Category Archives: Investing and fiduciary requirements

Regulators Interpret the 90-Day Waiting Period Limit

By |Lifehealthpro

September 4, 2012

Federal regulators have come out with another of the many batches of guidance that employers and their advisors will need to implement the “health coverage access” provisions of the Patient Protection and Affordable Care Act of 2010 (PPACA).

The PPACA pay-or-play provisions, which are officially known as the “employer shared responsibility provisions,” will require large and midsize employers to choose between providing health coverage for full-time employees or paying a penalty.

Employers will not have to offer coverage to any employees, but a coverage access section that’s separate from the play-or-play provision will require employers that do offer major medical coverage to limit any waiting periods that occur before coverage begins to 90 or fewer days.

Benefits specialists have been asking regulators many questions about how federal agencies will interpret the 90-day waiting period limit, especially when employers are looking at new employees who may end up working more hours than expected.

Three agencies — the Internal Revenue Service (IRS), the Employee Benefits Security Administration (EBSA), and the U.S. Department of Health and Human Services (HHS) — now have addressed some questions about the 90-day waiting period limit in a batch of guidance posted on the IRS website as IRS Notice 2012-59.

In the guidance, regulators have defined the term “waiting period” to be “the period of time that must pass before coverage for an employee or dependent who is otherwise eligible to enroll under the terms of the plan can become effective.”

“Being eligible for coverage” will mean “having met the plan’s substantive eligibility conditions (such as being in an eligible job classification or achieving job-related licensure requirements specified in the plan’s terms),” officials say.

Federal agencies will not consider an employer health plan or insurance issuer to have violated the waiting period limit if a worker is slow to decide whether to take up coverage, officials say.

If an employer provides benefits only for workers who work a specified number of hours, and the employer cannot reasonably expect a new worker to work enough hours to qualify for coverage, then “the plan may take a reasonable period of time to determine whether the employee meets the plan’s eligibility condition,” officials say.

The employer may have almost 14 months from a variable-hour worker’s start date to make coverage effective, officials say.

To get that amount of flexibility, the employer must have the coverage for an variable-hour worker who is eligible for health benefits take effect within a period equal to 13 months plus the “time remaining until the first day of the next calendar month” if the worker’s start date is not the first day of a calendar month.

Low-income and moderate-income workers who were not eligible for affordable employer-sponsored benefits could get tax subsidies through the new health insurance exchanges, or Web-based health insurance supermarkets, that PPACA is supposed to create.

Officials give 4 examples of how the variable-hour worker guidance might apply to specific workers.

Comments on the guidance are due Sept. 30.

Employers, plans and issuers should be able to rely on the compliance guidance in the notice at least through the end of 2014, officials say.

IRS officials said they were working on the 90-day waiting period limit guidance in February, in IRS Notice 2012-17.

In the same guidance, officials said they also were working on a number of other PPACA implementation rules aimed at employers.

IRS and PPACA: What’s a Full-Time Employee?

By  September 4, 2012 •

Employers can take up to 12 months to determine whether workers are full-time employees for purposes of applying the new federal “play or pay” health benefits rules.

Employers also will be able to use a worker’s Form W-2 wages to determine whether the health coverage offered to a worker was affordable at least until the end of 2014.

The Internal Revenue Service (IRS) has included those assurances in IRS Notice 2012-58, a batch of guidance officials developed to help employers apply the Patient Protection and Affordable Care Act (PPACA) play-or-pay provisions.

The play-or-pay provisions, also known as the “employer shared responsibility” provisions, will require employers with 50 or more full-time employees to provide what PPACA and regulators define as being “affordable health coverage” or else pay a penalty.

Supporters of play-or-pay rules argue that they keep employers from skimping on health coverage in an effort to undercut competitors that do offer health benefits.

Some types of employers, such as restaurants and temporary help firms, have argued that imposing any play-or-pay requirements on their businesses would jack up their costs, saddle them with massive new administrative burdens, and force them to cut back on the number of people they employ.

Others have argued that poorly designed regulations could make the play-or-pay provisions more burdensome than they would otherwise be or force employers to pry into workers’ personal affairs.

Employer groups and insurance groups have suggested that some proposed play-or-pay interpretations could force employers to shift workers from one type of plan to another completely different type of plan every month.

The IRS has proposed several different methods that employers could use to classify workers and stabilize their benefits over the past few years.

In the Notice 2012-58, IRS officials create a “standard “measurement period” and an “initial measurement period” of 3 months

to 12 months. An employer could use the hours worked during the measurement period to classify employees.

Officials also create a worker classification “stability period” that would have to be at least as long as the measurement period and could last from 6 months to 12 months.

