Tax Credit Helps Low- and Moderate-Income Workers Save for Retirement

TaxCredits2

By Leila Morris – Low- and moderate-income workers can take steps now to save for retirement and earn a special tax credit in 2014 and years ahead, according to the Internal Revenue Service.

The saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to IRAs and 401(k) plans and similar workplace retirement programs. Also known as the “retirement savings contributions credit,” the saver’s credit is available in addition to any other tax savings that apply.

Eligible workers still have time to make qualifying retirement contributions and get the saver’s credit on their 2014 tax return. People have until April 15, 2015, to set up a new individual retirement arrangement or add money to an existing IRA for 2014. However, elective deferrals (contributions) must be made by the end of the year to a 401(k) plan or similar workplace program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, or the Thrift Savings Plan for federal employees. Employees who are unable to set aside money for this year may want to schedule their 2015 contributions soon so their employer can begin withholding them in January.
The following people can claim the saver’s credit:
• Married couples filing jointly with incomes up to $60,000 in 2014 or $61,000 in 2015.
• Heads of household with incomes up to $45,000 in 2014 or $45,750 in 2015.
• Married individuals filing separately and singles with incomes up to $30,000 in 2014 or $30,500 in 2015.

Like other tax credits, the saver’s credit can increase a taxpayer’s refund or reduce the tax owed. Though the maximum saver’s credit is $1,000, $2,000 for married couples, the IRS cautioned that it is often much less and, due in part to the impact of other deductions and credits, may, in fact, be zero for some taxpayers.
A taxpayer’s credit amount is based on filing status, adjusted gross income, tax liability and amount contributed to qualifying retirement programs. Form 8880 is used to claim the saver’s credit, and its instructions have details on figuring the credit correctly.

In tax year 2012, saver’s credits averaged $215 for joint filers, $165 for heads of household and $127 for single filers. The saver’s credit supplements other tax benefits available to people who set money aside for retirement. For example, most workers may deduct their contributions to a traditional IRA. Though Roth IRA contributions are not deductible, qualifying withdrawals, usually after retirement, are tax-free. Normally, contributions to 401(k) and similar workplace plans are not taxed until withdrawn. Other special rules that apply to the saver’s credit include the following:
• Eligible taxpayers must be at least 18.
• Anyone who is claimed as a dependent on someone else’s return cannot take the credit.
• A student cannot take the credit. A person enrolled as a full-time student during any part of 5 calendar months during the year is considered a student.

Certain retirement plan distributions reduce the contribution amount used to figure the credit. For 2014, this rule applies to distributions received after 2011 and before the due date, including extensions, of the 2014 return. Form 8880 and its instructions have details on making this computation. More information about the credit is on IRS.gov.

Many Are Unprepared to Sell Their Businesses to Fund Retirement

While many small business owners plan to sell their businesses to fund their retirement, few have identified possible buyers, according to a study by Guardian Life. Fifty-two percent of small business owners say they are very or fairly well prepared for retirement, and 56% have a clear vision of how they will spend their time once they are no longer involved with the business compared to 50% in the 2011 study.

Thirty-five percent of small business owners are counting on the sale of their business to fund retirement compared to 30% in 2011. Yet, only 17% have identified potential buyers. Thirty-five percent of small business owners say they started their business to fund their retirement compared to 25% in 2011. Also, thirty-nine percent of small business owners believe they can retire earlier than planned compared to 31% in 2011. In 2014, half of the surveyed small business owners spoke to their financial advisor when preparing for retirement. One-third are counting on retirement plans funded for their business or retirement plans/pensions from former employers.

Women small business owners are more likely to say they are not as confident and financially prepared for retirement (45% versus 56%). They are more likely to prefer an advisor who pushes them toward their goals (33% verse 23%) while men are more likely to want an advisor who is creative and takes calculated risks (28% versus 21%). Key findings from the study are available here: http://www.guardianlife.com/SBOStudy/).

