Compliance August 22, 2017

IRS Issues Amendments for Bifurcated DB Distribution

The amendment suggests language a defined benefit sponsor might want to use.
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Following its issuance of a final rule on partial annuity distribution options in defined benefit plans (DBs), the Internal Revenue Service (IRS) has just issued model amendments including language that DB sponsors might want to use when offering such options.

To facilitate the payment of benefits partly in the form of an annuity and partly as a single sum, the Department of the Treasury and the IRS amended the regulations to simplify how sponsors would calculate the payments, in order to encourage sponsors to offer participants the additional option of an annuity. Their objective was to protect participants with an annuity in the event of unexpected longevity. The participant can decide to divide his benefit into two or more portions, and the IRS offers sponsors two methods to compute how the benefits would be distributed.

In addition, for pre-approved plans, some portions of the model amendment may be included in the basic plan document and others may be included in the adoption agreement.

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However, the IRS is also allowing plan sponsors to limit how the bifurcation is handled. For example, sponsors may limit bifurcation to only two forms. They could also set certain percentage parameters, such as 50/50 or 75/25. Sponsors could also limit bifurcation for the portion of an accrued benefit earned before a specific date and the portion earned after that date.

The IRS’s notice on model amendments to add bifurcated distribution options to DB plans can be downloaded here.

Products August 22, 2017

Alegeus Looks to Enhance CDH Benefit Adoption

Considering a lack of awareness around health benefits options, Alegeus is looking to enhance employee engagement programs for employers.

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Alegeus, a firm specializing in consumer directed healthcare (CDH) solutions, is expanding its consumer engagement capabilities designed to maximize adoption and utilization of CDH benefit programs including high-deductible health plans and health savings accounts (HSAs). 

The firm is redesigning communications content and rolling out automated, targeted outreach programs. Alegeus says it is now able to offer its clients customizable blueprints for year-round, direct-to-consumer engagement designed to optimize CDH program participation and ongoing usage.

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These expanded programs focus on foundational education, open enrollment, onboarding of new members, post-enrollment optimization and usage opportunities. “The goal of these programs is to help consumers become empowered to make better decisions and to understand the basics, such as adopting the right account; saving the right amount of money; getting a better value from their healthcare dollars; and how to take a more active role in their healthcare finances,” the firm says.

The firm argues it is also responding to a lack of awareness around health benefits. According to research by Mercer, 53% of large employers today offer HSAs, but only 23% of eligible employees adopt them. Moreover, a study by Fidelity Investments suggests that Americans lack awareness of HSA benefits, with three out of ten people surveyed saying they were unaware HSAs were not governed by a “use it or lose it policy.”

Alegeus notes that six out of 10 consumers find it challenging just to understand the differences between their benefit options. Half want guidance to answer questions, make recommendations and validate their thinking. However, most employers communicate benefits directly with employees only once a year through open enrollment.

Alegeus finds that half of employers rate their ability to articulate the value of CDH benefits as average or below, and six out of 10 rely only on paper documents and enrollment forms to educate employees. At the same time, just one-third of employers currently offer digital decision-support tools and multi-media education content, the firm says.

Steven Auerbach, Alegeus CEO, warns that “without meaningful consumer engagement to drive enrollment and optimal consumer value, our clients will not be able to fully unlock the tremendous potential of the CDH market opportunity.”

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