational “lunch & learn” seminars
Alpha’s New Services:Total Retirement Solutions
Employees who terminate their employment will have to make decisions regarding their retirement plan. We can help by:
Exploring the many, and sometimes complex, alternatives
Helping them avoid triggering substantial income tax
Helping them allocate investments based on lifetime changes
Alpha’s New Services:Total Retirement Solutions
Background
Effective dates
Provisions
Pension Protection Act of 2006 - PPA
Defined Benefit funding concerns strain pension system
American workers not saving enough for retirement
Signed into law by President Bush on August 17, 2006
Various effective dates
Pension Protection Act of 2006 – PPA:Background
Various effective datesEGTRRA permanence (immediate)
Automatic enrollment changes (immediate and 2008)
Vesting changes (2007)
Investment advice (2007)
DB(k) Plan – combination of best of defined benefit and 401(k) in one plan (2010)
Other changes (highlights)
Pension Protection Act of 2006 – PPA:Effective Dates
Today’s Focus – 401(k) Changes
Makes permanent higher contribution limits for 401(k)s and IRAs, enabling more workers to build larger retirement nest eggs:
Increased Deferral LimitsCatch-up ContributionsIncreased 415 LimitsSaver’s CreditAfter-Tax Contribution RolloversDirect Rollovers to Roth IRAsRoth(k) Contributions
Today’s Focus – 401(k) Changes:EGTRRA Permanency Growth Opportunities
Removes barriers that prevent companies from automatically enrolling employees in 401(k) plans:
State law preemption (effective immediately)Corrective distributions (2008)Default Investments (TBD)Refunds within 6 months (vs. current 2 ½ monthsAutomatic Enrollment Safe Harbor (2008):
Today’s Focus – 401(k) Changes:Automatic Enrollment
Effective 2007Current Law
Employer “other” contributions5 year cliff vesting
7 year graded
Employer “matching” contributions3 year cliff vesting
6 year graded
PPA – All employer contributions:3 year cliff vesting
6 year graded
Today’s Focus – 401(k) Changes: Faster Vesting
Current law – Combined plan (DB/DC) deduction limit is 25% of pay, or DB funding minimum
2006/2007 – for DC plan purposes – contribute up to 6% of pay in DC plan; irregardless of the DB plan
Starting in 2008 – The DB/DC combined plan deduction limit is eliminated
Today’s Focus – 401(k) Changes: DB/DC Combined Plan Deduction Limit
Ensuring workers have more information about the performance of accounts. Requirements:
Participants with control – Quarterly Statements
Participants without control – Annually
Explanation of diversification importance
Risk statement if 20% of portfolio from single investment
Department of Labor (DOL) is to issue regulations
Effective 2007
Today’s Focus – 401(k) Changes: Participant Account Statements
Provide a prohibited transaction exemption for advice from a fiduciary advisor to a DC plan participant under an “eligible investment advice arrangement”
Fiduciary advisor
Eligible investment arrangement
Effective in 2007
Today’s Focus – 401(k) Changes:Professional Investment Advice
Tax trap for corporate owned life insurance
Notice and consent requirement
Exceptions based on insured’s status
IRS information reporting requirement
Today’s Focus – 401(k) Changes:Other Provisions - COLI
New Rules for Non-qualified Deferred Compensation Plans
Consequences of Non-compliance
American Jobs Creation Act of 2004
Broad definition of deferred compensation
Limitations on what may trigger payment
Rules for when the election to defer must be made
Rules on re-deferrals
Prohibits acceleration of payments
409A
Compensation subject to immediate taxation
Interest at IRS rates plus 1%
20% penalty on amount that should have been included as taxable income
Non-Compliance
Review current executive compensation arrangements, including individual employment contracts
Work with advisors to make sure compensation agreements are in compliance with 409a.
Due Diligence
PA Taxation of Non-qualified Deferred Compensation
Split Dollar Regulations
Tax Treatment of Long Term Care Insurance
Life Insurance Product Improvements
Viatical Settlements
Additional Updates
Todd Hons
Presenting:
Medical Carrier Updates
Medical Rates
Lower Renewals!