HEALTHCARE

Medicare ACOs Are in Peril

Sixty-six percent of accountable care organizations (ACOs) under the Medicare Shared Saving Program are unlikely to remain in the ACO Program. An additional 26% are undecided, only 8% are likely to sign a second contract, according to a survey by the National Association of ACOs. Association president, Clif Gaus says that this is the most troubling aspect of the Medicare Shared Savings Program. “If this is not addressed in the upcoming CMS proposed rules, the Medicare Shared Saving Program will no longer exist and the high hopes of DC policy-makers to migrate ACOs to capitation and two-sided risk will be impossible,” he added.The association notes that ACOs are spending a lot to sustain their operations. On October 31st, CMS finalized quality measures and benchmarks with the Medicare Shared Savings Program. President Clif Gaus said, “While CMS has made modest improvement to the ACO Quality Benchmarking, it is still a punitive program that will only lead to future reductions in savings paid to the ACOs who have worked hard to achieve those savings. Coupled with the many attribution and financial benchmarking defects, the Medicare Shared Savings Program is not sustainable in its configuration and will decelerate the pathway to accountable care for Medicare Beneficiaries.” For more information, visit https://www.naacos.com/pdf/Newsletter110314.pdf.

AMA Addresses Problems with Narrow Networks

As open enrollment for the health insurance exchanges gets underway, the American Medical Association (AMA) has adopted a new policy to address inadequate networks. The AMA wants insurers to make provider terminations without cause before the enrollment period begins. The AMA says that inaccurate or late revised provider directories are leaving patients stuck with plans that dropped their physicians after they enrolled. The AMA says that new physicians should be able to be added to a network at any time. Also, health plans need to give patients an accurate, complete directory of participating physicians through multiple media outlets, which includes identifying providers who are not accepting new patients. AMA president Robert Wah, MD said, “Patients who need to seek care out-of-network should not be punished financially. If patients find themselves in networks that are deemed inadequate, there should be adequate financial protection in place to ensure they can access the care they need and deserve…As enrollment opens for health insurance exchanges, patients deserve to have an honest look at their coverage options including the physicians, hospitals and medications they will have access to as well as cost-sharing so that they can make an informed choice.”

The AMA says the following:

  • If the patient’s plan is deemed inadequate, insurers should treat visits to out-of-network physicians the same as visits to in-network physicians.
  • There should be a way for patients to file formal complaints with regulators about network adequacy.
  • The AMA supports regulation and legislation that would require out-of-network expenses to count toward annual deductibles and out-of-pocket maximums when a patient is enrolled in a plan with out-of-network benefits or is forced to go out-of-network based to get care.
  • State regulators should enforce network adequacy requirements so that patients have access to adequate provider networks throughout the plan year.
  • Insurers should submit public reports, at least quarterly, to state regulators on several measures of network adequacy, including the number and type of physicians who joined or left the network,  essential health benefits that are provided, and consumer complaints.

For more information, visit www.ama-assn.org/go/aca.

New Model for Low-Cost High-Quality Healthcare: The Cayman Islands?

Health City Cayman Islands, a new, high-tech hospital in the Caribbean, is increasingly seen as a model for U.S. health systems struggling to remain profitable in the face of razor-thin margins and declining reimbursement. Less than two hours by air from Miami, the planned 2,000-bed facility expects to attract American patients with high-deductible health plans seeking less expensive high-quality care.

As featured in a new documentary film, “From the Heart: Healthcare Transformation from India to the Cayman Islands,” Health City is the first development outside of India by Narayana Health, internationally regarded as one of the world’s lowest-cost, highest-quality healthcare providers. The brainchild of famed heart surgeon Dr. Devi Prasad Shetty, who was Mother Teresa’s personal physician, Health City replicates the model that enables Narayana’s average cardiac hospital to perform thousands of heart surgeries per year for less than U.S.D $1,400 per case – about 2% of the average cost for heart surgery in the U.S.

