Important Retirement Plan Deadlines

September 3, 2021

It’s that time of year when deadlines abound. It’s also a great time to evaluate your retirement plan design and there is still time to make changes or even more importantly implement a new plan. Remember we are here to help! Take the opportunity to act now because they will be here before you know it!

November 1 – Deadline to send notices regarding ending a SIMPLE retirement plan.
December 1 – Deadline to provide notice for a safe harbor match feature for the 2022 plan year coming up.
December 31 – Deadline to implement a 4% safe harbor non-elective contribution for the previous plan year retroactively.
Business’s tax return due date 2021 – An employer now has until the due date of the business’s tax return, including extensions, to establish a profit sharing, defined benefit, or cash balance plan for the prior year. The tax filing deadline varies based on the employer’s business entity type.

Have questions on these deadlines or the best retirement plan options for your business? Contact Mike Young at 714.716.4060 or mike@my-EBP.com or fill this short form out.

While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor if different, the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it.

This publication is posted on the understanding that the publisher is not engaged in rendering legal, accounting, or other professional advice or services. Readers should always seek professional advice before entering into any commitments.

5 Strategies for Reducing Health Benefit Costs in 2022

August 27, 2021

For the past two decades, health costs have increased each year. This happens for a variety of reasons, such as inflation or, say, a global pandemic. With that in mind, employers can bank on prices going up in 2022.

According to a PricewaterhouseCoopers (PwC) report, medical costs are projected to increase 6.5% in 2022. This is about average for the past decade; although, it is slightly lower than the 7% increase projected this year (as more spending goes toward the COVID-19 pandemic).

Yet, 6.5% is still a considerable increase, especially when so many budgets have been reallocated or slashed due to the pandemic. That’s why employers must think both strategically and creatively about how they can lower their health benefits expenses in 2022.

This article includes five ways to help reduce spending without compromising benefits quality.

1. Control Drug Spending

Drug prices are rising faster than any other medical service or commodity. Prices are now 33% higher than they were in 2014, according to GoodRx. This is a significant problem during inpatient procedures, where individuals aren’t usually given an option to select a generic medication—patients rarely know what drugs they’re given until after the fact. Even in routine prescription scenarios, employees may be prescribed name-brand medications simply due to physician preference.

Employers can educate employees on the price differences between name-brand and generic medications. Doing so can help employees understand that they can save money while still receiving the same quality treatment. Additionally, employers may consider introducing varying levels of prescription drug coverage. For instance, fully covering generic prescriptions or drugs used for chronic conditions. For higher levels (e.g., specialty drugs), employers may cover less of the costs. Ultimately, employers will need to determine the appropriate coverage levels for their unique workplaces

2. Encourage Active Benefits Participation

Beyond drug spending, employers can help limit overall health costs by making employees active participants in their health care. This means encouraging employees to improve their health literacy, research treatments and price shop.

Price shopping, in particular, should be easier in 2022, given the new hospital price transparency rule that took effect Jan. 1, 2021. Employees will now be able to see specific prices for procedures and other services. This incentivizes employees to educate themselves before making costly health decisions.

3. Offer Savings Accounts with Carryovers

Health plans with savings components are becoming more popular each year. That’s because these tax-advantaged savings accounts empower employees to control their own spending and improve their health literacy. The accounts include health savings accounts (HSAs), flexible spending accounts (FSAs) and others.

Many accounts allow for fund carryover from year to year, or allow employers to add that option onto their plan designs. Allowing carryover encourages employees to contribute more funds, since they’re no longer “use it or lose it.” Since many employers match contributions up to a limit, more money added to these accounts means greater tax savings for everyone.

4. Embrace Virtual Health Options

One major takeaway from the COVID-19 pandemic has been that virtual solutions can offer high-quality outcomes. This is so true that many companies are allowing employees to work remotely permanently. Virtual health options are no exception to this trend.

