Did you know that ACA repeal could have and effect on health savings plans (HRA)? Read this interesting article from Benefits Pro about how the repeal of the ACA might affect your HRAs by Marlene Y. Satter
With the repeal of the Affordable Care Act looming, one surprising factor in paying for health care could see its star rise higher on the horizon—the retirement planning horizon, that is. That’s the Health Savings Account—and it’s likely to become more prominent depending on what replaces the ACA.
HSAs occupy a larger role in some of the proposed replacements to the ACA put forth by Republican legislators, and with that greater exposure comes a greater likelihood that more people will rely on them more heavily to get them through other changes.
For one thing, they’ll need to boost their savings in HSAs just to pay the higher deductibles and uncovered expenses that are likely to accompany the ACA repeal.
But for another—and here’s where it gets interesting—they’ll probably become a larger part of retirement planning, since they provide a number of benefits already that could help boost retirement savings.
Contributions are already deductible from gross income, but under at least one of the proposals to replace the ACA, contributions could come with refundable tax credits—a nice perk.
Another proposal would allow HSA funds to pay for premiums on proposed new state health exchanges without a tax penalty for doing so—also beneficial. And a third would expand eligibility to have HSAs, which would be helpful.
But whether these and other possible enhancements to HSAs come to pass, there are already plenty of reasons to consider bolstering HSA savings for retirement. As workers try to navigate their way through the uncertainty that lies ahead, they’ll probably rely even more on the features these plans already offer—such as the ability to leave funds in the account (if not needed for higher medical expenses) to roll over from year to year and to grow for the future, and the fact that interest on HSA money is tax free.
But possibly the biggest benefit to an HSA for retirement is the fact that funds invested in one grow tax free as well. If you can leave the money there long enough, you can grow a sizeable nest egg against potential future health expenses or even the purchase of a long-term care policy. And, at age 65, you’re no longer penalized if you withdraw funds for nonapproved medical expenses.
And if you don’t use the money for medical expenses in retirement, but are past 65, you can use it for living expenses to supplement your 401(k). In that case, you’ll have to pay taxes on it, but there’s no penalty—it just works much like a tax-deferred situation from a regular retirement account.
See the original article Here.
Satter M. (2017 January 16). HSAs could play bigger role in retirement planning [Web blog post]. Retrieved from address http://www.benefitspro.com/2017/01/16/hsas-could-play-bigger-role-in-retirement-planning?ref=hp-news
Interesting article from BenefitsPro about employee’s increased input into their 401(k)s by Ben Steverman
(Bloomberg) — Saving for retirement requires making sacrifices now so your future self can afford to stop working later. Someday. Maybe.
It’s not news that Americans aren’t saving enough. The typical baby boomer, whose generation is just starting to retire, has a median of $147,000 in all of his retirement accounts, according to the Transamerica Center for Retirement Studies.
And if you think that’s depressing, try this on: 1 in 3 private sector workers don’t even have a retirement plan through their job.
But the new year brings with it some good news: If people do have a 401(k) plan through their employer, there’s data showing them choosing to set aside more for their later years.
On average, workers in 2015 put 6.8 percent of their salaries into 401(k) and profit-sharing plans, according to a recent survey of more than 600 plans. That’s up from 6.2 percent in 2010, the Plan Sponsor Council of America found.
An increase in retirement savings of 0.6 percentage points might not sound like much, but it represents a 10 percent rise in the amount flowing into those plans over just five years, or billions of dollars. About $7 trillion is already invested in 401(k) and other defined contribution plans, according to the Investment Company Institute.
If Americans keep inching up their contribution rate, they could end up saving trillions of dollars more. Workers in these plans are even starting to meet the savings recommendations of retirement experts, who suggest setting aside 10 percent to 15 percent of your salary, including any employer contribution, over a career.
While workers are saving more, companies have held their financial contributions steady—at least over the past few years. Employers pitched in 4.7 percent of payroll in 2015, the same as in 2013 and 2014. Even so, it’s still more than a point above their contribution rates in the aftermath of the Great Recession.
