Compliance July 12, 2012

Sponsors Should Focus on Compliance, Cost Management for ACA

July 12, 2012 (PLANSPONSOR.com) - Following the Supreme Court’s recent ruling to uphold the Patient Protection and Affordable Care Act, plan sponsors should focus on both complying with the new rules and the longer-term impact for their plans.
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During a webinar sponsored by Fidelity and hosted by PLANSPONSOR, experts emphasized that regardless of the November presidential election outcome, plan sponsors should not delay their preparations.

The milestone years for the health care reform are 2014 and 2018. The year 2018 seems far down the road, but “that’s only four annual enrollments away,” cautioned Brad Kimler, executive vice president of benefits counseling at Fidelity.

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“The longer you wait [to plan], the more aggressive you’re going to need to be,” said Jeff Munn, vice president of benefits policy development at Fidelity.

Regarding near-term compliance, companies should prepare to deliver on employee communications, payroll issues, and financial and reporting information.  “Get on board and keep moving with the compliance,” said Christi Wise, senior vice president of product management at Fidelity.

Employee Communications  

  •  $2,500 health care flexible spending account (FSA) limit effective January 1, 2013;
  •  Notice of exchanges by March 1, 2013; and
  •  Summary of Benefits and Coverage/Uniform Glossary for annual enrollment beginning September 23, 2012 and beyond.

Payroll 

  • Medicare taxes for higher income employees effective January 1, 2013; and
  • W-2 reporting of health care value distributed by January 31, 2013.

 

Financial and Reporting Information  

  • Comparative effectiveness research fees apply to calendar year plans from 2012 to 2018, first due July 31, 2013;
  • Elimination of retiree drug subsidy (RDS) deductibility for employers effective January 1, 2013; and
  • Medical loss ratio rebates must be paid by August 1, 2012.

For the longer term, plan sponsors should prepare for 2014 changes and implement communication strategies surrounding things such as employer mandate/penalties; increases in allowed rewards for wellness programs from 20% to 30%; and the elimination of preexisting condition limitation exclusions.

Sponsors should also prepare well in advance for the 2018 excise tax on high-cost health plans with a 40% tax on excess value, as well as higher thresholds for early retirees and specific high-risk occupations.

With all the health care changes on the horizon, it is imperative that employers focus on cost control now. Without cost control, the Fidelity webinar panelists cautioned, employers may be forced to reduce benefits dramatically when the excise tax becomes effective in 2018.

Employers should get compliance issues out of the way and then make key long-term decisions about managing costs to stay under the excise tax cap as long as possible, Kimler said.

Investing July 12, 2012

Mutual Fund Investors Show Caution in June

July 12, 2012 (PLANSPONSOR.com) - Investors continued to exhibit anxiety over global economic growth, putting just $13 billion in estimated net inflows into stock and bond mutual funds in the U.S. in June.
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June marked the smallest amount of positive net flows to long-term funds since December, when long-term mutual funds had net outflows of $22 billion, according to Strategic Insight, an Asset International company.   

Domestic equity funds registered their fifth consecutive month of net outflows, experiencing net outflows of nearly $8 billion. The net outflows in June came even though the average U.S. equity fund generated a 3.4% return for the month, on an asset-weighted basis. “For many fund shareholders, risk aversion will persist as a theme in the face of volatility. Gains in the stock market have not emboldened investors, who worry about the ever-present risk of future losses,” said Avi Nachmany, SI’s Director of Research. Nachmany noted that the S&P 500 index gained 4.1% in June, only to drop 1.4% through July 11.  

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International equity mutual funds drew net inflows of just over $5 billion in June, as investors willing to take on risk favored international total return funds and emerging market equity funds. International/global equity funds drew $17 billion in the second quarter.    

Bond mutual funds saw net inflows of $15 billion in June, up from $14 billion in May. Taxable bond funds saw net inflows of $11 billion for the month, as investors continued to use bond funds as income-producing alternatives to money market funds, CDs, and bank deposit accounts. There has been some evidence of investors diversifying their fixed income exposure, because while short- and intermediate-term and general corporate bond funds led June’s net inflows, mortgage-backed, high yield, and emerging markets bond funds also drew healthy inflows in the month. For the second quarter of 2012, taxable bond funds saw net inflows of $38 billion.   

Muni bond funds saw net inflows of $4 billion in June and money-market funds saw net outflows of $42 billion. Ultra-low yields continued to hamper demand for money market funds – a trend that resulted in net outflows of $66 billion in 2012’s second quarter.  

“When we look at the first half of 2012, we see much of what should be expected in the second half. Given the Federal Reserve’s current commitment to low interest rates and the lack of positive surprises in U.S. economic figures, we anticipate investors will continue to favor the relatively lower risk of bond funds over equity funds in coming months,” Nachmany said.

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