Compliance February 1, 2012

IRS Provides Guidance on HSAs for Users of Indian Health Service

February 1, 2012 (PLANSPONSOR.com) – The Internal Revenue Service issued guidance about whether individuals who are eligible for services at an Indian Health Services (IHS) facility are also eligible individuals for purposes of contributing to a health savings account (HSA).
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Notice 2012-14 says an individual who is eligible to receive medical services at an IHS facility, but who has not actually received such services during the previous three months, is an eligible individual within the meaning of § 223(c)(1) of the Internal Revenue Code who may establish and make tax-free contributions to an HSA. However, an individual generally is not an eligible individual if the individual has received medical services at an IHS facility at any time during the previous three months.   

Notice 2004-2, Q&A-6, provides that the receipt of permitted coverage, such as dental and vision care, or the receipt of preventive care, such as well-baby visits, immunizations, weight-loss and tobacco cessation programs, does not affect an individual’s eligibility.  

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Section 223(c)(1) provides that an eligible individual means, for any month, an individual who is covered by a high deductible health plan (HDHP) on the first day of such month and, generally, is not covered by any other health plan, with certain exceptions. In addition, an eligible individual cannot be claimed as a tax dependent on another person’s tax return and cannot be enrolled in Medicare.   

IHS is a division within the U.S. Department of Health and Human Services. An IHS facility means a facility operated directly by IHS, or by a tribe or tribal organization under the Indian Self-Determination and Education Assistance Act.  

Notice 2012-14 will be published in the Internal Revenue Bulletin 2012-8 dated February 21, 2012. Text of the Notice is available at http://www.irs.gov/pub/irs-drop/n-12-14.pdf.
Administration February 1, 2012

Institutional Plan Sponsors Post Fourth Quarter Gains

February 1, 2012 (PLANSPONSOR.com) - Northern Trust announced that U.S. institutional investment plan sponsors in the Northern Trust Universe gained 4.5% at the median in the fourth quarter of 2011. 
 
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A surge in U.S. equities created a positive ending to a mixed year for most plans. 

Institutional investors eked out a gain overall for the full year 2011, with a median return of 0.8% for all plans in the Northern Trust Universe. The results differed by segment, however. Corporate ERISA Pension Plans gained 2.3% at the median while the other two segments were practically flat, with the median public fund up by 0.9% and the median plan in the foundations & endowments segment down by 0.6% for the 12 months ending December 31, 2011.

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“Global market volatility contributed to an up-and-down year for institutional plan sponsors in 2011, with two quarters of moderate gains followed by a nearly 10% drop in the third quarter and a sharp recovery at year-end,” said William Frieske, senior performance consultant, Northern Trust Investment Risk & Analytical Services. “Last quarter’s positive results were in line with historical trends in the Northern Trust Universe, with fourth quarter median returns typically being the highest in the calendar year.”

Corporate Pensions led in the fourth quarter with median returns of 5.6%, as Public Funds gained 5.4% and Foundations & Endowments advanced 4.2% at the median. U.S. equities were the primary driver of performance, with the median U.S. Equity Program in the Northern Trust Universe gaining almost 12% in the fourth quarter. International equity programs gained almost 4% in the fourth-quarter while fixed income programs were up 2%. In alternative asset classes, real estate gained 2%, while private equity was down 1.6% and hedge funds were down 0.4% for the three months ending December 31.

Asset allocation again played a key role in relatively wide range of one-year performance figures. Corporate pension plans had the largest allocation (nearly 35% at the median) to fixed income in the third quarter, buffering losses, and also the largest allocation to U.S. equity (nearly 37% at the median), which contributed to gains in the fourth quarter. Public funds performance suffered from a larger allocation to international equities (16%) while foundations & endowments’ larger allocation to hedge funds (7%) was a drag on performance.

More detail on asset allocation and performance of funds can be found on the Investment Risk & Analytical Services web page.

The Northern Trust Universe represents the performance of about 300 large institutional investment plans, with a combined asset value of approximately $689 billion, which subscribe to Northern Trust performance measurement services. 

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