Benefits January 11, 2007

Wal-Mart Health Plan Enrollment Numbers Reflect Minor Bump

January 11, 2007 (PLANSPONSOR.com) - The number of eligible Wal-Mart employees covered by the company's health plan has inched up one percent since 2006, the giant retailer has revealed.
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The enrollment number increases have been moving at a snail’s pace, according to figures released by Wal-Mart on Thursday. Forty-seven percent of eligible Wal-Mart employees (or 636,391) are now covered by the company’s health plan, up from the 46% in 2006 and 43% in 2005.

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The data was extracted from the Arkansas-based company’s open enrollment surveys, which includes more than 200,000 participants.

According a press release, 43% of associates have health care coverage through another source, which leaves 90.4% of employees covered by Wal-Mart or another source. Those other sources include spouses (22.2%), Medicare (4.5%), parents, school or college (4.2%).

This leaves 9.6% of employees eligible for health benefits without any coverage. “We are not satisfied that 9.6% of associates do not have any type of health care coverage,” said Linda Dillman, executive vice president of risk management, benefits and sustainability, in the news release. “We will continue to work hard to get a better understanding of why people decline health coverage and what we can do to help.”

According to the report, the most common reason that eligible employees decline health care coverage is because they are already covered by another provider (81.71%), followed by 76.47% that say the company is not the primary source of household income and 62.25% who say Wal-Mart is not the primary source of personal income.

Wal-Mart’s record for health coverage for its employees has been the target of fire from politicians (See Doyle Accuses Wal-Mart of Health Care ‘Dumping’)and groups that say the retail giant employs more part-time workers to circumvent higher benefit costs.

Wal-Mart has relaxed some of its health care eligibility requirements for part-time employees, reducing co-payments for some prescription drugs from $10 to $3, and part-time workers will only have to be with the company for one year instead of two to qualify for health insurance (See Wal-Mart Broadens Health Benefits, To Trim Down Drug Co-Pay ).

It announced in September that it was cutting back on its benefit plan offerings for new hires, no longer offering two plans with lower deductibles. The employees can only choose from two plans in which the monthly monthly premium can be as low as $11, but the deductible could reach $6,000 (See Wal-Mart to Restrict New Hire Health Coverage ).

Compliance January 10, 2007

Regulators Issue Post-PPA Distribution Guidance

January 10, 2007 (PLANSPONSOR.com) - Regulators on Wednesday released guidance on how to properly implement new Pension Protection Act (PPA) rules governing a variety of qualified plan distributions.
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According to a news release from the US Treasury Department and the Internal Revenue Service (IRS),    Notice 2007-7   presents a series of PPA provisions and explains in question-and-answer format how certain plan payments will be treated for tax purposes.

Among the areas addressed are:

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  • interest rate assumptions for lump sum distributions.
  • hardship distributions from a 401(k) and similar plans.
  • early distributions from qualified plans to terminated public safety employees.
  • rollovers from qualified plans to IRAs for non-spouse beneficiaries.
  • distributions to pay for health insurance for retired public safety officers.
  • earlier vesting of certain employer contributions.
  • new rules for the notice and consent period for distributions

Early Withdrawal Penalty

For example, according to regulators, the PPA amended §72 of the Tax Code by adding § 72(t)(10), which allows a qualified public safety employee to not have to pay a 10% early withdrawal penalty if the distribution occurs when the person reaches age 50 instead of 55. The change is effective after the PPA’s enactment date of August 17, 2006, the IRS guidance said.

The notice also clarifies several issues concerning the provision permitting IRA owners age 70½ or older to directly transfer tax-free, up to $100,000 per year to an eligible charity. Additionally, the $100,000 annual limit applies separately for each spouse of a married couple. If both spouses have IRAs and are at least age 70 ½, the couple can transfer a combined total of $200,000, the guidance said.

Wednesday’s guidance also clarified that if a direct trustee-to-trustee transfer of any portion of a distribution from an eligible retirement plan is made to an individual retirement plan described in § 408(a) or (b) (an “IRA”) that is established by the nonspouse beneficiary to receive the distribution, the transfer is treated as a direct rollover of an eligible rollover distribution for purposes of § 402(c).

Also, tax code § 402(l) now provides for an exclusion from gross income for distributions from eligible government plans used to pay qualified health insurance premiums of an eligible retired public safety officer. The exclusion applies  to an eligible retired public safety officer who elects to have qualified health insurance premiums deducted from amounts distributed from an Eligible Government Plan and paid directly to the insurer.

The regulators also pointed out that Section 904 of PPA ’06 amended the minimum vesting requirements to require faster vesting of employer nonelective contributions to a defined contribution plan. Under Code § 411(a)(2)(B), a defined contribution plan satisfies the minimum vesting requirements for an employer nonelective contributions if it has a three-year vesting schedule or a two-to-six year vesting schedule. Code § 411(a) (2) (B) as amended by § 904 of PPA ’06 generally applies to contributions for plan years beginning after December 31, 2006.

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