‘Henry Ford proved that the commoditization of a product makes it cheaper, makes it better and makes it more efficient, I strongly believe that we have to commoditize the delivery of healthcare, and that is the model that Health City represents for the world,” said Dr. Shetty. Narayana’s secret is a laser-sharp focus on efficiency, enabling some of the highest patient volumes in the world. Surgeons at Narayana Health City in Bangalore, India perform roughly 30 cardiac surgeries each day. That compares to 12 cardiac surgeries per day at Cleveland Clinic, which says it performs 20 times more cardiac surgeries per year than any other U.S. hospital. Many of Heath City’s medical professionals have already performed thousands of surgeries with outcomes that rival the best American facilities. All Narayana providers are employees who are invested in increasing productivity, streamlining processes, and improving patient care. High volume drives cost savings, and Narayana has taken an aggressive approach to every component in the supply chain, which enables it to provide basic heart surgery for a fraction of the cost in the United States.

Health City is a joint venture between Narayana Health and Ascension Health, one of the largest U.S. healthcare providers, which has said it is interested in learning from the Narayana model. But Ascension is not the only U.S. health system interested in what’s happening in the Cayman Islands. Robert Pearl, MD, CEO of the (Kaiser) Permanente Medical Group, the largest U.S. medical group, wrote recently in Forbes that Health City has American health care providers watching closely, and anxiously. Dr. Pearl concluded that the operational approaches in Dr. Shetty’s hospital are about 10 years ahead of those used in the typical U.S. hospital.

Health City’s innovations begin at the ground level. Construction of the 108-bed facility took less than 12 months and cost $420,000 per bed, about one-third the U.S. average of $1.5 million to $2 million, despite the relatively high cost of real estate in the Cayman Islands. Real-time performance metrics are constantly available for administrators across the medical center. Analytics technology called “iKare” monitors lab results and clinical findings to predict potentially significant medical problems. Clinical teams are timed on their speed of response, with a particular focus on eliminating delays in treatment. Narayana Hospitals’ average time to an appropriate response is just seven minutes, significantly less than the average U.S. hospital.

Eschewing the profit-center approach of U.S. hospitals, in which key departments such as the operating room bill patients separately, Health City has only one profit center – the hospital. That arrangement aligns incentives to cut cost from every process. And to further simplify costs, the medical center provides an all-inclusive flat rate for every procedure covering every service. “We’re one of the few hospitals in the world to publish our prices as a bundled flat rate. And that’s what you’ll pay, nothing more. You get one bill and you’ll never get another bill. It’s a model that gets a lot of attention when we talk with other healthcare providers. A large provider of charitable care, Narayana Health gives its executives a daily profit/loss statement so they can see exactly how much care they can give away to patients,” said Chandy Abraham, MD, Health City’s Facility and Medical Director.

Health City Director Gene Thompson “We’re never going to match India and their costs. But we feel we can show that in a high-cost destination we can provide high-quality low-cost healthcare if we think outside of the box. It’s about saving lives and providing the highest quality healthcare to the most people at an affordable price, because humanity deserves it.” For more information, visit www.healthcity.ky. Or www.narayanahealth.org.

HealthCare.com Gets Major Funding

HealthCare.com, an unbiased search and comparison engine for personal health insurance plans, has secured $7.5 million in Series A funding. The financing will be used to enhance the consumer interfaces and service offerings and expand the company’s reach in the online healthcare market.  HealthCare.com has been a longtime provider of online healthcare-related services since the company’s founding back in 2006.

Step Therapy Impairs Mental Health Treatment

Many common insurance and state Medicaid policies may hurt patient health and impose a major workload on psychiatrists, according to a report by the National Council for Behavioral Health and the National Alliance on Mental Illness (NAMI). More than 50% of psychiatrists in community mental health centers say that formulary restrictions, prior authorization and step therapy protocols are the most frequent roadblocks to an optimal treatment regimen. Step therapy protocols are sometimes referred to as “fail first policies” since they only allow psychiatrists to pursue different drug options after other treatments fail.

