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How does it work when you’re curious whether or not you’re getting all you should be earning from your 401k – but have a designated fiduciary managing your plan? Brandon Oliver explains how consultants work in a world of managed retirement.

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We have a retirement savings crisis in this country. Auto-enrollment has been positioned as a possible solution to ensure everyone has a healthy retirement account when they reach retirement age. But how does it work? Does it work? And how common is it in businesses today? Brandon Oliver gives perspective on this topic.

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How do you go about switching 401k plans and providers? Brandon Oliver gives insights into what goes into the broader 401k sales process – and why it benefits you to know how it all works.

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This week on our weekly Money Radio (105.3 fm) segment Peter & Brandon Discussed QACA, the Qualified Automatic Contribution Arrangement a less commonly used type of Safe Harbor 401k plan. Which in some cases could be a better match formula and/or discretionary contribution than the older and more well know safe harbor match/contribution options.

1. A Third Safe Harbor Option, the QACA
   1. The QACA is a newer type of safe harbor 401(k) plan. Unlike the others, It includes a requirement for the plan to have an automatic enrollment feature. These work by automatically enrolling any eligible employee into the 401k on a certain date, without the need for them to actively enroll in the plan themselves.
2. QACA Match plans include the following special rules:
   • The QACA safe harbor matching contribution formula is a 100% match on the first 1% of compensation deferred and a 50% match on deferrals between 1% and 6% (3.5% total).
   • The plan’s default auto-deferral rate must start at no less than 3% and increase at least 1% annually to no less than 6% (with a maximum of 10%).
   • QACA safe harbor contributions can be subject to up to a 2 year cliff vesting schedule
3. There is also a nonelective QACA. It states:
   • • The nonelective QACA has a contribution of 3% to all participants, including those who choose not to contribute any amount to the plan.
     • QACA nonelective 3% contributions can also be subject to up to a 2 year cliff vesting schedule
     • Nonelective contributions can also be used to help satisfy Profit Sharing cross-testing. Fulfilling the minimum gateway for 9% profit sharing contributions to owners or other key groups as well as getting a pass for the plan’s nondiscrimination tests.

For more information on if a QACA safe-harbor plan may be appropriate for your company please contact Arcwood or your plan administrator.

This week on our weekly Money Radio (105.3 fm) segment Peter Rowe discussed the changes that are being implemented 1/1/2020 to allow business to use ICHRA, Individual Converge health Reimbursement Arrangements again. These can be a valuable tool for small businesses to offer their employees. Allowing them to make tax deductible contributions that their employees can use to buy their own policy’s on the individual market VS needing to offer full group plan. Peter also discussed their uses for larger employees looking to supplement the existing plans.  

This week on our weekly Money Radio (105.3 fm) segment Brandon Oliver hosted a discussion on Target Date Funds and how plan sponsors should monitor them.

Some of these best practices included actions plan sponsor & investment committees should follow including:

• Establishing a process for comparing and selecting TDFs
• Establishing a process for the periodic review of selected TDFs
• Understanding the fund’s investments–the allocation in different asset classes (stocks, bonds, cash), individual investments, and how these will change over time
• Reviewing the fund’s fees and investment expenses
• Inquiring about whether a custom or non-proprietary target-date fund would be a better fit for your plan
• Developing effective employee communications
• Taking advantage of available sources of information to evaluate the TDF and recommendations you received regarding the TDF selection
• And of course documenting the process

for more information on how to evaluate and monitor your plans target date funds please contact Arcwood Consulting or review the DOL TDF bulletin below.

https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/target-date-retirement-funds.pdf

The U.S. Department of Labor unveiled its long-awaited final rule on the overtime “white collar” exemptions on September 24, 2019.  The regulations, at 20 CFR Part 541, were last updated in 2004, when the DOL increased the minimum salary level for exemption from $150 to $455 per week and made changes to the job duties employees must perform for exemption from the FLSA’s overtime requirements.

The DOL has been working overtime to update the regulations since 2015, when it proposed to increase the minimum salary level for exemption to $913 per week ($47,476 annualized).  A Texas federal district court enjoined that rule in November 2016, but the Trump administration appealed the injunction to the U.S. Court of Appeals for the Fifth Circuit.  While the appeal is still pending, now that the final rule has been issued, it is expected that the agency will soon move to dismiss the appeal as moot.

The final rule increases the minimum salary level for exemption to $684 per week ($35,568 annualized).  The DOL will allow employers to pay up to 10% of that minimum level ($3,556.80) in commissions, bonuses, and other non-discretionary incentives. If incentive payments fall short by even $1, however, employers will owe overtime pay to shorted employees for the entire prior year.  Under the final rule, employers will have only a single pay period for a final make-up payment to ensure exempt employees receive the full $35,568 for the year.

The final rule also increases from $100,000 to $107,432 the total annual compensation required for employees to qualify under the shorter highly compensated test.  This level is significantly below the proposed level of $147,414, likely in response to public comments.  Highly compensated employees must receive the guaranteed minimum salary of $684 each week, but the remaining compensation may be in commissions, bonuses, or any other type of compensation.

The DOL has abandoned its plans to update automatically the minimum salary and highly compensated levels in the future. Although the final rule does not include any new provisions regarding future increases, the DOL stated that its goal is to update the levels more regularly; any increases to the levels will come only after the DOL publishes notice of the proposed increases and provides the public with an opportunity to comment, as required under the Administrative Procedures Act.