One reason workers participating in these plans are probably saving more: They’re being signed up automatically—no extra paperwork required. Almost 58 percent of plans surveyed make their sign-up process automatic, requiring employees to take action only if they don’t want to save.
Automatic enrollment can make a big difference. In such plans, 89 percent of workers are making contributions, the survey finds, while 75 percent make 401(k) contributions under plans without auto-enrollment. Auto-enrolled employees save more, 7.2 percent of their salaries vs. 6.3 percent for those who weren’t auto-enrolled.
Companies are also automatically hiking worker contribution rates over time, a feature called “auto-escalation” that’s still far less common than auto-enrollment. Less than a quarter of plans auto-escalate all participants, while 16 percent boost contributions only for workers who are deemed to be not saving enough.
A key appeal of automatic 401(k) plans is that they don’t require participating workers to be investing experts. Unless employees choose otherwise, their money is automatically put in a recommended investment.
And, at more and more 401(k) and profit-sharing plans, this takes the form of a target-date fund, a diversified mix of investments chosen based on a participant’s age or years until retirement. Two-thirds of plans offer target-date funds, the survey found, double the number in 2006.
The share of workers’ assets in target-date funds is up fivefold as a result.
A final piece of good news for workers is that they’re keeping more of every dollar they earn in a 401(k) account. Fees on 401(k) plans are falling, according to a recent analysis released by BrightScope and the Investment Company Institute.
The total cost of running a 401(k) plan is down 17 percent since 2009, to 0.39 percent of plan assets in 2014. The cost of the mutual funds inside 401(k)s has dropped even faster, by 28 percent to an annual expense ratio of 0.53 percent in 2015.
Steverman B. (2017 January 5). Employees putting billions more than usual in their 401(k)s [Web blog post]. Retrieved from address http://www.benefitspro.com/2017/01/05/employees-putting-billions-more-than-usual-in-thei?ref=hp-news&page_all=1
Great article from our partner, United Benefit Advisors (UBA) by
Recent research into individuals’ financial resolutions for 2017 can tell you whether your financial wellness initiatives are giving employees what they want. It can also tell you whether to expect employees to increase their retirement contributions next year.
Personal finance company LendEDU recently asked 1,001 Americans about their financial goals for 2017, as well as what their biggest concerns are. The results were published in LendEDU’s “Financial Resolution Survey & Report 2017,” which can help employers determine if their financial programs are on point.
Here are some of the more interesting Q&A’s from the research:
What’s your most important financial resolution in 2017?
Takeaway for employers: Improving savings should be front and center in any financial wellness strategy.
What’s your top financial resolution?
Takeaway for employers: Employees need the most help creating a budget they can stick to.
What’s your top financial concern?
Takeaway for employers: Helping employees manage healthcare costs can be a key add-on to any financial education program.
Do you think you’re better off financially in 2017 than in 2016?
Takeaway for employers: Employees’ financial state of mind is on the upswing, which is good. But it could make increasing participation in wellness initiatives more challenging.
Do you make financial resolutions with your spouse or significant other?
Takeaway for employers: When it comes to finances, very few people go it alone, so invite spouses to be a part of your wellness offerings.
What would make you stick to a financial resolution?
Takeaway for employers: Incremental rewards and incentives, can help drive participation and success in 2017 financial wellness initiatives.
Do you think you’ll increase your retirement savings contributions this year?
Takeaway for employers: This could be a good year to really push employees to bump up retirement plan contributions.
Author (Date). Title [Web blog post]. Retrieved from address http://www.hrmorning.com/financial-wellness-heres-what-employees-want-need-in-2017/
Helpful tips from Employee Benefit Adviser about attracting new talent by Aldor Delp
Unemployment is hovering around 5%, November marked 73 continuous months of job gains and wage growth is picking up. All indications seem to suggest that employers have positions to fill, which may also mean that workers now have leverage, confidence and options. This is good news for job candidates. But for employers vying for fresh talent, it means the attributes of a company need to be that much more enticing. It also makes me think that a comprehensive benefits package may tip the scales for a candidate who’s considering multiple offers. To put it simply: Benefits can be the game changer.