Trends
New PPO Plan designs available with different deductibles and co-insurance amounts
BlueCross will be renaming most of their products starting January 1, 2007
Ex. Twin 250 will be 250/100
Deductible will be combined for in/out of network
In addition to the March 1, 2006 Rx changes, BlueCross added 3 more plan available October 1, 2006
Retail Co-pays Mail Co-pays Ancillary Charge?*
5/35/50 15/70/125 No
15/30/50 40/75/125 No
10/30/50 25/75/125 Yes
*No ancillary charge when provider writes ‘Dispense as written’
Benefit ChangesEffective January 1, 2007 or upon renewal for groups 2-104Effective February 1, 2007 or upon renewal for groups 105+
KHP HMO – removing Nicotine Cessation Program (NCP)
All plans – A co-pay will apply to therapies in a home health setting, currently there is no co-pay
Vision Therapy – All plans – a co-pay will apply and will fall under physical medicine, currently no co-pay
Bony Impacted Teeth – All plans – will NOT be covered, currently covered under medical plan
Benefit ChangesDeductible Credit and Deductible Pro-ration
(effective and renewal date, other than January 1)
If a group moves to a higher deductible, member will receive credit for the portion of deductible already met
If a group is new to CBC or moving from a $0 deductible plan, members will receive a prorated deductible
First quarter – no pro-ration
Second quarter – member will be responsible for 75% of deductible chosen
Third quarter – member will be responsible for 50% of deductible chosen
Fourth quarter – member will be
responsible for 25% of deductible chosen
CBC requires medical underwriting for groups size 2-19 enrolling
CBC requires 75% participation after spousal waivers to any carrier, still requires a minimum of 50% to enroll
ePlatform available
Requirements:
Standard plan design (approved)
Online enrollment
Receive bills online
Receive enrollment materials online
If requirements are met, a 1.5% rate reduction is received
Dual options – must be approved by Highmark
Groups with over 50 enrollees – 75% participation required with spousal waivers from any carrier
Groups 2-50 enrollees – 75% participation required, will accept spousal waivers from Highmark and any other Blue plans outside of their 21 counties (not CBC or KHP)
Chamber Choice -
Exclusive to Highmark
Chamber Plan available for:
Berwick, Columbia, Waynesborough, Shippensburg, Schuylkill, and Chambersburg Chamber of Commerce
Main Advantages:
Discounted rates
$15,000 term life insurance included at no additional cost
Must be a standard, approved plan design
Can be marketed through Alpha Benefits
Forced Plan Changes
Higher specialist co-pays
Higher emergency room co-pays
Increased lifetime maximums
Rx changes – higher brand formulary and brand non-formulary co-pays
Select Rx OptionAutomatically included with PPO Plans
Option for POS plans with 50+ enrolled (approximate 1% increase in premium cost)
Select Rx takes away prior authorization for some commonly used prescriptions
Example: Acid reflux medications
Total list includes 22 medications
Gettysburg Hospital back in the network
New “EOBs” – Explanation of Benefits
Lehigh Select ProductsAvailable to groups in Lehigh, Carbon, Northampton counties
Plan includes competitive rates and benefit incentive to use Lehigh Valley Hospital
Offers fully insured products
Medical underwriting for all products
Working on competitive pricing
Accesses Highmark Blue Shield statewide doctor network
York Hospital (Wellspan) recently joined network
Lancaster General in network
New Plan designs with deductible and co-insurance
Carrier Updates:Aetna
Still building doctor and hospital network
Full array of PPO products
National capabilities
Carrier Updates:United Healthcare
Rx’s Coming Off Patent
Over the next 12-18 months approximately 70 prescription drugs will be coming off patent
Here are some of the most popular:
2006: Zocor, Pravachal, Zoloft, Ambien
2007: Norvasc, Imitrex, Plavix, Zyrtec
Captial BlueCross / Keystone Health Plan
Calendar Year
Highmark Blue Shield Plan Year
HealthAmerica and HealthAssurance
Plan Year
United Healthcare Calendar Year
Aetna Calendar Year
Significa Plan Year or Calendar Year
Plan Year vs. Calendar Year Deductibles
If someone is over age 65 and still working full-time, they are NOT eligible for Medicare Part D
Dates for providing Disclosure Notice to CMS
Plan years ending in 2006: March 31, 2006
Plan years ending in 2007 and beyond: Within 60 days after the beginning of the plan year (ex. Plan begins 1/1/2007, deadline is 3/2/2007)
Within 30 days of terminating a plan that provides prescription drug benefits
Within 30 days of a change in the creditable coverage status of a plan that provides prescription drug coverage
Dates for providing a creditable coverage notice to employees/retirees:
By November 15th of each year, starting in 2005
Prior to an individual’s initial enrollment period
Prior to the effective date of coverage for any Medicare-eligible individual that joins your group’s plan
When the plan you sponsor terminates
When the plan you sponsor changes its prescription drug coverage so that it is no longer creditable or becomes creditable
Upon an individual’s request
Medical Expense Reimbursement Plan (MERP Plan)
Deductibles increasing
100 Groups In-force
Health Savings AccountsStarting to make financial sense
High Deductible Update