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E-News ~ 1st Qtr 2005 |
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From the office of Tim Olson, CEBS, CMFC We continue to do many enrollments for health savings account (HSA) programs, and I am realizing how little is known about high deductible health plans (HDHP’s) even with the wealth of information available in the marketplace. Here are some clarifying tips we hope will be helpful to you. Everyone calls their plans "HSA options" (carriers, insurance professionals, and employers). The fact is they are HDHP options. If an employee chooses an HDHP, then, and only then, can they open up an HSA account. Even if an employee chooses the high deductible option, they do not have to participate in an HSA. The next area of confusion involves the custodians. The law says a custodian must hold the HSA deposits. Banks, insurance carriers, and financial institutions are the primary sources for custodians. By law, employees may choose any custodian. However, as an employer payroll deducting HSA deposits under your Section 125 salary conversion program, (thus allowing the deposits to be deducted before FICA, Federal, and State taxes) you can choose whomever you like and limit the number of institutions to which you will remit HSA deposits. If an employee wants to use a different custodian, the law allows that, but as an employer, you do not have to payroll deduct the money. The employee makes his own arrangements for making deposits, and he deducts the HSA contributions on his tax return at filing time next year. (He can only deduct Federal and State taxes.) We recommend employers choose only one custodian for payroll deductions to keep administration costs to a minimum. Do not pay big start up fees, monthly fees, or withdrawal fees to custodians! Banks make money on money. In my opinion, that is how they should get paid. A plan document is not required for an HSA plan (it is employee owned), and now that more and more custodians are handling HSA deposits, you should not pay any start up fee, and minimal per head costs for administration (typically around $4.00 - $6.00 per head per month, and only for those participating in the HSA). In general, I recommend you use an independent custodian. Many insurance carriers are their own custodian, but if you change carriers for the health program, you have to make another decision regarding the custodian. By using an independent, it allows you to change your health program without having to rethink the custodian arrangement. The last area of confusion is how to use HSA with flexible spending accounts (FSA). If an employee participates in both HSA and FSA, the HSA is used for medical expenses, and the FSA can only be used for dental and vision. However, if an employee participates in one or the other, they can use either account for medical, dental, or vision expenses. Both accounts have advantages and disadvantages, but together, they can be very powerful. We recommend you give employees the ability to participate in both because of their tremendous pre-tax advantages. In my next newsletter, I will go into greater detail on how to utilize both FSA and HSA for maximum tax savings. Are You Up-To-Date With The New COBRA Regulations? The most recent COBRA regulations published by the Federal Department of Labor in July 2004 required a few changes regarding notice to employees. Have you: 1. Adopted a uniform effective date for the implementation of the new notice provisions under COBRA. The effective date must be no later than the first day of the first plan year that begins on or after November 26, 2004. Calendar year plans must have an effective date of January 1, 2005. 2. Revised and updated all existing forms to comply with the final regulations’ content and time frame requirements. 3. Revised the "Initial COBRA notice" to ensure it meets the new notice requirements. 4. Developed a "COBRA Unavailability" notice to be given to participants who do not qualify for COBRA continuation. 5. Developed an "Early Termination of COBRA" notice for those instances when coverage will end before the normal expiration date. 6. Clarified language regarding Medicare entitlement as a second qualifying event. 7. Develop "reasonable" procedures in the SPD by which the employee/qualified beneficiary must notify the plan administrator/employer of a qualifying event (divorce, legal separation, loss of dependent child status, etc.). The new regulations are requiring "individually tailored" notices from employers, as opposed to the "one size fits all" notice used in the past. If you require assistance or have questions, please contact us at 1-866-289-1046. Dental Benefits
Automatic Rollover of Involuntary Cash-Outs Final regulations were issued in September 2004 to comply with the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) regarding automatic rollover of involuntary cash-outs. To meet these requirements, your plan document will need to be amended. The amendment must be in place no later than the last day of the plan year ending on or after March 28, 2005. Also, an Individual Retirement Account (IRA) for the automatic rollover of involuntary cash-outs will need to be established and a written agreement established with an IRA provider. These final regulations apply to your plan if your document provides for the involuntary cash-out of account balances over $1,000 and up to $5,000. The new regulations apply to terminated participants who do not respond to the notice to elect to receive a cash distribution or a rollover to another financial institution. If the terminated participant does not direct payment of his/her account balance and the involuntary cash-out rules apply to the participant, the employer is now required to establish an IRA for the participant. Failure to comply with the final regulations can jeopardize the qualified status of your plan. To make it easier for you, OneAmerica (AUL) and Principal have developed IRA products for the automatic rollovers. The Department of Labor has a special exemption from fiduciary responsibility on these rollover IRAs as long as the plan sponsor has a signed agreement meeting DOL requirements with an IRA provider. If you have the provision for plan document service, AUL and Principal will provide the plan amendment to you to comply with these regulations, and include a summary of plan changes for distribution to plan participants. The involuntary cash-out process begins when you complete the AUL Participant Status Sheet or send the information via internet website to Principal. Both AUL and Principal will send out the special tax notice, and if the participant does not give distribution instructions, the account balance is paid to an IRA. The notice will identify AUL or Principal as the trustee or issuer of the IRA plan. If you have questions, please call your plan services consultant at AUL at 1-800-261-9618 or at Principal at 1-800-547-7754. "Words are mere bubbles of water but deeds are drops of gold." Chinese Proverb "Though we travel the world over to find the beautiful, we must carry it with us or we will not find it." Ralph Waldo Emerson
