Benefits July 9, 2014

Employers Offering More Health Care Control to Employees

July 9, 2014 (PLANSPONSOR.com) - Employers seeking to better manage health care costs and benefits are offering employees more choice and ownership for their health care.
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For the 2014 benefit year, large employers continued to invest in wellness programs—adding some new programs, expanding incentive dollars and increasing their efforts to engage employees, according to the 2014 bswift Benefits Study. Within large companies, 87% now provide wellness programs for their employees. However, only 69% of small companies offered any wellness program to their employees—a significant drop from the 81% reported in 2013.

The percentage of large employers that are considering a defined contribution approach to health care benefits and/or private exchanges is gradually increasing, from 14% in 2013 to 18% in 2014. This modest increase may come as a surprise, given the extraordinary amount of attention that defined contribution and private exchanges have received in the media. Of smaller companies with 50 to 500 employees, 10% are considering a defined contribution strategy.

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Of those large employers interested in the concept of defined contribution, most are looking at it primarily for health/medical benefits—not for the full suite of benefits. Large companies report that they intend to provide more health plan options as a result of implementing a defined contribution approach; however, nearly an equal percentage of employers are not clear on their plans at this point. Very few are looking to provide a greater choice in carriers. Some of the early adopters of defined contribution may join a private exchange; others may simply add choices to their existing employee experience.

The study found employers have incorporated employee self-service for some functions but not for the full range of transactions. For new hires at large companies, online enrollment without administrator involvement is gradually trending upward, at 29% in 2014, over the 28% reported in 2013. For life events, however, the numbers are on the decline (18% in 2014 vs.19% in 2013), as are the numbers for annual open enrollment for all benefits (37%, down from 39% last year). While large employers continue to make slow and steady progress adopting employee self-service, it is noteworthy that nearly 30% still do not offer online enrollment for new hires.

Wellness Program Findings

The 2014 bswift Benefits Study found 40% of smaller companies base the success of their wellness programs primarily on employee participation, with 27% of employers ranking health cost savings as the most important factor. This is in contrast to larger employers: 40% put cost savings first, while 37% give employee participation the top position.

Wellness program participation rates declined this year. Fewer employers were able to achieve participation rates in excess of 50%. In 2014, 60% of companies reported wellness program participation rates of 50% or less.

For large employers with wellness initiatives, health risk assessments (HRAs) and biometric testing top the list with 84% reporting that they offer these two. Next are smoking cessation, weight loss/weight management programs and physical fitness challenges and activities (each at 81%). Thirty-six percent of large employers that have wellness programs offer annual incentives greater than $500, up from 29% of large employers last year.

Larger incentive dollars drive greater employee participation, the study indicates. Only 6% of employers using incentives of $50 or less have participation rates greater than 50%. Annual incentive amounts greater than $500 are typically necessary to drive high participation rates. However, a distribution of engagement results still exists within each incentive tier, so incentive design and communication do significantly impact results. For example, 17% of employers offering annual incentives greater than $1,000 still have participation rates of less than 50%, so human resource leaders cannot rely on incentives alone to deliver the engagement rates they seek, bswift said.

Nearly one-quarter of all employers with wellness programs in place reported offering incentives for meeting or exceeding biometric thresholds, up from one in seven in earlier years. Premium incentives (used by 64% of employers with wellness offerings and incentives, level with 64% in 2013 and up from 58% in 2012) and cash, gift cards and sweepstakes (used by 56%, up from 48% in 2013 and 38% in 2012) are proving to be the most popular forms of incentives.

The study may be downloaded from here.

Compliance July 9, 2014

Details About the Proposed 408(b)(2) Fee Guide

July 9, 2014 (PLANSPONSOR.com) – The Department of Labor (DOL) wants to ensure that plan fiduciaries fully understand fee information they receive.
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Therefore, the DOL is planning to ask covered service providers (CSPs) to provide plan fiduciaries with a guide when the 408(b)(2) provider fee disclosures are not contained in a single document or exceed a certain number of pages, said Craig Hoffman, general counsel at the American Society of Pension Professionals & Actuaries (ASPPA). Hoffman made his comments during an ASPPA webcast Tuesday titled “An Update on DOL Fee Disclosure.”

So far, the DOL has not been clear about how many documents or pages would trigger the need for a guide, Hoffman said. ASPPA has asked the DOL to provide guidance about this, along with parameters for font size and margin width, he said. “Some folks have a summary document with appendixes. When do you stop counting pages?” Hoffman noted. “The DOL is talking about reopening the comment period on the regulation. We would like them to do so.”