There are countless telehealth services available these days. Individuals can connect with health professionals in just a few clicks—no waiting times or driving to a clinic. Additionally, individuals will not need to take large chunks of time off work, allowing for greater productivity. As such, telehealth solutions are often much less expensive than a typical in-person doctor visit. Even the Centers for Medicare and Medicaid Services (CMS) acknowledges the usefulness of telehealth services, seeking to expand access.

Employers can consider adding telehealth services into their plan designs. In some cases, it may be cost-efficient for employees to schedule a virtual health visit before an in-person appointment, under certain circumstances. In any case, having a telehealth option expands access to care and lowers expenses for everyone.

5. Consider more Optimal Benefit Plan Funding Alternatives

A more drastic option for reducing health costs is restructuring how plans are funded. For instance, a self-funded plan may be more cost-effective than paying a monthly premium for a fully insured plan. Other options include level-funding or reference-based pricing models, each of which carries its own set of administrative rules and legal constraints.

Funding decisions should not be taken lightly and should be based on several factors, such as the size of an organization, risk tolerance, and financial stability. Employee financial stability should also be considered, especially while the effects of the COVID-19 pandemic can still be felt. Employees may not be able to burden large premium increases, constraining some plan funding flexibility options.

Historically, employers have shifted costs onto their employees (usually through higher premiums) as a way to reduce spending. However, that trend is not expected to be widespread in 2022. Considering the tight labor market and how many individuals are struggling financially due to the pandemic, employers will likely be hesitant to shift too much of the burden. Doing so may cause employees to seek other jobs or simply forego preventive care, which can lead to chronic conditions and higher future health care costs.

Conclusion

Employers have a variety of ways in which they can help contain health care expenses. Choosing the right method will depend on unique employee populations and budgets. For a copy of this news brief, click here: 5 Strategies for Reducing Health Benefit Costs in 2021 .

Reach out to Mike Young today for help strategizing your best options at 714.716.4060 or mike@my-EBP.com .

What’s the Difference between HRA and FSA?

What’s the difference between an HRA and FSA?

Difference between HRA and FSA

Most healthcare plan participants are all too familiar with the fact that not all expenses are covered by their group health insurance. This can be the cause of much frustration and stress, but it’s also the reason Health Reimbursement Arrangements (HRAs) and Flexible Spending Accounts (FSAs) exist. Both are supplemental health plan arrangements that can be offered by an employer to help cover the costs that a group health plan’s coverage will not. Employers looking to provide additional ways to look after the wellbeing of their employees can choose to offer these plans, but it’s important to know the difference between them and which is appropriate for you as a business owner and for your employees.

An HRA is an employer-owned account that can be paired with any type of health plan. Employers make the plan contributions and funds can be used to pay for qualified healthcare expenses. Contributions can be written off for the employer and can be used tax-free for the plan participants. Employers determine contribution amounts and eligible expenses that best fit the needs of their workforce. Unused HRA funds can be carried over to the next plan year, up to the rollover amount determined by the employer, which provides an incentive not to spend the full amount.

Medical and Limited Purpose FSAs are part of the IRS Section 125, also known as a cafeteria plan. Dependent Care FSAs fall under Section 129 of the IRS Code. While HRAs are employer funded, FSAs can be both employee and employer funded. Contributions can be made tax-free for both employers and employees.

FSAs exist in three different varieties: Medical FSA (FSA), Dependent Care FSA (DCFSA), and Limited Purpose FSA (LPFSA).

Medical FSA

Funds can be used for insurance deductibles, copayments and coinsurance, prescriptions, dental or vision expenses, over-the-counter (OTC) medicine & menstrual products. Employees may contribute up to $2,750 in 2021. Employers have the option to allow up to $550 of unused funds to be rolled over into the next plan year, or set up a grace period when the plan year ends to use the remaining funds past the deadline. The $550 maximum rollover amount was increased for plan year that ended in 2020 or 2021 to an unlimited amount.

Dependent Care FSA

Funds can be used for certain expenses related to caring for dependents including child care for children under the age of 13, though funds may also be used for a dependent of any age who is physically or mentally incapable of self-care. The usual contribution limits in 2021 were $5,000 for married couples filing jointly and $2,500 for single filers. Thanks to the American Rescue Plan, those caps were raised to $10,500 for married couples and $5,250 for singles for the calendar year of 2021 only.