It’s true that a traditional comprehensive benefit package has always been a successful recruitment element for companies. But given the wider array of benefits employers now can offer, today’s companies can use those elements to differentiate themselves from the competition.
From an employer’s perspective, competitive benefits don’t just help with recruitment but can also bolster retention. While strong benefit packages can potentially become expensive depending on the options they include, replacing an employee can be potentially even more costly and time consuming if a company experiences regular churn. With an investment in more appealing benefits packages, an employer may be able to mitigate the cost, time and effort of turnover and recruitment.
While healthy, stocked kitchens, nap areas and ping pong tables are perks that now reach far beyond the tech industry, many companies are building up three additional benefits areas that can truly change the game.
1) Financial wellness programs. Given the recent recession, retirement still is a growing concern for many American workers. A recent study showed that over the past 12 months, 38% of workers considered delaying retirement beyond the original age they intended and 52% said they will delay retirement because they “need to save more.” When these financial worries make their way into the workplace, employers should take notice. Consider a study from PricewaterhouseCoopers that showed that employees spend an average of three hours a week at work dealing with their finances. That’s fairly significant.
By offering financial wellness programs, employers can combat this anxiety and increase efficiency, while providing a sought-after benefit that many companies aren’t yet offering. Ninety-two percent of employer-respondents in another ADP study confirmed interest in providing their workforce with information about retirement planning basics, and 84% said the same of retirement income planning. Even if employers would like to provide these programs, few offer them, citing several existing challenges that stand in the way, such as a need to focus on other aspects of their business (27%) or not enough resources (15%). Providing financial wellness programs can be an added reward that may help a potential employee lean in your favor.
2) Strong internal training. Providing employees with training and development opportunities can promote retention and commitment. Regardless of the number of opportunities for career development, you can still help employees refine skills and increase knowledge that will serve them in the future. American workers want to learn to hone their skills. In fact, 84% of Americans are excited to use technology to learn in real-time, according to ADP’s Evolution of Work study. This is a benefit that not only can provide employee enrichment, it can also strengthen the talent pipeline to management positions.
However, internal training programs are not what they used to be. According to ADP’s recent report, Strategic Drift: How HR Plans for Change, corporate training budgets fell by 20% between 2000 and 2008. Seventy-six percent of executives see the market for skilled employees tightening and 75% expect high turnover among millennials. Reduced corporate training budgets have perpetuated a cycle of high employee turnover. So, if your organization has strong training programs, it’s likely to stand out from competitors. It may be worth considering internal and external training opportunities, mentoring, job shadowing, cross-training and professional development classes.
3) Workplace flexibility. Be open to the idea that it may be more feasible for some workers to telecommute and work from home for a portion of the week. Workplace flexibility is attractive for many employees and it can help reduce the number of unscheduled absences. Flexible work arrangements — such as the option to work from home, alternative start and stop times, compressed work weeks, or Summer Fridays — can help encourage workers to use their time more efficiently, and underscore a corporate culture that stresses balance, mindfulness and trust.
As job candidates and existing employees take a more holistic view of their benefits, relevant, supportive and flexible programs can be the game changer for them. The right mix of direct compensation and indirect benefits may be the difference between onboarding that “dream” candidate, retaining a top performer, or elongating the search for that precious needle in the talent haystack.
Delp A. (2016 December 12). 3 reasons benefits are a game-changer for attracting talent[Web blog post]. Retrieved from address http://www.employeebenefitadviser.com/opinion/3-reasons-benefits-are-a-game-changer-for-attracting-talent
Worried about your future retirement? Check out this great read by Marlene Satter
Retirement as we know it may be set to disappear, as younger people look for ways to finance surviving into old age.
But extinction? Surely not.
