Small Businesses Are Rethinking Retirement Benefits

rethinkingSmall business owners are finding that the Affordable Care Act (ACA) has decreased the appeal of health care benefits to employees and increased the importance of a retirement plan, according to a recent survey conducted on behalf of Nationwide. John Carter, president of Nationwide’s retirement plans business said, “The changing health care marketplace has created an opportunity for business owners to increase investment in retirement benefits offered to employees. Business owners who help their employees prepare for retirement can differentiate their business as a destination for top talent and a place where valuable workers want to stay.” Forty-three percent of business owners who plan to increase contributions to their 401(k) plan say they are doing so because their plan has become more important in attracting and retaining employees as a result of the ACA.

Eighty-six percent of small business owners say that America’s workers are facing a retirement readiness crisis. The good news is that business owners are taking action. Fifty-eight percent of small business owners who offer retirement plans plan to increase contributions, and 19% of those who don’t offer 401(k) plans say they will offer them in the future. For business owners who don’t offer retirement benefits, but plan to start in the future, 23% say it is because a 401(k) plan is now more important for attracting and retaining employees as a result of the ACA.

Joe Frustaglio of Nationwide says that business owner often have the following misconceptions that prevent them from starting a 401(k) plan:

  • Plans are too expensive for small businesses: There are options that minimize the fee impact for the owner and employee.
  • It’s hard to find a plan that can meet their needs: Plans of all sizes can be customized to deliver on the needs of the business’ owner and employees.
  • Small business retirement plans can’t compete with large corporations’ plans: Small businesses have access to the same retirement plan options as do the largest corporations.

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Most 401(k)s Fall Short of Providing Lifetime Income

Most 401(k) plans studied by the General Accountability Office don’t include products and services that could help participants turn their savings into a lifetime retirement income. Responses to GAO’s questionnaire represented about a quarter of plans at the end of 2014. About two-thirds did not offer a withdrawal option. About three-quarters did not offer an annuity.

Concerns about legal risks and record keeper constraints deter many plan sponsors (typically employers) from offering lifetime income options. The Dept. of Labor (DOL) has prescribed steps plan sponsors to satisfy their fiduciary duties. But plan sponsors often face problems interpreting ambiguous requirements that they must have “sufficient” information to “appropriately” conclude that the annuity provider is financially able to pay future claims. Without having clearer criteria to select an annuity provider, plan sponsors avoid offering them, fearing liabilities.

GAO found that a mix of lifetime income options is not usually available in a 401(k). DOL provides limited liability relief to plan sponsors who provide participants at least three diversified investment options, among other things. However, there is no such incentive for plan sponsors to offer a mix of lifetime income options. Without some liability relief, plan sponsors may be reluctant to offer a diverse mix of lifetime income options to participants. Lastly, stakeholders told GAO that record keepers can only make their own annuities available to the plans they service. DOL provides guidance on selecting service providers, but does not encourage plan sponsors to seek choices from their service providers, which may prevent plans from offering appropriate annuity options.

For those who don’t choose a lifetime income option, required-minimum distributions can offer a default: They set a minimum amount of taxable 401(k) income for those age 70 ½ or older, based on life expectancy. Some plan sponsors know how to administer required-minimum distributions, and some provide required-minimum distribution payments calculated to last a lifetime. However, DOL’s guidance on default lifetime income focuses on a particular annuity type used only by a few plans. DOL could encourage plans to consider letting required-minimum distributions be the default distribution process for retiring participants.

GAO makes seven recommendations to DOL, including clarifying the criteria for plan sponsors to select an annuity provider, providing limited liability relief for offering an appropriate mix of lifetime income options, issuing guidance to encourage plan sponsors to select a record keeper that offers annuities from other providers, and providing required-minimum distribution-based default lifetime income to retirees. DOL generally agrees, and has described actions it would take to address the intent of the recommendations. For more information, visit

Ergonomics & Telecommuters
Brian Kost, senior director of the Workplace Possibilities program at Standard Insurance Company offers tips for employers to ensure address the ergonomic needs of teleworkers. Just because a teleworker isn’t in the office doesn’t mean that an employer should overlook their work environment. Bad ergonomic habits, left unaddressed, could mean higher health care costs for the employer, lower productivity, and a higher potential for an employee to sustain a medical condition. This is especially true as musculoskeletal system disorders remain the leading cause of ongoing disability claims. Here are the tips:

