Tag Archives: PPACA

Top Milliman blog posts in 2014

Milliman consultants had another prolific publishing year in 2014, with blog topics ranging from healthcare reform to HATFA. As 2014 comes to a close, we’ve highlighted Milliman’s top 20 blogs for 2014 based on total page views.

20. Mike Williams and Stephanie Noonan’s blog, “Four things employers should know when evaluating private health exchanges,” can help employers determine whether a PHE makes sense for them.

19. Kevin Skow discusses savings tools that can help employees prepare for retirement in his blog “Retirement readiness: How long will you live in retirement? Want to bet on it?

18. The Benefits Alert entitled “Revised mortality assumptions issued for pension plans,” published by Milliman’s Employee Benefit Research Group, provides pension plan sponsors actuarial perspective on the Society of Actuaries’ revised mortality tables.

17. In her blog, “PBGC variable rate premium: Should plans make the switch?,” Milliman’s Maria Moliterno provides examples of how consultants can estimate variable rate premiums using either the standard premium funding target or the alternative premium funding target for 2014 and 2015 plan years.

16. Milliman’s infographic “The boomerang generation’s retirement planning” features 12 tips Millennials should consider when developing their retirement strategy.

15. “Young uninsureds ask, ‘Do I feel lucky?’” examines the dilemma young consumers face when deciding to purchase insurance on the health exchange or go uninsured.

14. Last year’s #1 blog, “Retiring early under ACA: An unexpected outcome for employers?,” is still going strong. The blog authored by Jeff Bradley discusses the impact that the Patient Protection and Affordable Care Act could have on early retirees.

13. Genny Sedgwick’s “Fee leveling in DC plans: Disclosure is just the beginning” blog also made our list for the second consecutive year. Genny explains how different fee assessment methodologies, when used with a strategy to normalize revenue sharing among participant accounts, can significantly modify the impact of plan fees in participant accounts.

12. Doug Conkel discusses how the Supreme Court’s decision to rule on Tibble vs. Edison may impact defined contribution plans in his blog “Tibble vs. Edison: What will it mean for plan sponsors and fiduciaries?

11. In her blog “Retirement plan leakage and retirement readiness,” Kara Tedesco discusses some problems created by the outflow of retirement savings. She also provides perspective on how employers can help employees keep money in their plans.

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Rulings from the U.S. Supreme Court: Fiduciaries, ACA, and union fees

The U.S. Supreme Court in late June decided three cases that, while apparently narrow in scope, may be of broad interest to employers. The cases involve: standards for fiduciaries in ERISA-covered retirement plans with employer stock as an investment option; the requirement of the Patient Protection and Affordable Care Act (ACA) that certain preventive healthcare benefits—which include coverage for contraceptives—be provided at no cost to group health plan participants; and the required payment of union fees by certain state workers under a state law.

For Milliman perspective regarding the three rulings, read this Client Action Bulletin.

Lump-sum payouts and tax implications

Clark-CharlieOver the past few years, there is evidence to confirm that several employers sponsoring defined benefit (DB) pension plans have been settling their plans’ pension obligation to former employees via a single lump-sum payout. It is commonly referred to as a lump-sum cleanup strategy. Some commenters have said that not only has demand for such a strategy not abated, it has accelerated.

This blog post will remain neutral on the prudence of implementing such a strategy, as each employer’s goal is unique. Recognizing that employers who implement such strategies spend enormous energy and resources to communicate the consequences and financial impact on those electing the lump-sum payout, it’s questionable whether recipients completely understand the individual tax implications it could personally have on them. (And to be clear, this blog post does not implicitly or explicitly render any type of tax advice.)

If a participant chooses to roll over the lump-sum distribution to a personal tax-deferred IRA or to a tax-qualified savings plan of a new employer, the issues below are irrelevant. However, if the lump-sum is received as current income:

• The individual could move into the next higher marginal tax bracket, both federal and state (where there is a state income tax).
• The individual could face a 10% excise tax if that person is younger than age 59½.
• The individual could incur an underwithholding penalty in comparison to their prior year’s tax liability.
• According to the U.S. Department of Health and Human Services (HHS), eligible individuals and families with incomes between 100% and 400% of the federal poverty level (FPL) may receive premium tax credits for purchasing health insurance in the healthcare exchange. The 2013 FPL for a single person is $11,490 and this individual’s healthcare premium payment is capped at $228 per year. A lump-sum of approximately $29,000 would raise that premium cap to $3,816. A lump-sum of approximately $34,000 would raise income above 400% of the FPL and the individual would have to pay the full premium of the healthcare policy selected on the healthcare exchange.

Takeaway: The economic impact of a lump-sum payout must be carefully evaluated by the recipient. It may not be as advantageous as it appears. Plan sponsors implementing this strategy may wish to consider the impacts of the ACA as they draft the communications to the prospective payees.

Top 10 Milliman blogs items for 2013

Milliman publishes blog content addressing complex issues with broad social importance. Our actuaries and consultants offer their perspective on healthcare, retirement plans, regulatory compliance, and more. The list below highlights Milliman’s top 10 blogs in 2013 based on total pageviews:

10. In their blog “Five keys to writing a successful qualified health plan application,” Maureen Tressel Lewis and Bonnie Benson highlight several best practices insurers should consider when submitting a qualified health plan application to the Health Insurance Marketplace.

9. “Understanding ACA’s subsidies and their effect on premiums” offers perspective into the relationship between healthcare premiums and federal subsidies for low-income individuals.

8. Funding for future Consumer Operated and Oriented Plans(CO-OPs) was eliminated as a result of the fiscal deal that was signed in December 2012. Tom Snook takes a look at how the deal affects CO-OPs in his blog “CO-OPs: An endangered species?