However, according to the Merrill Edge Report 2016, that might just be in the offing, as workers change how they plan and save for retirement and how they intend to pay for it.
Millennials in particular represent a shift in attitude that includes very unretirement-like plans, although GenXers too are struggling with ways to pay their way through their golden years.
That’s tough, considering that most Americans neither know nor correctly estimate how much money they might need to keep the wolf from the door during retirement—or even to retire at all.
Here’s a look at 9 reasons why retirement as we know it today might be a terminal case—unless things change drastically, and soon.
Most Americans have no idea how much they might need to retire, which leaves them behind the eight ball when trying to figure out when or whether they can afford to do so.
Of course, it’s hardly surprising, considering how many are members of the “sandwich generation,” who find themselves caring for elderly parents while at the same time raising kids, or even trying to put those kids through college.
With soaring medical costs on one end and soaring student debt on the other, not to mention parents supporting adult children who have come home to roost, it’s hard to figure out how much they’ll need to meet all their obligations, much less try to save some of an already-stretched income to cover retirement savings as well.
We already know most workers don’t know how much they’ll need in retirement—but it’s not just a matter of ignorance. They don’t know how to figure it out, either.
More than half—56 percent—figure they’ll be able to get by during retirement on a million dollars or less, while 9 percent overall think up to $100,000 will see them through.
And 19 percent just flat-out say they don’t know how much they’ll need.
Considering that health care costs alone can cost them a quarter of a mil during retirement, the optimists who think they can get by on $100,000 or less and even those who figure $100,000–$500,000 will do the job are way too optimistic—particularly since saving for medical costs isn’t one of their top priorities.
It’s pretty hard to get motivated about something if you think it’s not achievable—and that discourages a lot of people from saving for retirement.
Those who have a “magic number” that they think will see them through retirement aren’t all that optimistic about being able to achieve that level of savings, with 40 percent of nonretired workers saying that reaching their magic number by retirement will either be “difficult” or “virtually unattainable.”
When you don’t believe you can do it on your own, what else is left? Sheer dumb luck, to quote Professor Minerva McGonagall at Hogwarts after Harry and Ron defeated the troll.
Only instead of magic wands, 17 percent of would-be retirees are sadly (and amazingly) counting on winning the lottery to get them to their goal.
Retirement? What retirement? Millennials in particular think they’ll need side jobs in the gig economy to keep them from the cat food brigade.
In addition, exactly half of younger millennials aged 18–24 believe they need to take on a side job to reach their retirement goals, compared with only 25 percent of all respondents. They don’t believe that just one job will cut it any more.
While 83 percent of current retirees are not currently working or never have during their golden years, the majority (83 percent) of millennials plan to work in retirement—whether for income, to keep busy or to pursue a passion.
The rise of the “gig economy” has created an environment where temporary positions and short-term projects are more prevalent and employee benefits such as retirement plans are less certain. This may be why more millennials (15 percent) are likely to rank an employer’s retirement plan as the most important factor when taking a new job compared with GenXers (5 percent) and baby boomers (5 percent).
Older generations had unions to negotiate benefits for them. Millennials might realize they have to do it all themselves, but they aren’t negotiating for salaries high enough to allow them to save.
And union benefits or not, 64 percent of boomers, 79 percent of Gen Xers and even 17 percent of currently retired workers plan to work in retirement.
Lack of communications is probably not surprising, since most people won’t talk about savings anyway.
Fifty-four percent of respondents say that the only person they feel comfortable discussing their current retirement savings with is their spouse or partner. Only 36 percent would discuss the subject with family, and only 22 percent would talk with friends about it.
And as for coworkers? Just 6 percent would talk about retirement savings with colleagues—although more communication on the topic no doubt could provide quite an education on both sides of the discussion.
They won’t talk about it, but they think they do better than others at saving for retirement. How might that be, when they don’t know what others are doing about retirement?