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The DOL’s proposal would ask CSPs to provide the guide as a separate document at the same time it releases the 408(b)(2) fee information so fiduciaries will take notice of it. ASPPA is concerned that if plan fiduciaries are already receiving multiple 408(b)(2) documents, an additional guide document might be burdensome to them rather than helpful, Hoffman said.

The DOL says the guide would ask CSPs to provide a “roadmap [identifying] the document and page [number] or other sufficiently specific locator, such as a section, that enables the responsible plan fiduciary to quickly and easily find the [information].” The roadmap can also provide specific links to the information on a Web page. “The guide would serve as a tool to accompany the disclosure documents to assist the plan fiduciary find the salient information,” Hoffman said. Many ASPPA members are already using a roadmap or table of contents along with their 408(b)(2) data.

As proposed, Hoffman said, the guide would ask for the following information: a description of the services provided, whether the CSP is a 3(21) fiduciary or registered investment adviser (RIA), information about both direct and indirect compensation expected as well as any additional compensation paid to other parties, what compensation will be due upon termination of the contract, recordkeeping fees and information about investments.

Although the DOL had considered requiring CSPs to provide a summary of the key disclosure data points, it backed away from this idea because CSPs are concerned about the costs, and the DOL fears fiduciaries would only take notice of the summary, Hoffman said.

The new guide regulation would become effective one year after it is published in the Federal Register. However, “providers might not have the technology in place to facilitate pulling this information together,” Hoffman said. “I have spoken with folks at some big bundled providers, and they are not so sure a year will be enough time to put systems in place.”

Additionally, “the 408(b)(2) rule only requires a CSP to issue new information when a contract is changed, and since most contracts or arrangements are evergreen and ongoing without changes, in my personal opinion I think it is a waste of time and effort to issue a guide for the 408(b)(2) disclosures that were issued two years ago, by the July 1, 2012, deadline,” Hoffman said. “The guides should only be given on a forward basis—when a new contract or change is made.”

The DOL also plans to interview 70 to 100 plan fiduciaries from small retirement plans (those with fewer than 100 participants) through eight to 10 focus group sessions to find out how the 408(b)(2) disclosures are affecting them, Hoffman said. The DOL will ask the fiduciaries whether they were able to find the costs of the services provided to them and how that information affected their decisions with regard to running the plan. The DOL will also ask if their CSPs provided a guide to finding the information, whether they think a guide would be helpful and how much they would be willing to pay for such a guide, Hoffman said.

“It seems to me that if you are going to do focus groups to determine if there is a need, it is probably better to do those focus groups before you put out a regulation,” Hoffman said. “This is why the DOL has said it is considering reopening the comment period on the guide once the focus group comments are in.”

Hoffman also discussed how the DOL is enforcing 408(b)(2). The DOL is charging any CSP that fails to disclose its fees a 15% excise tax on all of the fees paid under the contract and terminating its contract. In the past 18 months, some regional DOL offices have established a Service Provider Enforcement Project to investigate whether fiduciaries are receiving the fee information, understand it and can determine if the fees are reasonable. This information is being furnished to the Employee Benefits Security Administration (EBSA). The DOL is also looking into excessive fee cases and has increased its audits and examinations into service providers, Hoffman added.

As for disclosing fee information to participants through the 404(a)(5) regulation, the DOL requires ERISA [Employee Retirement Income Security Act] plan administrators to ensure the disclosures are made to participants every year even if they have no account balance and have never contributed to the plan. They must issue the information using “measures reasonably calculated to ensure actual receipt of the material,” the DOL says. They may also issue the information electronically if the electronic system is an integral part of their job. However, if the participant requests the information be delivered via paper, the administrator must comply. The administrator may furnish the information as a separate document, in the summary plan description or in a participant benefit statement.

The DOL has also determined that while a brokerage window is not a designated investment alternative (DIA), 404(a)(5) applies in that providers must disclose brokerage fees to participants every quarter, Hoffman said. “And while it is difficult for a plan administrator to provide fee listings on every investment available in the window, the DOL is telling participants to ask their providers about the fees.”

“The DOL has also said that the DIA must be a manageable number of investments and that plans must monitor what people are picking in the window,” Hoffman said. “We told the DOL that few plans have the technology to cost effectively monitor participant investments through a brokerage window and that this needs economic analysis and public comment.” As a result, the DOL asked a number of plans this past April to provide it with information on brokerage window usage, and, hopefully, the DOL will change this requirement, he said.

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