  1. Ask the teleworker where they plan to work; having a dedicated space with ergonomics in mind is the first step to a successful work-from-home environment. Kost says,“I’ve gone into an employee’s home to do an assessment and noticed that they’re working from a stool at a kitchen breakfast bar. This isn’t the best setup for an eight-hour workday, and is exactly the type of situation that could lead to musculoskeletal issues.” “In some cases, teleworkers are wary of letting a third party enter their home for this type of consultation. At a minimum, an employer should consider how to connect an employee with a consultant over the phone to coach them through ergonomic workstation adjustments,” says Kost. 
  1. Discuss proper ergonomics. Make sure that the employee has the proper equipment. A fitted chair to improve posture and reduce back strain or an ergonomic keyboard to reduce tension on muscles could prevent future injuries or pain. “Not only do ergonomic tools promote healthy and happy employees, but they also prevent headaches for an employer. The employer is minimizing their risk of an employee having to take disability leave, in extreme cases,” says Kost.
  1. Implement accommodations. If needed, there are three avenues to deliver ergonomic assistance. A visit from a consultant through the employer’s disability carrier, a third-party ergonomic professional vendor, or the Occupational Safety & Health Administration online tool can help an employee create a safe and personalized workstation.


Protecting Consumers From Surprise Medical Bills
The California Legislature approved AB 72, which would provide strong protection against surprise out-of-network medical bills starting next July. The measure mandates that patients who received care from in-network facilities would only have to pay in-network cost sharing. This change would only affect non-emergency care since emergency physicians in California are already barred from balance billing patients. “CAHU has been a long-time supporter of legislation that would protect our individual/family and employer group clients from financial hardship due to medical care received by non-participating providers, within an in-network hospital or facility,” said Richard P Coburn, CLU, MHP, president of the California Association of Health Underwriters. Gov. Jerry Brown (D) is expected to sign the bill, which could spur other states to take similar action.

DMHC Board Seeks Members
The Dept. of Managed Health Care (DMHC) is seeking five health care professionals to serve on the DMHC Financial Solvency Standards Board. The board meets quarterly to advise the director on matters of financial solvency that affect the delivery of health care services. The board reviews reports on plan operations and makes recommendations to the director on financial solvency requirements, standards, and regulations. Members are appointed for a three-year term. The most-qualified candidates will have training and experience in one or more of the following areas:

  • Medical and health care economics
  • Accountancy, with experience in integrated or affiliated health care delivery systems
  • Excess loss insurance underwriting in the medical, hospital, and health plan business
  • Actuarial studies in health care delivery systems
  • Management and administration in integrated or affiliated health care delivery systems
  • Investment banking
  • Information technology in integrated or affiliated health care delivery systems

For a description of the duties of board members, click here to see the duty statement.To review materials from prior board meetings, click here. Candidates should submit a letter of interest along with a statement of qualifications, and resume to If you have questions about the board positions, contact Mary Watanabe at or 916-324-2560. 


Open Enrollment Tips for Consumers
This fall, up to 1.5 million people will be affected when Aetna, UnitedHealthcare and Humana exit some of the public exchanges. Many other plans will have narrower networks with increased premiums. That adds up to millions of Americans shopping for a plan this open enrollment season. GetInsured is offers the following tips to help consumers select a health plan.

Make sure that your doctors are in network. Even if a 2016 plan covered certain physicians, that might not be the case for 2017. Review your plan for any changes. Check to see if your medications are included.

Select the right metal tier. At first glance, Bronze plans can seem attractive because of their lower monthly premiums. But they typically come with higher deductibles, coinsurance and copays, out-of-pocket maximums, and lower levels of coverage.

Don’t shop by monthly premium alone. A plan with a $100 monthly premium may end up costing more than one with a $200 monthly premium when you consider deductibles, copays/coinsurance, and prescription costs.

Find out if you qualify for tax credits. Last year, 85% of people who enrolled in a health plan on the Marketplace qualified for tax credits averaging $291. Tax credits are determined by income and household size, and can help to significantly reduce monthly premiums.

Don’t be afraid to ask for help. Licensed agents are available, across the country, to help consumers compare and shop for health insurance plans; there is no charge for this service. Consumers should select an agent who represents multiple carriers.

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CDHP Members Have Lower Health Care Spending
People with consumer-driven health plans (CDHPs) have lower total per capita spending on health care, partly because they use less health care, according to a study by the Health Care Cost Institute. At the same time, out-of-pocket spending by CDHP consumers is 1.5 times higher than for non-CDHP consumers. For example, people in consumer-driven health plans an average of $58 more a year in out-of-pocket cost on doctor visits and $50 more in costs for emergency room visits. They had 8% fewer doctor visits and 10% fewer emergency room visits. People in CDHPs were responsible for nearly a quarter of their medical costs on average, compared to 14% for those enrolled in non-CDHPs.