An employer would have to look at a new employee after an initial measurement period and an “ongoing employee” after a standard measurement period. If the employer determined that the employee was a full-time employee, then the employer would have to treat the employee as a full-time employee in play-or-pay calculations throughout the coverage stability period.

For an ongoing employee, “the employer has the flexibility to determine the months in which the standard measurement period starts and ends, provided that the determination must be made on a uniform and consistent basis for all employees in the same category,” officials say.

The safe harbor rules protect only employers that are offering eligible workers affordable coverage that meets the PPACA minimum essential coverage standards, officials say.

Officials also state that an employer can keep a new full-time employee out of the health plan for a 90-day waiting period without having to pay play-or-pay penalties.

An employer can use a 90-day “administrative period” to determine whether an employee is eligible for coverage and enroll an employee in coverage, but the administrative period “may neither reduce nor lengthen the measurement period or the stability period,” officials say.

Using the safe harbor methods described in the new guidance is optional, and the new guidance will protect employers from having to comply with any more restrictive interpretations at least until Jan. 1, 2015, officials say.

Officials ask at the end of the guidance for comments on other play-or-pay interpretations that are still in the works.

Officials are asking about:

  • The types of safe harbors they should develop for temporary employees and employees who fill high-turnover jobs.
  • How employers and others should determine whether a new employee “is reasonably expected to work an average of at least 30 hours per week.”
  • The rules that should apply to mergers involving employers that use different rules for counting full-time employees.
  • How they should define the term “seasonal worker” for purposes of applying the play-or-pay rules.

Comments are due Sept. 30.

The Rules of Retirement for Women

By Susan B. Garland at Kiplinger

Thu Aug 30, 2012 7:00pm EDT

For women heading toward retirement, there’s good news and bad news. The good news is they’re likely to be blessed with long life. The bad news: They may not be able to afford it.

That, in effect, is the conclusion of a recent study by the U.S. General Accounting Office. Despite the increase in women’s workforce-participation rates over the past two decades, the poverty rate in 2010 for women 65 and older was 9% — nearly twice the rate for men, at 5%. And while 6% of widowers lived in poverty, 12% of widows were poor.

According to the GAO report, women have a tougher time saving for retirement in part because they take time out from the workforce to care for family members, and when they do work they have lower earnings than men. Other studies bear this out: Women who are 50 to 69 have about 20% less in retirement savings than men in that age group, according to a recent report by the ING Retirement Research Institute. Another report notes that while half of baby-boomer men have retirement savings of at least $200,000, only 35% of female boomers have that level of savings.

Women who are five to ten years from retirement can take some steps to improve their financial readiness. Many of these moves can apply to women of all ages.

Maximize your own retirement benefits. If you’re looking for a new job, make sure it has a good retirement plan. It’s unlikely these days that you will find a job with a pension plan that guarantees a stream of income in retirement. But you can seek out employers that will match all or part of your contributions to a 401(k) or a similar employer-based plan. A company match is free money.

Even when married women are working, women tend to set aside a smaller amount of their income than men, says Suzanna de Baca, vice-president of retirement and wealth strategies at Ameriprise Financial Services. “The couple may decide that the woman’s income is more discretionary,” she says. “But any woman who is working should contribute as much as possible to an employer-sponsored retirement plan.” If her employer doesn’t offer a retirement plan, de Baca says, she should set up an IRA.

Indeed, Kelly O’Donnell, vice-president at Financial Engines, which provides asset management for 401(k) plans, told the U.S. Senate Special Committee on Aging at a recent hearing that men tend to save nearly twice as much as women. “Among our clients, the median 401(k) account balance for men age 60 and older is $82,000 and only $46,000 for women age 60 and older,” O’Donnell said.

In 2012, you can set aside up to $17,000 (plus up to $5,500 in “catch-up” contributions if you’re 50 or older) in a 401(k). If you’re self-employed, you can make deductible contributions to a retirement plan, too, such as an individual 401(k). If you don’t have access to an employment-based retirement plan, you can make $5,000 ($6,000 if you’re 50 or older) in deductible contributions to a traditional IRA, or you make the same amount of after-tax contributions to a Roth IRA, which grows tax-free.

Working longer can help maximize your Social Security benefits. The Social Security Administration uses your highest 35 years of earnings to calculate your benefit. Any zeros — perhaps for years you left the workforce to care for children — will pull down the average. If you keep working, you’ll be able to raise your benefit — and maybe knock out a zero or two.

If you’re married but not working, you can still contribute to a tax-advantaged retirement account, known as a spousal IRA. In 2012, a nonworking spouse can make a deductible IRA contribution as long as the couple file a joint return. Also, the working spouse must have enough earned income to cover the contribution.

Consider long-term care coverage. Because they have longer life expectancies, women spend nearly three times what men spend on long-term-care services — $124,000, on average, for women, compared with $44,000 for men, according to a study by the Society of Actuaries. To protect themselves against such huge costs, many women should consider buying some form of long-term-care coverage during their fifties or early sixties.

