Friday, January 29, 2010
Benefits Question of the week:
As a Business owner or Benefits Administrator, what is your biggest challenge when handling your company's Benefits?
Tuesday, January 26, 2010
What changes have been made to COBRA and how do they benefit me?
Ever heard the phrase “You don’t know what you got till it’s gone”?
This phrase has never rung more true, then when an employee leaves their employer.
When an employee leaves their employer not only are they giving up their position and income. They’re also giving up their benefits (i.e. Medical, Dental, Vision etc.).
That’s where COBRA comes in; COBRA is the “Consolidated Omnibus Reconciliation Act” and allows a prior employee to maintain medical coverage after they have severed employment. Regardless of whether the employee left the company voluntary or was forced out, COBRA allows them to keep their benefits for up to 18 months, in the State of New York it has been amended to 36 months as of Nov 2009.
Any employer MUST notify their employees that they’re eligible for continued coverage under COBRA within 60 Days, failure to do so can lead to legal ramifications. Employers should make sure their compliant with COBRA laws; this can be accomplished through the use of an ERISA attorney to ensure all proper documentation is being communicated in a timely manner to avoid conflicts.
Most recently the “COBRA Continuation Coverage Assistance Under ASSA” has be updated. For employees that were forced out of their employment, this Act has provided “Health Insurance Premium Subsidy”.
Under this Act “eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit. To qualify, individuals must experience a COBRA qualifying event that is the involuntary termination of a covered employee's employment. The involuntary termination must occur during the period that began September 1, 2008 and ends on February 28, 2010. The premium reduction applies to periods of health coverage that began on or after February 17, 2009 and lasts for up to 15 months.
For more information: http://www.dol.gov/ebsa/cobra.html
COBRA is a valuable tool for employers and employees to maintain coverage for themselves and their families.
If you have any questions, I’d be more than helpful to answer them (631) 338-9917.
Related Posts: Using a Health Savings Account to pay for Cobra
This phrase has never rung more true, then when an employee leaves their employer.
When an employee leaves their employer not only are they giving up their position and income. They’re also giving up their benefits (i.e. Medical, Dental, Vision etc.).
That’s where COBRA comes in; COBRA is the “Consolidated Omnibus Reconciliation Act” and allows a prior employee to maintain medical coverage after they have severed employment. Regardless of whether the employee left the company voluntary or was forced out, COBRA allows them to keep their benefits for up to 18 months, in the State of New York it has been amended to 36 months as of Nov 2009.
Any employer MUST notify their employees that they’re eligible for continued coverage under COBRA within 60 Days, failure to do so can lead to legal ramifications. Employers should make sure their compliant with COBRA laws; this can be accomplished through the use of an ERISA attorney to ensure all proper documentation is being communicated in a timely manner to avoid conflicts.
Most recently the “COBRA Continuation Coverage Assistance Under ASSA” has be updated. For employees that were forced out of their employment, this Act has provided “Health Insurance Premium Subsidy”.
Under this Act “eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit. To qualify, individuals must experience a COBRA qualifying event that is the involuntary termination of a covered employee's employment. The involuntary termination must occur during the period that began September 1, 2008 and ends on February 28, 2010. The premium reduction applies to periods of health coverage that began on or after February 17, 2009 and lasts for up to 15 months.
For more information: http://www.dol.gov/ebsa/cobra.html
COBRA is a valuable tool for employers and employees to maintain coverage for themselves and their families.
If you have any questions, I’d be more than helpful to answer them (631) 338-9917.
Related Posts: Using a Health Savings Account to pay for Cobra
Wednesday, January 20, 2010
What’s the difference between a Health Savings Account (HSA) and a Flexible Spending Account (FSA)?
This question actually came up this morning at a Networking Function I attended and most of the attendees were surprised with the answer.
For those of you that read my prior postings, you would know that a Health Savings Account is money that you can set aside “Pre Tax” to pay for medical expenses on a tax favored basis!
Sounds pretty good huh? You get to pay for Drugs, exams and hospitalization Pre Tax!
Here’s an example:
You have a $3000 Deductible on your Health Insurance Plan. If you pay for that with after tax funds and you’re in the 25% tax bracket, you would have had to make $4,000 before taxes, paid taxes of $1,000, and then used the remaining $3,000 to pay for your medical bills.