Forty-three percent of workers say they are better at saving than their friends, while 28 percent believe they’re doing better at it than coworkers; 27 percent think they’re doing better than their spouse or partner, 27 percent say they’re doing better than their parents and 24 percent say they’re beating out their siblings.
All without talking about it.
They’re struggling to figure out how much they need, many won’t talk about retirement savings even with those closest to them and they’re anticipating working into retirement—but millennials in particular are taking a more hands-on approach to their investments.
Doing it oneself could actually be a good thing, since it could mean the 70 percent of millennials, 72 percent of GenXers and 57 percent of boomers who are taking the reins into their own hands better understand what they’re investing in and how they need to structure their portfolios.
However, doing it oneself without sufficient understanding—and millennials in particular are also most likely to describe their investment personality as “DIY,” with 32 percent making their own rules when it comes to investments, compared to 19 percent of all respondents—can be a problem.
After all, as the saying goes, “A little knowledge is a dangerous thing.”
Satter M. (2016 December 7). 9 reasons why retirement may go extinct[Web blog post]. Retrieved from address http://www.benefitspro.com/2016/12/07/9-reasons-why-retirement-may-go-extinct?ref=mostpopular&page_all=1
by Marlene Satter
Lack of confidence, lack of knowledge and lack of money all plague workers trying to save for retirement, leaving them working longer than they planned and saving considerably less than they need.
But a series of surveys from TIAA has identified three ways that plan sponsors can help to improve retirement outcomes for their employees.
Employees want income for life, for instance, with 49 percent saying that their retirement plan’s top goal should be providing guaranteed monthly income in retirement.
And although it’s something they badly want, 41 percent are unsure if their current plan has that as an option.
1. Employees need help figuring how much retirement income they’ll need and how to translate savings into income – Plan sponsors can help with this, said the data, by helping employees be realistic about how much income they’ll need in retirement—something few have figured out.
While 63 percent of Americans who are not retired estimate that they’ll need less than 75 percent of their current income to live comfortably, most experts recommend replacing 70–100 percent of current income in retirement.
Compounding the situation is the fact that 53 percent of employees haven’t even figured out how to translate their savings into income—while 41 percent of people who haven’t yet retired are saving less (many considerably less) than the 10–15 percent of income experts recommend.
Lifetime income options such as annuities are one way to guarantee income replacement during retirement, but most people are unaware of them or of how they work. Just 10 percent of Americans have annuities, so for the other 90 percent, they’re not an option.
2. Employees are interested in receiving financial advice – Sponsors can also offer financial advice as part of a benefits package.
While 61 percent of those who have received advice feel confident about their financial situation, just 37 percent of people who haven’t feel that way.
But the cost—or perceived cost—of seeking advice is putting them off, as is distrust of advisors in general.
Although 71 percent of Americans say they’re interested in receiving advice, more than half haven’t.
For instance, 35 percent of Americans who have not worked with a professional financial advisor say they don’t think they have enough money to justify a meeting; 51 percent say they don’t have enough money to invest (49 percent believe they need more than $50,000 in savings to get an advisor to talk with them), while 45 percent have concerns about cost and affordability.
And 34 percent don’t know whom they can trust.
3. Employees can use tools and resources early and in all stages of retirement planning – Last but not least, the study found that getting involved early in the planning process can make a difference.
Sponsors who introduce resources for all stages of the financial planning process, with customizable planning tools and tailored support based on employees’ life stages, can help employees consider what they need to do to prepare for retirement, even if that day is years away.
Such tools can make it easier for employees to evaluate their personal risk tolerance, asset allocation and the current status of Social Security and Medicare to help them better envision their future retirement and the steps they can take to make sure that their retirement is successful
Satter M.(2016 December 8). 3 ways to help employees with retirement planning[Web blog post]. Retrieved from address http://www.benefitspro.com/2016/12/08/3-ways-to-help-employees-with-retirement-planning?ref=hp-news
Department of Labor fiduciary rule survives its first challenge, by Nick Thornton
The National Association for Fixed Annuities has lost its challenge to the Department of Labor’s fiduciary rule.