You can buy a stand-alone policy, perhaps purchasing three years of coverage. But what could make more sense are newer products that combine long-term-care coverage with either an annuity or life insurance. If you never use the long-term-care coverage, you will get annuity payouts for yourself or leave a death benefit for your heirs. Also, the medical underwriting rules are not as tough for these policies as they are for traditional long-term-care insurance.

Rose Swanger, a certified financial planner with ING Financial Partners in Knoxville, Tenn., recommends the annuity combination products for many of her women clients. “If you use it for long-term care, great,” she says. “If not, it becomes longevity insurance down the road.”

Boost your survivor benefits. If you’re married, make sure you’re not shortchanged when it comes to your husband’s defined-benefit pension and Social Security benefits. You want to make sure you will get the biggest payout if he dies first.

For pensions, monthly payouts are usually paid out in one of two ways: either as a “single life” benefit that ends with the retiree’s death or as a “joint and survivor benefit” that ends after both the employee and spouse die. Lifetime payouts differ for each option. A single-life option could pay out $1,600 a month until the retiree dies, for instance; the joint annuity could pay out $1,300 a month until the retiree dies, then $650 to the surviving spouse until she dies.

Federal law requires the spouse to sign a consent form to waive her right to the spousal benefit. You may be tempted to take the higher, single-life payment. But if you will need the cash after your husband dies, don’t sign the waiver.

If you’re the lower earner, you and your husband can also maximize your Social Security survivor benefit. Survivors are entitled to a benefit of 100% of the worker’s benefit. When the higher earner, usually the husband, claims early, he deprives his lower-earning spouse of extra cash after he dies, especially when she is much younger.

The full retirement age is 66 for those born between 1943 and 1954. If you claim at the early-retirement age of 62, as most beneficiaries do, the benefit is permanently reduced by 25%. For each year you delay claiming benefits past age 66, you get an extra 8%, plus cost-of-living adjustments, until you reach age 70. If a couple’s goal is to boost the survivor’s benefit, the higher earner should delay as long as he can.

Learn about your household finances. With older married couples, it’s not unusual for the wife to defer to her husband when it comes to overseeing investments and household finances. Only 34% of women said they were most responsible for the financial and retirement planning, compared with 61% of men, according to a study by the MetLife Mature Market Institute and the Scripps Gerontology Center.

When Swanger meets with couples and encourages wives to take a more active role in the household finances, she has seen “husbands roll their eyes. They think they know best.” Her message to wives: “Don’t be intimidated by your husband. You can handle basic investments, too.”

A study by the Hartford and MIT AgeLab found that couples that share financial decisions generally save more for retirement than couples in which one spouse takes charge of investments. These couples also are most likely to have created a plan that assures the financial security of the surviving spouse.

Consider this suggestion from Cindy Hounsell, president of the Women’s Institute for a Secure Retirement, a Washington, D.C., education and advocacy group: Schedule a “really nice dinner” as a reward for a one- or two-day session in which both spouses get up to speed on all aspects of the household finances, including investments, insurance policies, beneficiary designations and the location of all information.

The collaboration shouldn’t end at dinner, but both spouses should continue to work together on savings and spending issues, Hounsell says. She says she has seen many new widows without a clue of what to do. “You need to have a bird’s eye view of all the details, so that you are prepared to take care of this yourself,” she says.

Demand a fair share in divorce. Divorce among couples 50 and older is at a record high. In 2009, about 25% of people who got divorced in 2009 were 50 and older, compared with about 10% in 1990, according to a report this year by two sociologists at Bowling Green State University.

It is essential for divorcing women to negotiate a fair share of retirement assets. Under state laws, a pension earned in retirement is a joint asset. If both spouses have retirement accounts, one route is to “equalize” the assets so that each spouse gets half of the total.

You should not necessarily forgo your right to the retirement pension income stream in exchange for the house. You could end up with a mortgage, property taxes and maintenance costs that you can’t afford — and be forced to sell in a declining real estate market. “A pension will bring in money for the rest of your life, but a house will have the costs that houses have,” Housell says.

If you plan to ask for a share of your husband’s employer-based retirement benefits, make sure you get a court order, known as a qualified domestic relations order, in addition to the divorce decree. The QDRO gives legal permission to the plan sponsor to disburse funds to the ex-spouse.

Also, you could be entitled to Social Security spousal or survivor benefits based on a former husband’s earnings record. To be eligible for such benefits, you must have been married for at least ten years and not be entitled to a higher benefit based on your own record.

To collect a spousal benefit based on an ex-spouse’s earnings record, you must be 62 and unmarried. To collect a survivor benefit on a late husband’s record, you need to be at least 60 (or 50 and disabled); your benefits could continue even if you remarry.

