Dusting Off DC Annuity Conversations

via Lockton Retirement Services

Over the last several years, many have discussed adding annuities to defined contribution plans as a guaranteed retirement income option.  Actually doing this, however has been a challenge.  The DOL historically offered fiduciaries little guidance on the appropriate selection and monitoring of these products.  A recent Fiduciary Assistance Bulletin attempts to remedy this for plan sponsors, but a lot of questions remain unanswered.  This issue of “The Beacon” explains the DOL’s guidance and highlights the challenges that remain for sponsors considering annuities for their DC plans.

To read the full Beacon article CLICK HERE

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IRS Issues Draft Instructions for 2015 ACA Reporting Forms

via Lockton Benefit Group

With early 2016 filing deadlines looming, the IRS recently issued draft instructions for the filing of four key reporting forms related to the Affordable Care Act’s (ACA’s) individual and employer mandates. The draft instructions serve as a reminder, for those who have begun preparing for ACA reporting, that the deadline is drawing slowly but inexorably nearer. The draft instructions are a call to action for employers who have not yet begun to prepare.

Background The ACA requires all but the smallest employers to provide a new tax form, Form 1095-C, to each of their employees who were full-time for at least one month in 2015. The form shows the extent to which the employer met the ACA’s employer mandate in 2015 with respect to that particular employee.

Lockton comment: Employers that dodged the employer mandate’s health insurance coverage obligation in 2015 because they had between 50-99 full-time and full-time equivalent employees during the relevant lookback period in 2014 are nevertheless required to comply with the employer mandate reporting obligation for 2015.

Please click for the full Alert

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Two Essential Tools for Repairing the ObamaCare Damage

via Wall Street Journal

With the end of the Obama administration on the horizon, Republican presidential candidates—and members of Congress—are proposing ways to replace or repair the Affordable Care Act. Undoing the damage of ObamaCare may finally become a realistic possibility.

For now, Americans are experiencing the law’s natural consequences: rising health-insurance premiums and limitations on individuals’ choice of physicians and hospitals. Further consolidation in the insurance industry and among providers will likely drive health-care costs even higher. To reverse these trends, any replacement for ObamaCare should include two essential elements: high-deductible insurance coverage and health-savings accounts.

Well-designed high-deductible insurance—in which the individual pays a few thousand dollars for most health-care services before the plan kicks in to cover claims—restores the fundamental purpose of health insurance: to reduce the financial risk of large and unanticipated medical expenses..

To read the full article CLICK HERE

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Public or Private, Health Benefits Face Strategic Pruning

via Wall Street Journal

Finance chiefs at companies ranging from Cisco Systems Inc. toWestmoreland Coal Co. are scrutinizing employee health benefits as they face the Affordable Care Act’s looming “Cadillac tax” on generous health plans.

They aren’t the only ones. Across the country, cities and states are also scrambling to figure out how many millions the tax will cost them.

The ferment underscores how all employers stand to be pinched if they can’t reduce employee health-care costs below government-set thresholds.

Starting in 2018, both public and private employers will have to pay a tax of 40% on the amount by which the cost of their health-care plans exceed $10,200 for individuals and $27,500 for families. Those sums include premiums paid by both employers and employees.

To read the full article CLICK HERE

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The UAW Benefits Failure

via Bloomberg

A Ford Motor assembly plant in Louisville.

The experiment looked doomed at the start. Five years ago, General Motors, Ford Motor, and Chrysler, with the blessing of the United Automobile Workers union, created an independent entity to provide health insurance for more than 700,000 retirees and to manage the investments that would finance the benefits. The move was good for the automakers, allowing them to shed crushing liabilities that threatened to impede their recovery amid the Great Recession. The conventional wisdom was that the trust fund would quickly run low on money and ask union retirees to cough up large annual premiums or settle for more limited coverage. “People didn’t believe the math worked,” recalls Art Schwartz, GM’s labor negotiator at the time.

Contrary to expectations, the $61 billion UAW Retiree Medical Benefits Trust is thriving. Retirees’ drug costs are falling; dental, vision, and other benefits have even been added. What’s more, the investment fund that pays for all of it has booked double-digit annual returns in recent years. “A lot of people thought this wouldn’t hunt,” says Fran Parker, who came out of retirement in 2010 to run the trust. Parker, who previously headed a large health plan in Michigan, said in a July 10 interview that she relished the challenge. “I thought, Oh dear, I’m going to take care of the same people that I took care of when they were active. What a fitting bookend.”

To read the full article CLICK HERE

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Understanding Market Volatility

via Lockton Retirement Services

What is Happening?

  • The stock market declined approximately 10% over the last three weeks (as of 08/24/15).
  • Emerging market losses have been greater, most notably in China.
  • The VIX Volatility Index, also known as “The Fear Index,” spiked which is typical during market sell-offs.
  • The sell-off seems very similar to the two summer sell-offs of 2011 and 2012

Markets seem likely to break their 10-quarter long streak of consecutive gains. Volatility spiked in recent weeks and stock markets around the world are seeing sharp declines. Although investors have benefited from the last five years of very high returns and very low levels of volatility, such a streak isn’t normal. In fact, there have only been four other periods of time, since 1929, when the market produced more than 10 consecutive quarterly gains..

To read the full article CLICK HERE

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A Healthy Side of Insurer Mega-Mergers

via Wall Street Journal

Anthem’s proposed merger with Cigna following Aetna’s acquisition of Humana has set off alarms about lack of competition in the health-insurance industry. But policy makers should consider the potential benefits of industry consolidation. The greater efficiency and market power of larger insurance plans could lower prices for consumers by offsetting the bargaining power of health-care providers.

In many U.S. communities there are only one or two hospitals, which dictate the cost of care. A recent report by Kaufman, Hall & Associates LLC showed that the number of hospital mergers and acquisitions increased 44% between 2010 and 2014. There is a similar problem with specialist physicians who, through consolidation of practices, control of entry and other arrangements, have considerable market power.

Insurance companies can act as a counterweight, and lower prices will get passed along to consumers instead of increasing insurance-company profits. That’s because the Affordable Care Act requires insurers to spend at least 80%-85% of every premium dollar on consumer medical claims and activities that improve the quality of care..

To read the full article CLICK HERE

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