7. Robert Schmidt discusses why the methodology used to determine COBRA premium rates is essential in his blog “The growing importance of COBRA rate methodologies.”

6. A second blog by Maureen Tressel Lewis and Mary Schlaphoff entitled “Five critical success factors for participation in exchange markets” highlights tactics that insurers offering qualified health plans may benefit from implementing.

5. “Pension plans: Key dates and deadlines for 2013” offers Milliman’s three retirement plan calendars (defined benefit, defined contribution, and multiemployer) with key administrative dates and deadlines throughout the year.

4. In her blog “Fee leveling in DC plans: Disclosure is just the beginning,” Genny Sedgwick explains how investment expenses and revenue sharing affect the fees paid by defined contribution plan participants.

3. Maureen Tressel Lewis and Mary Schlaphoff’s blog “Five common gaps for exchange readiness” describes items issuers of qualified health plans have to resolve before their plans can be sold on the Health Insurance Marketplace.

2. In the lead up to implementation of the Patient Protection and Affordable Care Act (ACA), debate often centered on how the law would affect healthcare premiums. Our “ACA premium rate reading list” offers perspective on how rates may be affected.

1. In his blog “Retiring early under ACA: An unexpected outcome for employers?,” Jeff Bradley discusses the impact that the ACA could have on both early retirees and plan sponsors.

This article was first publish at Milliman Insight.

Retiring early under ACA: An unexpected outcome for employers?

Bradley-JeffWith the recent release of state health exchange premium data, we are finally getting a meaningful look at what the Patient Protection and Affordable Care Act (ACA) means for early retirees.

One of the largest barriers to early retirement is health coverage. Indeed, before ACA, purchasing individual coverage could be very expensive and significantly limit coverage for any preexisting conditions. Under ACA, the coverage is less expensive because of the inclusion of a large pool of younger workers and the requirement that the highest premium in an exchange plan cannot be greater than three times the lowest premium.

Workforce planning may be more critical than ever under ACA
• Depending on existing post-retirement healthcare options, employees may begin retiring much earlier than expected.
This Columbia University study notes that as many as 940,000 workers in “job lock” may leave employment because of the availability of healthcare under ACA.
• Employers should consider the ramifications of an unexpected wave of early retirements in 2014 as it will be easy for early retirees to receive heavily subsidized health coverage under ACA.

Managing MAGI is the key
Many early retirees who plan carefully can receive federal tax subsidies toward their cost of health coverage under the exchanges. Federal subsidies are available under ACA as long as the retired family has a modified adjusted gross income (MAGI) under 400% of the federal poverty level (FPL). There is no means testing for the federal subsidies.

Consider a married couple, both aged 55, with an expected 2014 MAGI of $63,000. According to this calculator from the Kaiser Family Foundation, they can expect to pay $13,461 in premiums for a silver plan. Because they are expected to be at 406% of FPL they are not eligible to receive any federal tax credits to help pay the premium.

However, if this couple has a 2014 MAGI of $62,000, they would be expected to be just under the 400% FPL threshold and eligible for $7,571 in federal tax credits to help pay for the coverage. Thus, with a bit of careful tax planning, early retirees can become eligible for tax credits to pay for a significant portion of the cost of an exchange plan.

What does this mean for potential early retirees?
• Careful tax planning is important. Failure to do so could result in missed savings under ACA.
• Deferring Social Security until eligible for Medicare (age 65) should be considered. Even though some Social Security income may be exempt from federal income tax, all Social Security income is includable in MAGI.
• It may make sense to defer taking distributions from tax-qualified retirement accounts until age 65. Funds necessary for living expenses may be taken instead from tax-exempt distribution sources such as personal savings or Roth IRAs.
• Other tax strategies to minimize MAGI may be useful:
– Sell assets that result in capital losses first
– Before retiring, consider converting any tax-qualified retirement accounts to Roth accounts

Please note that none of this should be construed as tax advice. Participants should consult with their respective tax advisors on these issues.

What does this mean for employers?
• Workforce planning for 2014 and beyond may be critical, for reasons mentioned above
• For those employers that wish to encourage early retirements, consider setting up Health Reimbursement Accounts (HRAs) for potential early retirees.
– HRAs allow early retirees to use the (usually notional) employer contribution to purchase health insurance from the exchange or to pay for other qualifying medical expenses
– HRAs do not require coverage under a high-deductible health plan and may be used to pay insurance premiums
• Consider moving early retirees covered under an existing retiree medical program to the health insurance exchanges.
– Potentially lower cost (which is due to premium subsidization), as mentioned earlier
– Because early retirees have much control of how and when they receive pension and savings plan benefits, a planning process can be used to maximize the federal subsidies
– Private exchanges have call centers and other support that come at little or no cost to the plan sponsor

IRS proposes rule on employer “shared responsibility” under PPACA

The Internal Revenue Service (IRS)  has issued a proposed rule on payments that certain employers will be subject to if they do not offer a minimum level of affordable healthcare coverage to their full-time employees beginning in 2014. The employer “shared responsibility” requirement under the Patient Protection and Affordable Care Act (PPACA) applies to employers with at least 50 full-time employees (taking into account full-time equivalent employees) if at least one of those employees receives a federal premium tax credit for purchasing individual coverage from a health insurance exchange in 2014. Employers may rely on the IRS’s proposed rule pending the publication of a final rule or other applicable guidance. Comments on the proposed rule must be submitted to the IRS by March 18, 2013.

This Client Action Bulletin discusses the proposed rule on the employer “shared responsibility” requirement under PPACA.