If you used a Health Savings Account, you would have set aside $3,000 Pre Tax and it would have all went toward your medical benefits. So, the other $1,000 you would have had to set aside originally, you would pay taxes on ($250) and you would have pocketed the remaining $750.
So, if you in the 25% Tax Bracket you would save roughly $250 per $1000 by using Tax Advantaged funds.
After looking at these numbers, you clearly make out much better using a Health Savings Account.
Then you may ask, “What’s a Flexible Spending Account?”
Well, simply put they are almost identical to Health Savings Accounts with one major drawback.
In a Flexible Spending Account you CAN NOT carry over remaining balances at the end of the year!
This is considered a use it or lose it benefit. This is why it becomes so difficult to use them. Insured’s don’t want to save too much, because if you don’t use it for health care by the end of the year, you lose the balance, but if you save too little you don’t maximize your benefit! This creates a major budgeting issue!
So, why would I use a Flexible Spending Account?
Health Savings Accounts MUST be paired with a High Deductible Health Insurance Plan. So, if you have a traditional plan a Flexible Spending Account is your only option.
So, in conclusion Health Savings Accounts have a better benefit (The balances carries over year after year) because there’s greater exposure that you have to meet a high deductible at some point.
Flexible Spending Accounts offer a similar benefit (Without the carry over) to people who have a traditional health insurance plan.
So what should I do?
If you have an Health Savings Account:
Try to save Pre Tax your Deductible every year. Its Pre Tax and forced savings, it’ll benefit you in the long run.
If you have an Flexible Spending Account on a Traditional Plan:
Look at how much you spent on medical expenses the year prior, and set only that amount aside for the up and coming year. This way you’ll still take advantage of the benefit without the threat of over contribution. You should also spend the remaining balance by the end of the year (ie. Buy prescriptions, checkups etc. before the year ends).
If you have any questions you can always reach me at 631-338-9917.
Related Posts: Hoosiers and Health Savings Accounts
Related Posts: What's a H.R.A & How is it different then an H.S.A?
Related Posts: Should I consider a High Deductible Plan?
Related Posts: What's a Health Savings Account (H.S.A) and why I should consider one
Related Posts: Using a Health Savings Account to pay for Cobra
For those of you that read my prior postings, you would know that a Health Savings Account is money that you can set aside “Pre Tax” to pay for medical expenses on a tax favored basis!
Sounds pretty good huh? You get to pay for Drugs, exams and hospitalization Pre Tax!
Here’s an example:
You have a $3000 Deductible on your Health Insurance Plan. If you pay for that with after tax funds and you’re in the 25% tax bracket, you would have had to make $4,000 before taxes, paid taxes of $1,000, and then used the remaining $3,000 to pay for your medical bills.
If you used a Health Savings Account, you would have set aside $3,000 Pre Tax and it would have all went toward your medical benefits. So, the other $1,000 you would have had to set aside originally, you would pay taxes on ($250) and you would have pocketed the remaining $750.
So, if you in the 25% Tax Bracket you would save roughly $250 per $1000 by using Tax Advantaged funds.
After looking at these numbers, you clearly make out much better using a Health Savings Account.
Then you may ask, “What’s a Flexible Spending Account?”
Well, simply put they are almost identical to Health Savings Accounts with one major drawback.
In a Flexible Spending Account you CAN NOT carry over remaining balances at the end of the year!
This is considered a use it or lose it benefit. This is why it becomes so difficult to use them. Insured’s don’t want to save too much, because if you don’t use it for health care by the end of the year, you lose the balance, but if you save too little you don’t maximize your benefit! This creates a major budgeting issue!
So, why would I use a Flexible Spending Account?
Health Savings Accounts MUST be paired with a High Deductible Health Insurance Plan. So, if you have a traditional plan a Flexible Spending Account is your only option.
So, in conclusion Health Savings Accounts have a better benefit (The balances carries over year after year) because there’s greater exposure that you have to meet a high deductible at some point.
Flexible Spending Accounts offer a similar benefit (Without the carry over) to people who have a traditional health insurance plan.
So what should I do?
If you have an Health Savings Account:
Try to save Pre Tax your Deductible every year. Its Pre Tax and forced savings, it’ll benefit you in the long run.
If you have an Flexible Spending Account on a Traditional Plan:
Look at how much you spent on medical expenses the year prior, and set only that amount aside for the up and coming year. This way you’ll still take advantage of the benefit without the threat of over contribution. You should also spend the remaining balance by the end of the year (ie. Buy prescriptions, checkups etc. before the year ends).