Three-quarters of psychiatrists spend more than 10% of their time on utilization management-related administrative tasks, with one in ten spending 40% or more of their time on such tasks. Three-quarters of psychiatrists say that patients have trouble complying with medication plans, and 62% say patients had more emergency department visits, hospitalizations, and increased health care costs. Nearly 90% of psychiatrists say that multiple medication options allow them to find the best fit for patients.

Linda Rosenberg, president and CEO of the National Council said, “Mental health treatments are not one size fits all. Choosing the right plan should be the decision of a patient and their doctor, not rigid health plan policies. Increasing options, reducing paperwork, and restoring physician authority result in better patient care.” For more information, visit www.TheNationalCouncil.org.

LONG TERM CARE

Genworth Stock Plunges

Genworth Financial Inc. sent shockwaves through the market November 6 after announcing earnings the night before, in which it disclosed a reserve charge and an impairment to goodwill, according to an SNL report. (The site, www.investopedia.com defines “impairment of goodwill” as follows, “Goodwill that has become or is considered to be of lower value than at the time or purchase. From an accounting perspective, when the carrying value of the goodwill exceeds the fair value, then it is considered to be impaired.”) The stock plummeted during the session, falling 38.5% and wiping out more than $2.5 billion in market cap for the Richmond, Va.-based insurer.  The reserve charge, which totaled $345 million after taxes, was related to Genworth’s long-term care business. The goodwill impairment, which came to $517 million after taxes, was fueled in part by the long-term care operations. But the insurer’s life business played a role in the goodwill impairment as well.

In its second-quarter earnings announcement, Genworth provided some indication that a reserve charge might be coming. The insurer increased reserves by $66 million, after taxes, during the period on account of its long-term care business and said that it was conducting a review. The company is likely to change some of its assumptions, which could increase its long-term care insurance claim reserves, and any increase may or may not be material, the company wrote in the July 29 earnings release. Then again, reserving depends upon a lot of variables and requires human judgment, and can therefore be difficult to predict. SNL compiled data from this section for P&C, life and health filers. For instance, Genworth Financial’s totals reflect data from its Genworth Life Insurance Co., Genworth Life Insurance Co. of New York and Genworth Life & Annuity Insurance Co. units, which file the long-term care form. For more information, visit www.snleurope.com

LIFE INSURANCE

A Robust Life Insurance Market for Diabetics

A study by LifeQuotes.com reveals that that high quality coverage is available to certain diabetic applicants at very attractive rates. Assuming no other ratable health conditions, the charts of sample monthly premiums reveal the best possible monthly prices for type 2 diabetic considering a 20-year, medically underwritten, level term life policy that covers death by any cause, at any time, in any place, except for suicide within the first two policy years (one year in some states). The sample 20-year term life rates require initial medical underwriting and are renewable, without evidence of insurability, to age 90+ as well as convertible to permanent insurance without having to undergo any further underwriting.

20-Year Level Term (Renewable to age 90+)
Sample Monthly Rates for Women with Type 2 Diabetes
Age $100,000 $250,000 $500,000 $1 million
25 $14 $22 $33 $58
30 $13 $23 $34 $63
35 $14 $25 $41 $77
40 $17 $31 $53 $100
45 $22 $42 $78 $142
50 $28 $51 $96 $180
55 $38 $74 $142 $269
60 $60 $121 $236 $440
65 $102 $214 $423 $795
20 Year Level Term (Renewable to age 90+)
Sample Monthly Rates for Men with Type 2 Diabetes
Age $100,000 $250,000 $500,000 $1 million
25 $14 $25 $40 $70
30 $14 $25 $41 $74
35 $15 $28 $46 $85
40 $19 $35 $63 $119
45 $27 $54 $99 $189
50 $36 $67 $130 $251
55 $53 $104 $203 $375
60 $87 $172 $339 $648
65 $155 $306 $607 $1,206

“The most popular customer choice at LifeQuotes.com is the 20-year level term, said Robert Goss, executive vice president. Rates on a 10-year policy would cost less while rates for policies with 25, 30, or lifetime rate guarantees would cost more. All of the sample premiums shown require a signed application, a paramedical interview, a review of the applicant’s medical records, and acceptance as respects each company’s individual underwriting guidelines. For more information, visit www.lifequotes.com.