Limited Purpose FSA

Limited Purpose FSAs were designed to be compatible with Health Savings Accounts (HSA). Participants who elect an LPFSA can use funds for dental, vision OTC and post-deductible expenses with pretax funds while remaining eligible for an HSA. HSAs require participants to have a high-deductible health plan (HDHP) and exclude participation in both an HSA and Medical FSA. LPFSAs offer a great way for employees to get tax savings on certain expenses while still contributing to an HSA.

The difference between HRA and FSA plans is important to know. Both HRAs and FSAs have their own advantages and can work together, or separately, to provide exceptional value for your employees when designed correctly.

To learn more about providing strategic employee benefits guidance throughout the year that will position your company as a top employer of choice, contact us here today.

IRS provides additional Q&As on American Rescue Plan’s COBRA Subsidy

August 13, 2021

On July 26, the IRS issued Notice 2021-46, providing additional guidance on the application of the American Rescue Plan (ARPA) subsidy for continuation health coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) in the form of 11 questions and answers.

The Notice expands on prior guidance issued on May 18, 2021.

Background

The ARPA subsidy covers 100% of COBRA and state mini-COBRA premiums from April 1–Sept. 30, 2021, for certain assistance-eligible individuals whose work hours were reduced or whose employment was involuntarily terminated. The subsidy is funded via a tax credit provided to employers, insurers or group health plans, according to the terms of the statute.

Q&A Topics

The questions addressed include:

Subsidy availability to individuals eligible for an extension who had not elected it;
Whether subsidies for vision or dental-only coverage ends due to eligibility for other coverage that does not include vision or dental benefits;
Subsidy availability under a state statute that limits continuation coverage to government employees;
Whether employers may claim the tax credit if the Small Business Health Options Program (SHOP) Exchange requires employers to pay COBRA premiums; and
Which party may claim the tax credit in situations involving parties other than an insurer or former common law employer providing the COBRA coverage.

For a copy of the News Brief, click here: Additional IRS Q&As on American Rescue Plan’s COBRA Subsidy. If you have any comments or questions regarding any of the information here, contact Mike Young at 714.716.4060 or mike@my-EBP.com.

Safe Harbor 401k plans-don’t miss the Opportunity-upcoming Safe Harbor 401(k) Deadline.

Safe Harbor 401k Plans-don’t miss the Opportunity-upcoming Safe Harbor 401(k) Deadline!

Benefits of a Safe Harbor 401(k) Plan

Relief from required ADP and ACP annual compliance testing
May allow for additional profit sharing or matching contributions
An Ideal Solution. Can be paired with a Cash Balance hybrid plan for an ideal solution for business owners looking to reduce tax liabilities with even larger tax deductible contributions and substantially accelerate retirement savings. Examples:
- a 45-year old business owner could contribute $184,00 to his retirement plans.
- a 55-year old professional could contribute $271,500 to her retirement plans.

To meet requirements, company contributions can be either a flat 3% non-elective contributions to eligible employees, or a matching contribution of up to 4% of pay.

Deadlines for Establishing a New Safe Harbor 401(k) Plan

The deadline to establish a new safe harbor plan for this calendar year is October 1. If a safe harbor matching contribution will be made, it is elected at this time. However, a safe harbor non-elective provision can be added as late as December 1 by adding a deferral feature by October 1.

Deadline for Existing 401(k) Plan Adding a 3% Safe Harbor Provision

Based on the recently passed SECURE Act, an existing 401(k) plan can add a safe harbor feature without advance notice! The deadline to amend your existing 401(k) plan to a safe harbor plan with a 3% non-elective contribution to all eligible employees is December 1.

If this deadline is missed, however, an existing 401(k) plan can amend until December 31 of the following calendar year if the employer makes a 4% non-elective contribution.

Interested in finding out more about these options including timely updates and valuable resources. Contact Mike Young at 714.716.4060 or fill out the quick form here.