In a decision issued today in the United States District Court for the District of Columbia, Judge Randolph Moss denied NAFA’s motions for a preliminary injunction and summary judgment.
Among other things, NAFA claimed DOL violated the Administrative Procedure Act when it shifted the regulation of fixed indexed annuities to the rule’s Best Interest Contract Exemption. In the proposed version of the rule, FIAs were scheduled for regulation under the less restrictive Prohibited Transaction Exemption 84-24.
In shifting FIAs to the BIC exemption in the final rule, NAFA argued industry was not given adequate notice to comment on the implications, as the APA requires.
But Judge Moss cited case law showing that a final rule “need not be the one proposed” in the rulemaking process.
“It is enough that the final rule constitute a logical outgrowth” of the proposed version, wrote Moss.
Moss reasoned that NAFA was given adequate notice that the Department was considering regulating FIAs under the BIC exemption when it explicitly sought comments on whether annuities were adequately regulated in the proposal.
NAFA argued the proposal gave “no inkling whatsoever that the Department was considering moving FIAs from PTE 84-24 to the BIC.”
But Moss ruled that NAFA’s reading of the proposal, and DOL’s request for comment on the viability of how annuities were treated, was “not tenable.”
“The Department expressly requested comment on its decision to ‘continue to allow IRA transactions involving’ fixed indexed annuities ‘to occur under the conditions of PTE 84-24,” wrote Moss.
“That is, it (DOL) asked whether fixed indexed annuities should be grouped under PTE 84-24 or not,” added Moss. “And, if there were any doubt on this, it would be put to rest by the fact that NAFA, along with other industry groups, provided comments on that very issue.”
Full analysis of the ruling will follow.
Thornton, N. (2016 November 04). Court denies NAFA in DOL fiduciary rule case. [Web blog post]. Retrieved from address http://www.benefitspro.com/2016/11/04/court-denies-nafa-in-dol-fiduciary-rule-case?ref=hp-news&slreturn=1478547367
HR Elements Content Provided by our Partner, United Benefit Advisors.
Original post ubabenefits.com
Originally posted July 22, 2014 by Nick Thornton on http://www.benefitspro.com
A typical household needs to save roughly 15 percent of their income annually to sustain their lifestyle into retirement, according to a brief from the Center for Retirement Research at Boston College.
Generally, workplace retirement savings plans should provide one-third of retirement income, according to the study. For lower income families, defined contribution or defined benefit plans should provide a quarter of all retirement income. Higher income families will need their retirement plans to provide about half of all retirement income.
Middle-income families will require 71 percent of pre-retirement income to maintain living standards after they leave the workforce. About 41 percent of their retirement income is expected to come from social security.
Low-income families need an annual savings rate of 11 percent in order to sustain their lifestyle into retirement, which is lower than middle-income families (15 percent) and high-income families (16 percent). For lower income families, social security will replace a greater portion of pre-retirement income.
The Center’s National Retirement Risk Index says that half of Americans lack adequate savings to maintain their standard of living into retirement. A “feasible increase” in savings rates by younger workers can greatly affect their retirement wealth.
For those middle-income workers ages 30 to 39 who lack enough savings, a 7 percent increase in annual savings can provide adequate retirement funding. But middle-income workers age 50 to 59 who lack retirement savings would have to increase their annual savings rate by 29 percent, an unlikely expectation, the report adds.
For those older workers behind the curve, a better funding strategy would be “to work longer and cut current and future consumption in order to reduce the required saving rate to a more feasible level.”
Delaying retirement to age 70 greatly reduces the annual savings expectations workers need to meet in order to fund retirement.
A worker who starts saving at age 35 will need a 15 percent annual savings rate in order to retire at age 65. But if the same worker delays retirement until age 70, only a six percent annual savings rate is necessary.
A worker who starts saving at age 45 would need to save 27 percent annually to retire at 65. But by delaying retirement to age 70, the same worker only has to save 10 percent to maintain their standard of living after retirement.