EMPLOYEE BENEFITS

Employers Don’t Understand the True Costs of their Workforce

Mid-size companies don’t fully understand what they spend on employees, according study by the ADP Research Institute. The measurement of employee costs is unfortunately named, “the total cost of ownership” (TCO). While six in 10 midsized businesses are familiar with the concept of TCO and two-thirds believe it is important, nearly three-quarters are not able to calculate TCO correctly. TCO consists of five key areas: payroll, employee benefit administration, talent management, human resources administration, and time and labor management. It is the total amount that companies spend on all direct and indirect costs for managing their employees. About two-thirds worry about better ways to lower their company’s overhead costs while more than half think about the total cost of managing their company’s employees. To get a free copy of this ADP Research Institute whitepaper, visit www.adp.com/tco.

NEW PRODUCTS

Retirement Readiness App

Transamerica Retirement Solutions is offering a mobile app that allows users to view short retirement readiness awareness videos. When users point their Smartphone at a printed advertisement, the app will provide an added digital layer of content. For more information, visit www.trsretire.com.

Incentive-based Financial Wellness

Buck Consultants at Xerox are launching SavIncent, a financial wellness program that improves employees’ financial health and retirement readiness. The program uses monetary incentives to reward workers’ financial improvement activities – much the same way many workers are already being rewarded for their wellness activities. SavIncent is a program that links financial education and activities to a company’s retirement savings plan. Employees who complete various elements of the program are rewarded with employer contributions to their savings plan, thus motivating them to improve their financial health. Examples of activities that SavIncent can reward include: completing a financial health or risk profile, enrolling in a 401(k) plan or signing up for auto rebalancing, meeting with a financial advisor, establishing a will, taking financial training seminars and monitoring one’s credit score. For more information, visit www.xerox.com/hrconsulting.

Prenatal Support App

UnitedHealthcare’s is offering a prenatal care app for self-insured companies with more than 5,000 employees. Women who enroll in Baby Blocks can earn rewards for completing prenatal, postpartum, and healthy-baby appointments. Users get email appointment alerts and wellness-related text messages; they connect directly with maternity nurses; and they can earn rewards for keeping the appointments. Rewards include gift cards to retail outlets, and maternity-related items such as teething rings, diaper bags, thermometers, and other items. For more information, visit www.uhc.com.

Retained Death Benefit Transactions

Abacus Life Settlements is offering retained death benefit life settlement transactions. “With the retained death benefit option, we now have a new arrow in the quiver for policy sellers who no longer want to be saddled with expensive premium payments, but who also want their beneficiaries to get a portion of the death benefit when they die,” said Samantha Butcher, Abacus’s Chief Operating Officer. Butcher explained that the retained death benefit transaction is a true win-win for the senior policy seller because a life settlement provider assumes the premium payments for unwanted policies, but the policyholder retains a percentage of the face value payout for beneficiaries. In limited instances, the senior may also qualify for a cash settlement. The growing popularity for the retained death benefit option comes at a time when the life settlement industry is undergoing resurgence. For more information, visit https://abacuslifesettlements.com.

IN CALIFORNIA

Agent Coalition Mobilized Members to Protect Clients and Helped Defeat Proposition 45

On Election Day, Proposition 45 was defeated by a 59.8% to 40.2% margin, thanks in part to the aggressive campaigning of the insurance agent coalition – Agents of Action. Patrick Burns, California Association of Health Underwriter’s (CAHU) board president said, “California voters sent a message, loud and clear, that Proposition 45 was wrong for California. Through the Agents of Action campaign, health insurance agents played an essential role in letting clients, family and friends know the truth about this, flawed ballot measure. We are proud to stand up for our clients and all healthcare consumers to help defeat Proposition 45.”

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