The Impact of Biden’s Competition Executive Order on the Health Care Industry

The American economy is finally recovering after more than a year of stagnation due to the COVID-19 pandemic. President Joe Biden’s administration wants to continue this momentum and further stimulate the economy. To help in that effort, President Biden recently signed an executive order aimed at increasing competition among businesses.

According to the White House, the order was designed to “promote competition in the American economy, which will lower prices for families, increase wages for workers, and promote innovation and even faster economic growth.”

The Biden administration notes that corporate consolidation has been accelerating for many years, leaving the majority of industries in the hands of only a few entities. The administration points to this trend as the main reason for slow wage growth and rising consumer prices. This latest executive order intends to reverse these effects.

All in all, the executive order includes 72 initiatives by more than a dozen federal agencies to help address competition inequality. This article briefly outlines how the order affects the health care industry.

Health Care Impact

The executive order addresses competition in health care in four main areas:

Prescription drugs
Hearing aids
Hospitals
Health insurance

Prescription Drugs

Right now, large drug manufacturers enjoy incredible profits year over year. The White House alleges that this is due to lack of competition and “pay for delay” tactics, where name-brand drug manufacturers pay generic manufacturers to stay out of the market. Such strategies result in Americans paying 2.5 times more for the same medications as peer countries.

The executive order directs the Food and Drug Administration to work with states and tribes to safely import prescription drugs from Canada, where drugs are less expensive. It also directs the Health and Human Services (HHS) Administration to increase support for generic and biosimilar drugs. Additionally, the order encourages the FTC to ban “pay for delay” and similar agreements.

Hearing Aids

Currently, the White House points out, only 14% of Americans with hearing loss use hearing aids. The administration says it’s due to high prices, costing more than $5,000 per pair (typically not covered by insurance). Additionally, hearing aids can only be obtained after a medical analysis by a doctor or specialist—an unnecessary requirement, according to the Biden administration.

The executive order directs the HHS to consider issuing proposed rules within 120 days for allowing hearing aids to be sold over the counter.

Hospitals

Hospitals have been consolidating through mergers for years, resulting in higher prices and fewer rural locations. The White House notes that consolidated hospitals charge far higher prices than hospitals in markets with more competition.

The executive order directs the FTC to review and revise its merger guidelines to ensure hospital mergers do not harm patients. Additionally, the order directs the HHS to support existing hospital price transparency rules and finish implementing bipartisan federal legislation to address surprise hospital billing.

Health Insurance

Consolidation is also an issue in the health insurance sector, according to the Biden administration. Fewer insurance companies mean fewer options for consumers. Even when there are more options, comparing plans continues to be a struggle for many individuals.

The executive order directs the HHS to standardize plan options in the National Health Insurance Marketplace so people can comparison shop more easily.

Summary

The executive order broadly addresses competition inequalities across market sectors, with a significant focus on health care. These proposed initiatives have the potential to help individuals and small businesses alike. However, it remains to be seen how all of these initiatives will play out, as executive orders are essentially a directive to federal agencies to revise their regulations.

In other words, some of the proposals may never come to fruition, and those that do may take months to implement. At the very least, this executive order and its initiatives indicate the position of the Biden administration—signaling that it may pursue these agenda items through alternative means, if necessary.

Employers should continue to monitor exactly how the executive order plays out.

For a copy of this news brief, click here: The Impact of Biden’s Competition Executive Order on the Health Care Industry .

Mandatory CA retirement plan: CalSavers-Know your options!

If you live in California, you should become familiar with the state’s newly implemented state retirement plan known as CAL-SAVERS. How did this program come about and why is it growing in popularity? Are employers mandated to participate and do they have other options for retirement plans? Let’s discuss these questions below.

Why was CalSavers introduced?

The fact that a majority of Americans are not saving nearly enough for retirement has long been a growing concern and in reality many are not saving at all. The good news is that recent studies have shown that employees are much more likely to contribute to a 401k plan if their employer offers it as a benefit. On top of this, a majority of employees cite an employer’s offering of a 401k plan as a primary reason for accepting an offer to work for that very same employer. Despite this, US Bureau of Labor states that only 4 in 10 employers with 100 or less employees actually provide this as a benefit.