Of the five CDHP age groups studied, the 19-25 group is the only one that used more health services and had slightly higher per capita spending compared to their non-CHDP counterparts. They spent 81% more out-of-pocket than those without a CDHP, which is the largest spending difference among the five age groups. Enrollment in CDHPs has been increasing steadily in the Health Care Cost Institute’s employee-sponsored insurance population. More than a quarter had a CDHP in 2014, compared to just 15% in 2010. For more information, visit

Group Supports Mental Health Parity Enforcement
The National Alliance on Mental Illness (NAMI) is supporting legislation to ensure enforcement of the 2008 federal mental health insurance parity and expanded coverage under the ACA. “While significant progress has been made, people living with mental illness continue to encounter significant barriers in getting necessary mental health services covered in health insurance,” said NAMI CEO Mary Giliberti in a letter to Health Subcommittee Chair Joe Pitts (R-Pa.) and Ranking Member Gene Green (D-Texas.)

NAMI cited its 2015 report, “A Long Road Ahead,” based on a survey of approximately 3,000 health care consumers and analysis of 84 insurance plans in 15 states. Nearly one third of survey respondents reported insurance company denials of authorization for mental health and substance abuse care— nearly twice the rate for other medical care. NAMI thanked the subcommittee for its work on the “Helping Families in Mental Health Crisis Act” (HR 2646), which the House passed almost unanimously on July 6, 2016. Several provisions address parity enforcement. It requires federal agencies to collaborate to improve compliance with the mental health parity law, to report on federal parity investigations, and create a plan to improve federal parity enforcement. It also requires a Government Accountability Office (GAO) study on mental health insurance parity. Click here to see more.  “These provisions would be a significant step forward in eliminating discrimination towards mental illness and substance use disorders in health insurance,” Giliberti said. Enactment of parity enforcement provisions now depends on Senate action and coordination between the Senate and House in adopting final legislation. For more information visit

Employers Are Skeptical of Prescription Drug Mandates
America’s employers are concerned about high drug prices and say that private sector solutions would address the issue more effectively than government intervention, according to a national survey conducted for the Pharmaceutical Care Management Association (PCMA). By a three to one margin, they say that new government mandates would lead to higher drug costs. When it comes to pharmacy benefits, the top concern among employers is reducing costs. When asked to choose their top two most important objectives, 54% cited reducing overall costs and 45% cited reducing premiums and other out-of-pocket costs for consumers. Very few cited contracting issues, such as transparency of payments to drugstores (9%) or rebates to pharmacy benefit managers (4%) as a priority,)

By more than a two-to-one margin, employers say that private companies are better able than the federal government to manage prescription drug benefits. Seventy percent say the private sector is better equipped than the government is to manage pharmacy benefits.

Three-fifths of these business leaders say that adding new government health regulations would raise prescription drug prices. While most employers say that drug companies are primarily to blame for higher costs (54%) even more say new government mandates would make the problem worse. Sixty percent of employers say new government interventions would raise prices while only 18% say they would lower prices. The other 22% say new policies would have no effect on prices.

Despite concerns about drug prices, nine-in-ten employers are satisfied with their pharmacy benefits. While reducing prescription drug costs is their top priority, 91% are satisfied with the drug benefits they can provide. Not surprisingly, 95% are satisfied with the company they’ve hired to manage their prescription drug benefits. More than 90% of the three-quarters of companies that offer a mail-service pharmacy to employees are satisfied with the service. Seventy-six percent offer a mail-service pharmacy as part of their prescription drug benefits; among those, 95% say their employees are satisfied with mail-service pharmacy. Also, companies that offer mail-service pharmacy services are slightly more satisfied (92%) with their benefits than those that do not (84%.).


Millennials and Retirement Planning
Contrary to popular belief, Millennials (ages 18-34) want to achieve many of the same traditional life milestones as do their older counterparts, but they are waiting to start saving because they don’t have enough to cover minimum expenses (38%) or don’t know where to start (27%), according to a study by the Million Dollar Round Table. Millennials are more worried about not achieving those milestones (53%). They are also more aware of the need for financial planning to prepare for these milestones (76% versus 60% of those ages 35+). However, 91% of Millennials don’t have a financial plan for retirement and 78% aren’t even saving for it. For more information, visit


Easy Claims Processing
Cigna customers who have both group short-term disability coverage and group critical illness or accidental injury voluntary benefits now only need to file a disability claim to trigger both policies. Here’s how it works: When a customer files a short-term disability claim, it’s automatically reviewed to determine if it could also be a payable accidental injury or critical illness claim. Cigna then initiates the accidental injury or critical illness claim. This saves customers time and effort when they’re typically focused on recovery. For more information, visit

Guide for Defined Benefit Plan Sponsors
Transamerica has published “The Defined Benefit Plan Continuum,” a white paper to help plan sponsors, retirement advisors, and plan consultants evaluate their defined benefit plans and explore ways to mitigate costs and risks associated with sponsoring a plan. For more information, click here, and or call 800-770-6797.

Free Open Enrollment Tools
HR360 released its latest free tools, the “2016 Open Enrollment Benefits Notices Templates” and the “Open Enrollment Benefits Summary Template.” These customizable templates make it easier to ensure that clients get their benefit notices on time. For more information, visit