Transcript Document

David Foster, JD, CLU, ChFC
Presenting:
The Changing Landscape of Qualified and
Non-qualified Retirement Plans
Alpha’s New Services:
Financial Services
Executive Compensation / Benefits
Incentive Bonus Plans
Deferred Compensation Programs
Supplemental Disability / Life Insurance
Wealth Management Resources
Executive Long Term Care
Programs
Phantom Stock, Stock Options &
Stock Appreciation Rights
• Employee Financial Planning
Retirement and college education
– Lunch & Learn educational seminars
savings projections
– Individual employee financial consulting
– Retirement and college education savings projections
Alpha’s New Services:
Financial Services
Estate Planning
Estate Tax Planning
Asset Protection
Trust Planning
Planning for Children With
Special Needs
Planned Giving Alternatives
• Business Succession Planning
– Buy-Sell Agreements
– Exit Planning Strategies
– Management Buy-Out Arrangements
Employee Stock Ownership
Plans
Family Business Continuation
Alpha’s New Services:
Financial Services
Qualified Retirement Plans
Defined Contribution Plans – 401(k), 403(b), Profit Sharing, SIMPLE
Plans, ESOPs
Defined Benefit Plans – Pension Plans, 412(i) Plans
Products
Mutual Funds
Annuities
Managed Investment Accounts
Life Insurance
Disability Insurance
Long Term Care
Alpha’s New Services:
Total Retirement Solutions
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
Pension Protection Act of 2006 - PPA
Background
Effective dates
Provisions
Pension Protection Act of 2006 – PPA:
Background
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:
Effective Dates
Various effective dates
EGTRRA 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)
Today’s Focus – 401(k) Changes
Today’s Focus – 401(k) Changes:
EGTRRA Permanency Growth Opportunities
Makes permanent higher
contribution limits for 401(k)s
and IRAs, enabling more
workers to build larger
retirement nest eggs:
Increased Deferral Limits
Catch-up Contributions
Increased 415 Limits
Saver’s Credit
After-Tax Contribution Rollovers
Direct Rollovers to Roth IRAs
Roth(k) Contributions
Today’s Focus – 401(k) Changes:
Automatic Enrollment
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 months
Automatic Enrollment Safe Harbor
(2008):
Today’s Focus – 401(k) Changes:
Faster Vesting
Effective 2007
Current Law
Employer “other” contributions
5 year cliff vesting
7 year graded
Employer “matching” contributions
3 year cliff vesting
6 year graded
PPA – All employer contributions:
3 year cliff vesting
6 year graded
Today’s Focus – 401(k) Changes:
DB/DC Combined Plan Deduction Limit
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:
Participant Account Statements
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:
Professional Investment Advice
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:
Other Provisions - COLI
Tax trap for corporate owned life
insurance
Notice and consent requirement
Exceptions based on insured’s
status
IRS information reporting
requirement
American Jobs Creation Act of 2004
New Rules for Non-qualified
Deferred Compensation Plans
Consequences of Noncompliance
409A
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
Non-Compliance
Compensation subject to
immediate taxation
Interest at IRS rates plus 1%
20% penalty on amount that
should have been included as
taxable income
Due Diligence
Review current executive
compensation arrangements,
including individual employment
contracts
Work with advisors to make sure
compensation agreements are
in compliance with 409a.
Additional Updates
PA Taxation of Non-qualified
Deferred Compensation
Split Dollar Regulations
Tax Treatment of Long Term
Care Insurance
Life Insurance Product
Improvements
Viatical Settlements
Todd Hons
Presenting:
Medical Carrier Updates
Trends
Medical Rates
Lower Renewals!
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 Changes
Effective January 1, 2007 or upon renewal for groups 2-104
Effective 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 Changes
Deductible 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 nonformulary co-pays
Select Rx Option
Automatically 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 Products
Available 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
Carrier Updates:
Aetna
York Hospital (Wellspan) recently joined network
Lancaster General in network
New Plan designs with deductible and coinsurance
Carrier Updates:
United Healthcare
Still building doctor and hospital network
Full array of PPO products
National capabilities
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
Plan Year vs. Calendar Year Deductibles
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
If someone is over age 65 and still working fulltime, 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 Medicareeligible 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
High Deductible Update
Medical Expense Reimbursement Plan (MERP
Plan)
Deductibles increasing
100 Groups In-force
Health Savings Accounts
Starting to make financial sense