Small Employers May Face High Health Care Renewal Rates
October 23, 2014 (PLANSPONSOR.com) - Employer health care costs remained stable for 2014, but the number of employers delaying renewal to delay the effects of health care reform increased 322%.
Thirty-two
percent of all employers postponed their renewal date, according to the 2014
United Benefit Advisors Health Plan Survey. Of this 32%, a vast majority (94%) were small
businesses with less than 100 employees. Based on current renewal rates coming
in from carriers, in the states that did not allow renewal of pre-Patient
Protection and Affordable Care Act (ACA) plans, many small employers are facing
rate increases of 30% to 160%, United Benefit Advisors (UBA) finds.
Given
that a number of states allowed pre-ACA plans to renew, delaying the effects of
health care reform even further, the full impact of the ACA is still largely
unknown, UBA notes. “We’re seeing little change in premium rates and
employee benefit plans, and that’s because many employers renewed twice in 2013
to delay the effects of ACA,” says Carol Taylor, chairwoman of the UBA
Client Compliance Solutions Committee and a benefits adviser with D&S Agency,
a Virginia-based insurance firm and UBA Partner. “In the category of
employers with 50 or fewer employees, the results are staggering. In 2012,
there were 507 employers with a December 1 renewal date. In December 2013, that
number was over five times (412.4%) higher, at 2,598 employers. This is going to
have a ripple effect for years to come in the small group market.”
While employers have
seen modest cost increases in recent years—average annual cost per employee was
$9,302 in 2013 versus $9,504 in 2014—employers continue to push more of the
burden onto employees through out-of-pocket cost increases and reductions in
family benefits, the survey finds.
While
average in-network deductibles remained fairly level at $1,901, out-of-pocket
maximums (OOP maximums) increased more than 6% in 2014. The median single OOP
maximum increased $500 to $3,500 and median family OOP maximum increased $1,000
to $8,000. The increase in medians was more than double the increase in average
OOP maximums for both single and family, which both went up less than $250.
The
percent of plans with no deductible in-network decreased from 21% for an
individual in 2013 to 20% in 2014, and from 22.5% for a family in 2013 to 20.8%
in 2014. The number of plans with no out-of-network deductible also decreased
from 8% for individuals in 2013 to 6.9% in 2014, and from 9.8% for a family in
2013 to 8.1% in 2014.
Plans
with 100% coinsurance are also disappearing rapidly, having decreased by 14.8%
since 2012. In 2014, 36.2% of plans offered the coverage for individuals, and
only 1.3% covered families at this level.
UBA
continues to find there is still a big difference between an employer's cost to
insure an employee in the Northeast versus the West. Average annual cost per
employee in the Northeast was $10,931, which is 13% higher than the West, at
$9,513 per employee. The North Central region comes in second at $10,130, and
the Central region pays the least at $8,088 per employee. Employers in the
South pay $8,254 per employee.
A copy of the UBA
Health Plan Survey may be pre-ordered here.
Retirement Plan Deferral Limit to Increase in 2015
October 23, 2014 (PLANSPONSOR.com) - The Internal Revenue Service (IRS) announced cost of living adjustments affecting dollar limitations for retirement plans, as well as other retirement-related items for tax year 2015.
The
elective deferral (contribution) limit for employees who participate in 401(k),
403(b), most 457 plans, and the federal government’s Thrift Savings Plan is
increased from $17,500 to $18,000. The catch-up contribution limit for
employees aged 50 and over who participate in 401(k), 403(b), most 457 plans,
and the federal government’s Thrift Savings Plan is increased from $5,500 to
$6,000.
Effective
January 1, 2015, the limitation on the annual benefit under a defined benefit
plan under Section 415(b)(1)(A) remains unchanged at $210,000. For a
participant who separated from service before January 1, 2015, the limitation
for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying
the participant’s compensation limitation, as adjusted through 2014, by 1.0178.
The
limitation for defined contribution plans under Section 415(c)(1)(A) is
increased in 2015 from $52,000 to $53,000.
The
annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and
408(k)(6)(D)(ii) is increased from $260,000 to $265,000.
The
dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of
key employee in a top-heavy plan remains unchanged at $170,000.
The
dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum
account balance in an employee stock ownership plan subject to a five-year
distribution period is increased from $1,050,000 to $1,070,000, while the
dollar amount used to determine the lengthening of the five-year distribution
period remains unchanged at $210,000.
The
limitation used in the definition of highly compensated employee under Section
414(q)(1)(B) is increased from $115,000 to $120,000.
The dollar amount
under Section 430(c)(7)(D)(i)(II) used to determine excess employee
compensation with respect to a single-employer defined benefit pension plan for
which the special election under Section 430(c)(2)(D) has been made is
increased from $1,084,000 to $1,101,000.