In the case of a spousal benefit, your ex does not need to know you’ve made a claim. He must be eligible for benefits (that is, 62 or older), though not necessarily claiming, before you can apply.

Haven’t yet filed for Social Security? Create a personalized strategy to maximize your lifetime income from Social Security. Order Kiplinger’s Social Security Solutions today.

MassMutual Claims The Hartford’s Retirement Business

Many of my clients were with the Hartford before, IMHO, they started to fail at heir mission about 8 years ago and I moved everyone out.  So, this should not come as a surprise to anyone.  –  Reeve

September 4, 2012 (PLANSPONSOR.com) – Massachusetts Mutual Life Insurance Company and The Hartford have entered into a definitive agreement for MassMutual to purchase The Hartford’s Retirement Plans business.

The purchase price is $400 million, subject to adjustment at closing. The transaction, which is subject to regulatory and other approvals, is expected to close by the end of 2012. Under the leadership of Elaine Sarsynski, executive vice president and head of MassMutual’s Retirement Services Division and chairman and CEO of MassMutual International LLC, a plan will be implemented to ensure an orderly integration of this acquisition over the coming year.  

The Hartford’s Retirement Plans employees will become part of MassMutual’s Retirement Services Division.  

The Hartford’s Retirement Plans business is primarily a defined contribution business with $54.9 billion in assets under management as of June 30, 2012. The business serves more than 33,000 plans with more than 1.5 million participants, and has a strong presence in the small to mid-sized corporate 401(k) and tax-exempt markets. It also provides administrative services for defined-benefit programs.   

MassMutual said The Hartford’s Retirement Plans’ tax exempt business will strengthen MassMutual’s foothold in this segment.    

Once the transaction is completed, the combined retirement businesses are projected to have approximately $120 billion in assets under management and three million participants. 

According to PLANSPONSOR’s 2012 Recordkeeping Survey (see “RK Survey 2012”), in 2011, The Hartford had $41.5 billion in 401(k) assets, $2 billion in 403(b) assets and $9.6 billion in 457 plan assets. MassMutual had $36.2 billion in 401(k) assets, $1.8 billion in 403(b) assets, $70 million in 457 plan assets and $976 million in profit sharing plan assets.

The Middle Class Are Blaming The Wrong People For Their Three Lost Decades

A thought-provoking article from Mish Shedlocks blog columnon September 3rd.

Mike “Mish” Shedlock Mish is an investment advisor at Sitka Pacific Capital. He writes the widely read Mish’s Global Economic Trend Analysis.

The Pew Research center ponders The Lost Decade of the Middle Class.

Since 2000, the middle class has shrunk in size, fallen backward in income and wealth, and shed some—but by no means all—of its characteristic faith in the future.

These stark assessments are based on findings from a new nationally representative Pew Research Center survey that includes 1,287 adults who describe themselves as middle class, supplemented by the Center’s analysis of data from the U.S. Census Bureau and Federal Reserve Board of Governors.

Median Income

chart

 Median Net Worth

chart

 Fully 85% of self-described middle-class adults say it is more difficult now than it was a decade ago for middle-class people to maintain their standard of living. Of those who feel this way, 62% say “a lot” of the blame lies with Congress, while 54% say the same about banks and financial institutions, 47% about large corporations, 44% about the Bush administration, 39% about foreign competition and 34% about the Obama administration. Just 8% blame the middle class itself a lot.

Who Is To Blame?

chart

 Three Lost Decades! 

Median net worth is back to a level first seen in the 1980s. By that measure, the US has had three lost decades. Wow. 

62% Blame Politicians, Only 8% Blame Themselves

Note that 62% blame politicians and 54% blame financial institutions, but only 8% blame themselves.

Five Questions

Median net worth is back to a level first seen in the 1980s. By that measure, the US has had three lost decades. Wow. 

62% Blame Politicians, Only 8% Blame Themselves

Note that 62% blame politicians and 54% blame financial institutions, but only 8% blame themselves.

Five Questions

  1. Did banks force people to take out loans they could not pay back, or did people do so voluntarily?
  2. Who elects congress? 
  3. Do people make enough effort to understand interest rates, debt, the economic policies of politicians, exponential math and its implications, the untenable nature of public union pension plans and promises?
  4. Do a significant number of people (if not the majority) get their economic views (assuming they have any economic views) from The View, Oprah, The Talk, or CNBC?
  5. Why did PEW leave off the Fed and Fractional Reserve Lending from the list of answers?

Two Bonus Questions

  1. Would the majority of respondents know anything at all about the Fed and Fractional Reserve lending had the PEW listed those options?
  2. Who is really to blame for what is happening?

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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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