Securities offered through
Sunset Financial Services, Inc. 3520 Broadway Kansas City, MO 64111 (816) 753-7000 (OSJ) Member NASD/SIPC Sunset Financial is not affiliated with The Olson Group. |
Ready To Rollover? Job changing is now becoming commonplace in today’s world. No longer do the majority of people work at the same job for 35 or 40 years, and then retire. A study done by the Employee Benefit Research Institute shows that more than half of all adult American workers stay on their jobs for less than five years. If you are seeking a change in today’s mobile workplace, or if retirement is just around the corner, you will soon have an important decision to make about your financial future; what to do with the money you have accumulated in your retirement plan. One of the most advantageous methods is to roll your assets into an individual retirement account (IRA). IRA rollovers provide a wide range of investment opportunities and benefits. Continued Tax Deferral Your money will continue to grow tax-deferred when you transfer your retirement plan to an IRA, preserving those funds for retirement. Diversification You can fund an IRA with virtually any type of investments - stocks, bonds, mutual funds, Certificates of Deposit, and government securities. Investment Selection Your present investment options have probably been limited by the plan document and are employer-directed. With an IRA, you can spread your dollars among all the asset classes and diversify your IRA to reflect your risk tolerance, long-term goals, and time horizon. Investment Control You can change your investment mix whenever your needs or goals change. Distribution Flexibility You can begin making penalty-free withdrawals from your IRA at age 59½. You can make withdrawals even earlier without incurring any penalties by taking a series of payments for at least five years or until you turn 59½, whichever is longer. This method is usually referred to as substantially equal periodic payments or 72(t) distributions. You may also be able to make penalty-free withdrawals if you become disabled, if you are purchasing your first home, or if you are paying college tuition for yourself or family members. Beneficiary Flexibility Many qualified plans dictate that non-spouse beneficiaries (i.e., children) receive a taxable payout within one year of the plan participant’s death. That means beneficiaries must pay federal income taxes on the full amount of the distribution during that tax year. With IRAs, beneficiaries can spread the account balance and taxes due over their own life expectancies by taking required minimum distributions. New Sponsor Service Center OneAmerica has announced that its new Sponsor Service Center will be opening April 4, 2005. The Sponsor Service Center was developed exclusively for smaller retirement plans with less than $250,000 in assets. This team of plan services consultants will be available to respond to your day-to-day administrative needs. The Sponsor Service Center will be able to answer questions on:
Why Voluntary Benefit Plans? Many employers are considering voluntary employee benefit plans to offset insurance costs and foster goodwill between workers and management. The advantages of voluntary benefits include convenience, tax savings and discounts for employees, and increased worker loyalty and cost-containment for the employer. The voluntary benefit programs that allow for a range of employee choice with respect to coverage’s and costs are widely accepted and greatly appreciated by the participating employee. By offering more choices, employers provide employees with the opportunity to tailor their benefits package to meet their own unique needs and budget. Offering choices also helps employers attract and retain good employees. By participating, employees perceive significant value in the program, and because they are bearing the cost they value the benefits highly. Employees like the convenience of buying products at work; they can pay through payroll deductions, receive a discount not otherwise received, and save them time researching products on their own. Providing voluntary benefits does not necessarily increase an employer’s liability. Disadvantages are minimal. The most commonly cited costs’ are the cost of allowing employees time to enroll in the benefits and the cost of handling the payroll deductions. Voluntary benefits allow companies to offer something in return at a time when economic and business conditions are challenging. "Success means we go to sleep at night knowing that our talents and abilities were used in a way that served others." Marianne Williamson "Far and away the best prize that life has to offer is the chance to work hard at work worth doing." Theodore Roosevelt
Excellence
"Excellence can be attained if you constantly strive for perfection, and you care enough to do your very best in everything, in every way."
Make It Happen
"Greatness is not in where we stand, but in what direction we are moving. We must sail sometimes with the wind and sometimes against it – but sail we must, and not drift, nor lie at anchor." Oliver Wendell Holmes
Customer Service Contacts
AFLAC 1-800-462-3522 www.aflac.com Allstate (AHL) 1-800-521-3535 www.ahlcorp.com American Funds 1-800-421-0180 www.americanfunds.com Ameritas 1-800-487-5553 www.ameritasgroup.com Blue Cross Blue Shield 1-888-232-0942 www.bcbsne.com Jefferson Pilot 1-800-423-2765 www.jpfinancial.com Met Life 1-800-686-9311 www.metlife.com OneAmerica (AUL) 1-800-261-9618 www.eretirement.aul.com Enrollment Fax: 1-317-285-1728 Principal Financial 1-800-547-7754 www.principal.com Regional Care, Inc. www.regionalcare.com UNUM Provident 1-800-255-6148 www.unumprovident.com |
The Olson Group
20214 Veterans Drive, Suite 200PO Box 543
Elkhorn, NE 68022
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PHONE: (402) 289-1046 |
TOLL FREE: 1-866-289-1046 |
FAX: (402) 289-1012 |
EMAIL: tolson@theolsongroup.net |
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