Products September 14, 2020

PeopleKeep Offers ICHRA Decision and Design Support Tool

Individual Coverage Health Reimbursement Arrangements allow smaller employers, that might have smaller benefit budgets, to offer a good health benefit to employees.

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PeopleKeep, a provider of personalized benefits for small- to medium-sized organizations, has announced the availability of an Individual Coverage Health Reimbursement Arrangement (ICHRA) online tool to help employers design and decide on an ICHRA benefit compared with a traditional group health insurance plan.

Starting in January, employers were able to use ICHRAs to provide their workers with tax-preferred funds to pay for the cost of health insurance coverage that workers purchase in the individual market, subject to certain conditions.

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PeopleKeep notes that as employers and their human resource (HR) leaders consider and plan for 2021 health benefits, they may be faced with several challenges, such as greater pressure to offer a health benefit to more employees during the coronavirus pandemic, increased insurance rates that don’t fit constrained budgets during an economic downturn and confusion around how an ICHRA might work for them since many insurance brokers and other benefits advisers are still learning about ICHRAs.

Using the online tool, a PeopleKeep personalized benefits adviser will help an organization understand:

  • The budgetary trade-offs between its current group plan or quote versus an ICHRA;
  • The costs of different on-exchange plans available to each specific employee based on age and location;
  • How applicable large employers (ALEs) can meet affordability requirements under the Patient Protection and Affordable Care Act (ACA), including understanding the use of key safe harbors; and
  • How minimum class sizes apply in cases in which the employer intends to keep or offer employer-sponsored group health insurance to a different class of employees.
For now, PeopleKeep’s online ICHRA design and decision tool is only available when working with a PeopleKeep personalized benefits adviser. Employers may add their licensed insurance broker to keep them involved in the process, and PeopleKeep intends to make the tool available for third-party use in subsequent versions.
Compliance September 14, 2020

Sutter Health Faces Second Lawsuit Challenging Use of Actively Managed TDFs

The most recent lawsuit says the actively managed suite’s risk has been amplified during the COVID-19 pandemic.

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A second lawsuit has been filed against fiduciaries of the Sutter Health 403(b) Savings Plan for breaches of their fiduciary duties under the Employee Retirement Income Security Act (ERISA).

As in the lawsuit filed in July, the plaintiffs in the recently filed lawsuit spend a considerable amount of time in the complaint arguing why the actively managed version of the Fidelity Freedom Funds target-date fund (TDF) suite is a less prudent option for the plan than the index version of the TDF suite. The lawsuit claims the defendants failed to compare the active and index suites and consider their respective merits and features. “A simple weighing of the benefits of the two suites indicates that the index suite is and has been a far superior option, and consequently the more appropriate choice for the plan,” the complaint states.

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The plaintiffs argue that the active suite is also dramatically more expensive than the index suite, and riskier in both its underlying holdings and its asset allocation strategy. They say the defendants’ imprudence in selecting the active suite for the plan was exacerbated by setting it as the plan’s qualified default investment alternative (QDIA). “Given that the vast majority of plan participants are not sophisticated investors, many of the plan participants, by default, concentrate their retirement assets in target-date funds,” the complaint says. “By December 31, 2018, approximately 67% of the plan’s assets were invested in the active suite.”

The most recent lawsuit mentions that the active suite’s lack of downside protection has been magnified by the current COVID-19 crisis, and has been felt most sharply by plan participants approaching their target retirement date, who do not have ample time to recoup significant losses before they start withdrawing their retirement savings. “The more conservative Fidelity Freedom Index 2020 Fund has handled the current volatility exceptionally, with year-to-date returns through August 11 ranking in the 19th percentile among other 2020 target date funds. In stark contrast, the Fidelity Freedom 2020 Fund (i.e., part of the active suite), in which the plan had nearly $345 million at the end of 2018, ranks in the 56th percentile among the same peer group,” the complaint states.

The lawsuit also says that using a start date of January 1, June 30 or December 31, 2014, the index suite has outperformed the active suite to date.

A number of lawsuits this year have also focused on the use of the Fidelity Freedom Funds in retirement plans.

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