If you have any questions you can always reach me at 631-338-9917.
Related Posts: Hoosiers and Health Savings Accounts
Related Posts: What's a H.R.A & How is it different then an H.S.A?
Related Posts: Should I consider a High Deductible Plan?
Related Posts: What's a Health Savings Account (H.S.A) and why I should consider one
Related Posts: Using a Health Savings Account to pay for Cobra
Monday, January 11, 2010
Should I hire someone to manage my benefits?
The challenge with putting a benefits plan together is twofold.
First: Do you have anyone that can devote the necessary time and effort into crafting the proper plan?
Second: Do you have someone that can devote the necessary time to maintain that plan and is that the most cost effective option?
Let me answer the first question, many times CFO’s, CEO’s, and HR people are busy handling multiple problems and don’t have the time necessary to craft the right plan.
With an ever changing landscape of challenges, is your plan current?
"Have there been changes to the census (new employees, new families etc)?", "Have there been coverage changes (Benefit Changes, Deductible Changes)?" or "Has a provider changed (HIP & GHI have become Emblem in NY)?"
These are just a few of the questions that need to be asked, but with proper leg work can be answered.
The more complex questions become “how many plans do we offer?”, “Do we offer voluntary benefits?”, “How often do we review our claims history?”, “Are we compliant with ERISA?”.
This is why its so important to outsource your benefits to someone qualified that can devote the necessary time, that ONLY focuses on employee benefits.
This ties right into the second question, do you have someone who can service and maintain your benefits?
This usually falls into two categories, for larger companies a Human Resources Person and for smaller companies an office manager.
A Human Resources Person is more equipped to handle any situations that might arise but as companies get larger, the question becomes “Do we have sufficient HR Representatives handle the activity?” and "Who can they turn to if they have a problem?"
The challenge that office managers face, is they have multiple responsibilities, so benefits are typically not a priority. This can create a “fend for yourself” environment which breeds resentment by employees, where problems aren’t addressed fast enough and employees have to figure things out on their own.
Either way both situations aren’t ideal, this is why it’s valuable to have a benefits company not just handling your plan implementation but also your maintenance.
This way the office manager can manage the office!
If you have any questions you can always reach me at 631-338-9917.
Related Posts: Should my company have an employee advocacy program?
Related Posts: What do out of network benefits really mean
Related Posts: Benchmarking and why its important for your business
First: Do you have anyone that can devote the necessary time and effort into crafting the proper plan?
Second: Do you have someone that can devote the necessary time to maintain that plan and is that the most cost effective option?
Let me answer the first question, many times CFO’s, CEO’s, and HR people are busy handling multiple problems and don’t have the time necessary to craft the right plan.
With an ever changing landscape of challenges, is your plan current?
"Have there been changes to the census (new employees, new families etc)?", "Have there been coverage changes (Benefit Changes, Deductible Changes)?" or "Has a provider changed (HIP & GHI have become Emblem in NY)?"
These are just a few of the questions that need to be asked, but with proper leg work can be answered.
The more complex questions become “how many plans do we offer?”, “Do we offer voluntary benefits?”, “How often do we review our claims history?”, “Are we compliant with ERISA?”.
This is why its so important to outsource your benefits to someone qualified that can devote the necessary time, that ONLY focuses on employee benefits.
This ties right into the second question, do you have someone who can service and maintain your benefits?
This usually falls into two categories, for larger companies a Human Resources Person and for smaller companies an office manager.
A Human Resources Person is more equipped to handle any situations that might arise but as companies get larger, the question becomes “Do we have sufficient HR Representatives handle the activity?” and "Who can they turn to if they have a problem?"
The challenge that office managers face, is they have multiple responsibilities, so benefits are typically not a priority. This can create a “fend for yourself” environment which breeds resentment by employees, where problems aren’t addressed fast enough and employees have to figure things out on their own.
Either way both situations aren’t ideal, this is why it’s valuable to have a benefits company not just handling your plan implementation but also your maintenance.
This way the office manager can manage the office!
If you have any questions you can always reach me at 631-338-9917.
Related Posts: Should my company have an employee advocacy program?
Related Posts: What do out of network benefits really mean
Related Posts: Benchmarking and why its important for your business
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