Benefits December 2, 2014

Governments Report Efforts to Tame Health Benefit Costs

Rising health care costs over the last decade have prompted many local governments to make changes to their plans and strategies.
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Disease management programs, on-site clinics, dependent eligibility audits, and regular review and rebidding of health care vendor contracts have achieved significant health benefit cost savings for local governments, according to a nationwide survey by the Center for State and Local Government Excellence.

The top drivers of local government health care cost increases cited by survey respondents were increased claim costs (64%), prescription drugs (57%), an aging workforce (46%), insurance company price increases (45%) and federal health care policy (45%).

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Fifty-seven percent of respondents increased cost sharing of premiums paid by employees, and nearly half of respondents reported that their local governments changed the way health insurance is provided.  Nineteen percent of those reporting changes shifted employees to a high-deductible plan with a health savings account, and 14% established a health reimbursement arrangement.

The report includes six case studies describing how local governments have produced savings in their health benefit costs. For example:

  • Asheville, North Carolina, reports it has saved $4 for every $1 invested in chronic disease management;
  • Corpus Christi, Texas, reduced health care costs by $1.84 million by conducting a dependent eligibility audit and establishing an on-site wellness clinic;
  • Greater access to comprehensive medical care and related support services for offenders resulted in lower reincarceration rates and total inmate population in Hampden County, Massachusetts; and
  • Diverting offenders with extreme behavior problems into mental health services opened up capacity at the Buncombe County, North Carolina, Detention Facility, making it possible to rent the facility to crowded community jails and to generate $1,038,717 in new revenue.

Local governments report that providing easy access to health services at work sites not only supports employee wellness, but also reduces employee absenteeism and health care costs.

“Local government programs that contain costs and improve employee health are among the most important strategies,” notes Elizabeth Kellar, president and CEO of the Center for State and Local Government Excellence. “Wellness and disease management programs are offered by a majority of local governments and are valued by employees.”

The report, “Local Government Strategies to Address Rising Health Care Costs,” describes the findings from a national survey conducted by the Center for State and Local Government Excellence and the International Public Management Association for Human Resources (ipma-hr.org). Two hundred fifty-two IPMA-HR members took part in the survey, which was conducted in August 2014 at the request of the University of Tennessee Institute for Public Service (IPS).

Download “Local Government Strategies to Address Rising Health Care Costs” here.

Compliance December 2, 2014

IRS Updates Information About Retirement Plan Examinations

Two updated publications from the IRS discuss the employee plans examination process and appeal procedures.
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The Internal Revenue Service (IRS) has updated Publication 1-EP, “Understanding the Employee Plans Examination Process,” and Publication 1020, “Appeal Procedures Employee Plans Examinations.”

In “Understanding the Employee Plans Examination Process,” the agency discusses how retirement plans may be selected for examination and what areas may be reviewed. According to the publication, the most common areas of review include:

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  • Eligibility, participation and coverage—Are eligible employees properly participating?
  • Vesting—Have service and vesting been properly credited?
  • Discrimination—Do contributions, benefits, rights or features improperly favor highly compensated employees?
  • Top-heavy requirements—Have minimum contributions and benefits, and accelerated vesting been provided?
  • Contribution and benefit limits—Are contributions and benefits within applicable limits?
  • Funding and deductions—Are contributions correct and timely made, and are deductions within applicable limits?
  • Distributions—Are distributions correctly calculated, properly made, and timely and accurately reported?
  • Trust activities—Is the trust operated for the exclusive benefit of participants and according to fiduciary standards?
  • Plan and trust documents—Does the form of the plan and trust meet the tax law?
  • Returns and reports—Were federal returns and reports timely and accurately filed?

The publication also identifies the steps in the examination process and the correction programs available through the IRS.

In “Appeal Procedures Employee Plans Examinations,” the IRS explains what plan sponsors can do if they disagree with a proposed disqualification of their qualified retirement plan by the agency, as well as what plan sponsors must do if they agree to a proposed plan disqualification.

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