Other
limitations announced include:
The
annual compensation limitation under Section 401(a)(17) for eligible
participants in certain governmental plans that, under the plan as in effect on
July 1, 1993, allowed cost of living adjustments to the compensation limitation
under the plan under Section 401(a)(17) to be taken into account, is increased
from $385,000 to $395,000.
The
compensation amount under Section 408(k)(2)(C) regarding simplified employee
pensions (SEPs) is increased from $550 to $600.
The
limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts is
increased from $12,000 to $12,500.
The
limitation on deferrals under Section 457(e)(15) concerning deferred
compensation plans of state and local governments and tax-exempt organizations
is increased from $17,500 to $18,000.
The
compensation amount under Section 1.61 21(f)(5)(i) of the Income Tax
Regulations concerning the definition of “control employee” for fringe benefit
valuation remains unchanged at $105,000.
The compensation amount under Section 1.61 21(f)(5)(iii) is increased
from $210,000 to $215,000.
The
adjusted gross income limitation under Section 25B(b)(1)(A) for determining the
retirement savings contribution credit for married taxpayers filing a joint
return is increased from $36,000 to $36,500; the limitation under Section
25B(b)(1)(B) is increased from $39,000 to $39,500; and the limitation under
Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $60,000 to $61,000.
The
adjusted gross income limitation under Section 25B(b)(1)(A) for determining the
retirement savings contribution credit for taxpayers filing as head of
household is increased from $27,000 to $27,375; the limitation under Section
25B(b)(1)(B) is increased from $29,250 to $29,625; and the limitation under
Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $45,000 to $45,750.
The
adjusted gross income limitation under Section 25B(b)(1)(A) for determining the
retirement savings contribution credit for all other taxpayers is increased
from $18,000 to $18,250; the limitation under Section 25B(b)(1)(B) is increased
from $19,500 to $19,750; and the limitation under Sections 25B(b)(1)(C) and
25B(b)(1)(D) is increased from $30,000 to $30,500.
The
deductible amount under Section 219(b)(5)(A) for an individual making qualified
retirement contributions remains unchanged at $5,500.
The
applicable dollar amount under Section 219(g)(3)(B)(i) for determining the
deductible amount of an IRA contribution for taxpayers who are active
participants filing a joint return or as a qualifying widow(er) is increased
from $96,000 to $98,000. The applicable dollar amount under Section 219(g)(3)(B)(ii)
for all other taxpayers (other than married taxpayers filing separate returns)
is increased from $60,000 to $61,000. The applicable dollar amount under
Section 219(g)(3)(B)(iii) for a married individual filing a separate return is
not subject to an annual cost-of-living adjustment and remains $0. The
applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not
an active participant but whose spouse is an active participant is increased
from $181,000 to $183,000.
The
adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(I) for
determining the maximum Roth IRA contribution for married taxpayers filing a
joint return or for taxpayers filing as a qualifying widow(er) is increased
from $181,000 to $183,000. The adjusted gross income limitation under Section
408A(c)(3)(B)(ii)(II) for all other taxpayers (other than married taxpayers
filing separate returns) is increased from $114,000 to $116,000. The applicable
dollar amount under Section 408A(c)(3)(B)(ii)(III) for a married individual
filing a separate return is not subject to an annual cost-of-living adjustment
and remains $0.
The
deduction for taxpayers making contributions to a traditional IRA is phased out
for singles and heads of household who are covered by a workplace retirement
plan and have modified adjusted gross incomes (AGI) between $61,000 and
$71,000, up from $60,000 and $70,000 in 2014. For married couples filing
jointly, in which the spouse who makes the IRA contribution is covered by a
workplace retirement plan, the income phase-out range is $98,000 to $118,000,
up from $96,000 to $116,000. For an IRA contributor who is not covered by a
workplace retirement plan and is married to someone who is covered, the deduction
is phased out if the couple’s income is between $183,000 and $193,000, up from
$181,000 and $191,000. For a married individual filing a separate return who is
covered by a workplace retirement plan, the phase-out range is not subject to
an annual cost-of-living adjustment and remains $0 to $10,000.
The
AGI phase-out range for taxpayers making contributions to a Roth IRA is
$183,000 to $193,000 for married couples filing jointly, up from $181,000 to
$191,000 in 2014. For singles and heads of household, the income phase-out
range is $116,000 to $131,000, up from $114,000 to $129,000. For a married individual filing a separate
return, the phase-out range is not subject to an annual cost-of-living
adjustment and remains $0 to $10,000.
The
AGI limit for the saver’s credit (also known as the retirement savings
contribution credit) for low- and moderate-income workers is $61,000 for
married couples filing jointly, up from $60,000 in 2014; $45,750 for heads of
household, up from $45,000; and $30,500 for married individuals filing
separately and for singles, up from $30,000.