The final rule will take effect on January 1, 2020.

We’re here to help – call us today if you have any questions or need assistance in becoming compliant before January 1.

Requirement Applies to Employers that Offer Prescription Drug Coverage

Employers who sponsor group health plans that offer prescription drug coverage to Medicare-eligible individuals must provide a Medicare Part D Creditable or Non-Creditable Coverage Notice to those individuals before October 15.

These notices inform Medicare-eligible individuals whether the plan’s prescription drug coverage is expected to pay, on average, as much as the standard Medicare prescription drug coverage (meaning it is “creditable”).

For more information on this notice requirement, including links to downloadable model notices, click here.

Section 1557 of the Affordable Care Act provides that an individual cannot, on the basis of race, color, national origin, sex, age, or disability, be excluded from participation in, be denied the benefits of, or otherwise be subjected to discrimination under any covered health program or activity.

Covered Health Programs & Activities

Section 1557 covers:

• Any health program or activity, any part of which receives federal financial assistance (such as hospitals that accept Medicare or doctors who accept Medicaid);
• Any health program that the U.S. Department of Health and Human Services itself administers; and
• Health Insurance Marketplaces and issuers that participate in those Marketplaces.

Limited Applicability to Employer-Sponsored Health Benefit Programs

Employers will be held accountable under Section 1557 for discrimination in the employee health benefit programs they provide in three circumstances:

1. The employer receives federal financial assistance and is principally engaged in providing or administering health services, health insurance, or other health coverage;
2. The employer receives federal financial assistance a primary purpose of which is to fund the entity’s employee health benefit program; or  
3. The employer is not principally engaged in providing or administering health services, health insurance, or other health coverage, but operates a health program or activity, which is not an employee health benefit program, that receives federal financial assistance (in this case, the employer is liable only with respect to employees in that health program or activity).

For example, a hospital that provides health benefits to its employees is covered by Section 1557 in the health benefits it provides to all employees, including employees who work in the cafeteria, because the hospital is principally engaged in providing health services. By contrast, where a housing program receives federal financial assistance to operate a diabetes-screening program for housing residents, but is not principally engaged in providing health services or coverage, its employee health benefits are covered by Section 1557 only with respect to the employees of the diabetes-screening program.

Note: Section 1557 does not apply to employment practices such as hiring and firing; however, an employer may be subject to other employment discrimination laws.

Notice & Tagline Requirements

Covered entities are required to post notices of nondiscrimination and taglines that alert individuals with limited English proficiency to the availability of language assistance services.

The U.S. Department of Health and Human Services’s Office of Civil Rights has translated a sample notice and taglines for use by covered entities into 64 languages—click here to access.

Notices and taglines are generally required to be posted in:

• Significant publications and significant communications targeted to beneficiaries, enrollees, applicants, and members of the public;
• Conspicuous physical locations where the entity interacts with the public; and
• A conspicuous location on the covered entity’s web site accessible from the home page of the site.

Penalties

The enforcement mechanisms available for employment discrimination under existing federal laws also apply for purposes of section 1557. Click here for a list of remedies where discrimination is found under these laws (refer to section XIII). Compensatory damages for violations of section 1557 are also available in appropriate administrative and judicial actions.

Additional Resources

• Section 1557 Training Materials
• Federal Regulations

1. Medicare Part D Notice Requirements

Medicare generally requires employers that offer prescription drug coverage to Medicare-eligible individuals to satisfy two notice requirements:

1. Prior to October 15 each year, the employer must provide Medicare-eligible individuals with a Medicare Part D Creditable or Non-Creditable Coverage Notice. These notices serve to notify the individuals whether the employer-offered prescription drug coverage is “creditable” under law. Coverage is generally “creditable” if it is expected to pay, on average, as much as the standard Medicare prescription drug coverage. Click here to download model notices pertaining to this requirement.  
2. Within 60 days of the beginning of each plan year (generally March 1 for calendar-year plans), the employer must complete an online disclosure to the Centers for Medicare and Medicaid Services (CMS) to report whether the coverage offered is “creditable.” Click here to complete an online disclosure.

Additional requirements may apply. Click here for more information on the Medicare Part D notice requirements.

2. Medicare Secondary Payer Requirement

When an individual is covered by both an employer-sponsored group health plan and Medicare, it can be confusing as to who should pay for the individual’s medical claims. In general, the employer-sponsored group health plan is the primary payer of these claims, while Medicare is the secondary payer. However, exceptions do apply, including for employers with less than 20 employees. For more information, please contact CMS at 1-800-MEDICARE or give us a call.  

3. Medicare Nondiscrimination Requirements

Medicare-eligible employees are generally protected against discrimination in group health insurance benefits in two ways:

1. Employers with 20 or more employees are required by law to offer workers and their spouses who are age 65 or older the same health benefits that are offered to younger employees.
2. Employers are generally prohibited from encouraging or offering incentives to individuals to enroll in Medicare instead of a group health plan. However, the Equal Employment Opportunity Commission (EEOC) has stated that offering Medicare-eligible employees a choice between either group health insurance coverage or the reimbursement of Medicare Part B premiums is generally lawful as long as the choice creates an advantageous option available only to the Medicare-eligible employees.