What does CalSavers plan entail?

Cal-Savers requires that employers with at least 5 employees offer a retirement savings plan. If they do not offer their own plan, they must join the state’s program, where employees contribute to a Roth IRA. Yes, Roth IRA employee contributions are made with after-tax monies.

Employee contributes to a Roth IRA – after-tax monies
Employee contributions are automatic (employee can opt out)
Investment options are chosen by the state

Employers must set up their own plan or register for CalSavers by these deadlines:

Size of Business	Deadline
Over 100 employees	September 30, 2021 (passed)
Over 50 employees	June 30, 2021 (passed)
5 or more employees	June 30, 2022

CalSavers sets the default savings rate for employees at 5 percent, with an automatic contribution increase of 1 percent each year, up to 8 percent. Employees can opt out of program or change their savings rate at any time. With a CalSavers plan, all employees who have reached age 18 and have been on W-2 payroll for 30 days must be automatically enrolled.

In addition, employer contributions for employees are not allowed and Owners and those making over a certain income level (an AGI threshold) will not be able to participate in the CalSavers plan.

Employers are expected to receive annual penalties of up to $750 per eligible employee for not timely complying with CalSavers.

Potentially better retirement plan options?

Employers can look into sponsoring their own retirement plan versus automatically adopting the state’s CalSavers plan for several good reasons. Starting their own plan can provide more flexibility and be designed with an employer’s specific goals in mind. Also, employers who start a new plan may be eligible for a new federal tax credit up to $5,000, every year for the first three years. In addition, below are even more benefits:

Tax deductible contributions and/or Roth contributions
Higher contribution limits
More company-targeted eligibility requirement options (CalSavers is only set at all employees age 18 after 30 days of employment)
Allowing for employer contributions
Owners and highly compensated employees can contribute
And even more benefits & flexibility!

Take a look now!

Employers should look at their options and take advantage of the benefits above and start their own plan now. It is important that you have the expert perspective and resources for building and managing your new retirement plan. At MY-Employee Benefits Plus, we specialize in helping find the perfect retirement plan solution to fit your company, ultimately freeing you and your key employees up to focus on continued business retention, growth and success. Start a conversation with us here now.

New Payroll Protection Program flexibility approved

June 4, 2020

The Payroll Protection Program (PPP) for employers has been given a boost with enhanced PPP forgiveness. And just in time. Last night the Senate unanimously passed the PPP Flexibility Act that was passed last week by the House. It is expected to be quickly signed into law by President Trump. Some of the general highlights include:

The non-forgivable balance of loans will amortize over five years instead of 2 years.
The period for allowable forgivable expenses expands to 24 weeks instead of 8 weeks. Borrowers can still choose to use the 8 weeks.
The safe harbor for restoring full time employee (FTE) headcount is now 12/31/2020.
The threshold for covered payroll expenses is 60%, instead of 40%.

As a positive note, for businesses that have been badly hit by COVID-19, this legislation will give them more of a chance to live to fight another day. And for those businesses who are down a bit, stable or growing and received a PPP, this new extension should give an extra windfall to grow and expand.

Now, before getting too excited, there are two things to keep in mind.

As in all legislation, the devil is in the details, and the details are currently not precisely defined. The law is one thing, the guidance and interpretations of that law are another. Expect the bureaucrats at both the Treasury Departments and Small Business Administration (SBA) to be spending many late nights, over the next few weeks, trying to explain all of the detailed nuance of all the quasi-English language contained in the new law.
We are also anticipating more legislation coming, so the cycle of flexibility and understanding may start all over again.

Conclusion

As an employer, it is important that you have the resources to navigate this unprecedented time during this crisis. Being able to interpret how to work through the complexity of what is the Payroll Protection Program will ensure your ability to keep your employees paychecks coming, reinforcing your employees’ decision and confidence that made you their employer of choice, while ultimately contributing to continued business growth and success. We are constantly working to keep you updated on these programs and others both now and in the future. Find out more about our expert perspective by starting a conversation here now.

