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401k Litigation Update

In 2016 and 2017, 107 complaints were filed with the DOL about 401k plans. This is the most since 2008-2009 according to Retirement Study done at Boston College.

Some things are obvious- when markets fall, complaints tend to rise. These complains tend to fall with plans that were not being paid enough attention to typically, and resulted in “hundreds of millions of dollars in settlements…”

Further, the complaints are typically “obvious and preventable. What are the primary complaints:

  1. Neglecting to have and follow prudent fiduciary policies, procedures and practices.
  2. Failing to mitigate conflicts of interest
  3. Offering inappropriate investment choices
  4. Lacking required transparency

The time to adjust your behavior is before complaints and problems occur, of course. A common theme in the study is that as soon as lawsuits and investigations start, everyone starts getting educated on their fiduciary duties, but thats too late. Also note that these issues are not about investment advice, but about fiduciary processes, so if you have an investment adviser, thats just not enough!

Healthcare costs by state

From a recent survey by business insider, an interesting comparison of overall costs by state – including premiums and average deductibles and expenses. Costs continue to rise faster than wages. Interestingly, the state with the highest average income (NEw Hampshire) also has the highest costs- $8,289 per person per year. How did your state fare?

Long Term Care Policies in trouble?

Several events this past week are concerning about the financial viability of Long Term Care Policies.

In South Carolina, rate increases filed with the department of insurance last week requested between 143%-259%. The Director of the insurance department turned down those increases, which leads to the second event. In New York, Genworth (the largest writer in the past few years of LTC) announced, after their rate increases were declined, they are halting all new sales in the state.

Note that existing clients will still be serviced.

I am reminded that in 1988, when I was at John Hancock, they rolled out their LTC Policies with much fanfare, and a wizened old agent in the room asked a brilliant question. “How do they know what the claims will be in the future, they have never done this before. What if they underprice it?”

And the future is now here. Clients look at LTC premiums, rightfully balk, and elect life insurance or annuities with Chronic illness riders to accomplish the same basic thing…

“General Electric Co is setting aside one of the largest amounts ever to cover potential losses on policies that provide long-term care in nursing facilities and patients’ homes. But insurance experts are concerned that may not be enough.

GE shocked investors last year when it took a $6.2 billion after-tax charge and said it planned to set aside $15 billion over seven years to cover claims on some 300,000 long-term care policies written more than a decade ago, when actuaries did not yet know how costly the claims would become.

The costs, which far exceeded GE’s estimates, sent its shares tumbling, spurred an investor lawsuit and prompted the U.S. Securities and Exchange Commission to investigate.

Last week, GE provided new details about its insurance and scheduled a “teach in” for Thursday to give more information.

GE’s new reserves amount to about $55,000 per policy, in line with those of other long-term care insurers, according to an analysis for Reuters by Audit Analytics, an independent research company based in Massachusetts.

“For comparison, Humana Inc has set aside $77,282 per policy, while Unum Group has set aside $10,614, Audit Analytics said.

United and Quest move to improve, simplify, your experience

UnitedHealthcare is growing its national network of participating laboratory providers and launching an innovative value-based approach to laboratory services focused on ways to create more personalized care recommendations and a simpler consumer experience for the more than 48 million people it serves. We have renewed our long-term strategic agreement with LabCorp, and we are establishing an expanded relationship with Quest Diagnostics. LabCorp will continue to serve as our exclusive national laboratory provider until Jan. 1, 2019;1 Quest will be available as a network provider for all plan participants beginning Jan. 1, 2019.1 UnitedHealthcare will collaborate with both providers on a variety of value-based programs, bringing the same type of aligned incentives and enhanced patient experience to lab services that exist today in accountable care arrangements between UnitedHealthcare and more than 1,100 hospitals and 110,000 physicians. These expanding relationships will strategically change the way we support the health care needs of consumers by using real-time data sharing to better anticipate people’s care options – and reducing gaps in care – similar to the model UnitedHealthcare already uses to integrate medical and pharmacy data.

Tax Credit for employees on FMLA

The Internal Revenue Service (“IRS”) recently issued the 2018 Form 8994 for eligible employers to complete to receive the Employer Credit for Paid Family and Medical Leave (“Employer Credit”). The Employer Credit was signed into law by President Trump on December 22, 2017 as part of the Tax Cuts and Jobs Act. The Employer Credit enables eligible employers to claim a general business credit for employees on paid family and medical leave. The Employer Credit is available for years beginning after 2017 and before 2020, and ranges from 12.5% to 25% of wages paid to a qualifying employee while the employee is on family and medical leave. Employers that qualify may claim or elect not to claim the Employer Credit any time within three (3) years from the due date of their return on either an original return or an amended return.

For the complete article and more information, click here or call our office.

May 2019
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Reeve Conover is a Registered Representative. Securities offered through Cambridge Investment Research, Inc., a Broker/dealer member FINRA/SPIC. Cambridge and Conover Consulting are not affiliated. Licensed in SC, NC, NY, CT, NJ, and CA.
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