New guidance provides relief and extensions of deadlines to employee benefit plans and participants

May 1, 2020

On April 28, the Employee Benefits Security Administration (EBSA) of the U.S. Department of Labor (DOL) and the Internal Revenue Service (IRS), referred to here collectively as the Agencies, issued a joint notice announcing the extension of certain timeframes applicable to group health plans, disability and other welfare plans and participants and beneficiaries of these plans during the COVID-19 national emergency. On the same day, the EBSA published Disaster Relief Notice 2020-01 to provide relief for employee benefit plans and service providers from certain deadlines under ERISA of 1974. the guidance given reflects the Agencies’ understanding that the COVID-19 crisis is impairing the ability of employee benefit plans and participants to comply with the standard deadlines imposed by ERISA and the Tax Code.

Joint Notice from Agencies

The joint notice extends numerous deadlines for both group health plans and retirement plans. It defines the period from March 1, 2020, through the date that is 60 days after the end of the COVID-19 national emergency, or another date announced later by the Agencies, as the “Outbreak Period.” Plans must disregard this Outbreak Period when calculating deadlines for participants and beneficiaries to exercise certain rights. This means that days during the Outbreak Period can’t be counted as part of the maximum number of days in a participant or beneficiary has to take certain actions. Additionally, days during the Outbreak Period are disregarded when calculating the deadline by which a group health plan must provide a COBRA election notice.

Specifically, days during the Outbreak Period are not counted towards the:

Group Health Plans

30-day period (or 60-day period in certain circumstances) for an individual to request enrollment in a group health plan due to a HIPAA special enrollment event;
60-day period for a qualified beneficiary to elect COBRA continuation coverage;
30-day grace period for a qualified beneficiary to pay COBRA premiums;
45-day period from election of COBRA continuation coverage to the date the first payment may be due;
Deadline by which a group health plan must provide a COBRA election notice to qualified beneficiaries;
Period within which a claimant may request an external review of a denial appeal; and
Date by which a claimant may file information to perfect a request for external review

All ERISA Plans

Period during which claimants may file a benefit claim under the plan’s claims procedure; and
Period within which claimants may file an appeal of a claim denial.

The effect of the joint notice is to extend all of these deadlines until after the conclusion of the Outbreak Period. As of this date, the national emergency will expire July 25, 2020 (unless extended or terminated earlier by the Secretary of the U.S. Department of Health and Human Services), which means the Outbreak Period would be March 1, 2020 to September 23, 2020. As an example of this, an employee who previously declined group health plan coverage and had a baby on March 27, 2020, would have until October 23, 2020, to enroll herself and her child in coverage. Another example would be a participant who loses group health plan coverage and receives a COBRA election notice on May 1, 2020, would have until November 22, 2020, to elect COBRA.

Conclusion

As an employer, it is important that you have the expert perspective and resources to navigate this unprecedented time during this on-going crisis. Partner with MY-Employee Benefits Plus today to work through the complexities that present themselves in the area of employee benefit plans, ultimately freeing you and your key employees up to focus on continued business retention, growth and success.

Start a conversation with us here now.

Employers allowed to defer the employer-paid portion of Social Security taxes

April 24, 2020

The Cares Act allows employers to defer the employer-paid portion of Social Security taxes which would normally be deposited between March 27, 2020 and December 31, 2020. This relief also applies to the 50 percent of the Social Security portion of self-employment taxes for a self-employed individual.

The deferred deposits of the employer’s share of Social Security tax must be remitted by the following dates to avoid penalties:

On December 31, 2021, 50 percent of the deferred amount, and
On December 31, 2022, the remaining amount.

Companies who are participating in the Paycheck Protection Program (PPP) and are notified that some of their PPP loan will be forgiven will no longer be eligible to defer Social Security taxes due following this notification date. However, they may still defer deposit on the Social Security taxes otherwise due between March 27, 2020 and the date of the forgiveness notification of the PPP until the dates noted above.

For more information visit the IRS website here

Contact your payroll provider if you wish to take advantage of this relief.