 |
|
Striking a Balance for the New Year
 As
we enter the New Year, ECPs and practice management staff will
no doubt have as a New Year resolution to continuously improve
the quality, service and products provided to their highly valued
patients in 2007. Of equal importance to customer care and satisfaction
is the continuous achievement of revenue growth and improvement
in the quality of revenue—that is, margin contribution and other
key financial measures.
Moving from the revenue line to the expense line of your practice is another key New Year’s resolution—remain essentially on balance or reduce your overhead expense year on year. This is always a big challenge because you can be assured that the cost or “investment” in salaries and benefits will increase.
While the salary line is indicative of rewarding your staff for their contributions and their value to your practice, the benefit line represents non-cash compensation that ensures that your employees have reliable, affordable and competitive benefit plans and coverage. Benefit plan management is one additional element of your “investment in people” that presents some of the most formidable challenges to you in terms of consuming your time and managing this important investment.
We have devoted this edition of Business Essentials to benefit plans and programs, and their management. As well, you will find information regarding regulatory changes and ways to help you and your employees enhance the value of their benefit plans, like Health Savings Accounts.
We hope you find this information useful and valuable in your practice. While time is always a precious commodity for busy practitioners, please take a moment and give us your feedback at
www.visionmonday.com.
From all of the staff at Business Essentials, we wish you a safe, healthy and prosperous 2007.
Hedley Lawson, Jr. is the managing partner of Aligned Growth Partners, LLC, a strategic, operational and organizational consulting and executive search firm
(
www.alignedgrowth.com). Lawson also serves as consulting editor for Jobson's Business Essentials monthly e-newsletter. To read current and past issues of the newsletter go to
www.visonmonday.com.
|
| |
 |
| Explanation of Benefits
Q: How do I effectively present our benefits program to employees? What are some useful guidelines that will help me highlight the key points of our benefits program to them?
A: You
have touched on a critical component to communicating employee
benefits: highlighting the value of the benefit plans. Because benefits
have grown in importance to employees, they want to know what they are,
what they are worth, and more importantly how to use them. Benefits
information is compelling for what it means to your employees. Effective
benefit communication relies on defining your goals, understanding your
audience and sticking to those key messages.
First, keep the message
simple. Benefits material must communicate clearly to all
of your employees who, after all, have a wide range of interests and
needs as well as knowledge. You want to make sure everyone gets the
same information and they understand it. Some basic rules of thumb you
can follow are:
- Define your key messages and repeat them. Repetition aids understanding.
- Use plain language. Benefits can be complicated and you'll want to avoid any confusion.
- Use a conversational style. Benefits are personal and your message is better received if delivered in a casual manner.
- Use an active voice. Engage your employees about their benefits.
- When a benefits change occurs, explain why in advance of the effective date. Knowing the reason can help employees accept the change.
- Personalize the
value of benefits so that your employees understand fully the financial
value and cost of the plans—to you and to them.
Second, select the
media best suited to your message and audience. Paper documents are
good for casual presentation of material. They can be shared with family
members, who are also part of your benefits audience.
Effective benefit
communication relies on the same rules as other communication.
Determine what you wish to accomplish, define your audience, determine
your points and develop a plan to deliver your messages in person. If
you are able to answer employees' questions about their benefits, and
their value and access, you will know that you have succeeded.
--Hedley
Lawson, Jr.
If
you have a question you’d like answered by one of our experts
click
here. |
| |
 |
| Easy-reference
to web resources about human resource policies and rules |
|
|
IRS Retirement Plan Information
Click Here
Health Savings Accounts
Click Here
Tax Information for Businesses
Click Here
Bills in Congress
Click Here
|
|
 |
|
US Companies' Commitment to Employee Benefits Remains Strong
|
 Despite
increasing economic pressures, U.S. businesses overwhelmingly
view employee benefit programs as important to competing
effectively in today's marketplace, according to "Employee
Benefits: 2006 & Beyond," a new study released
by Prudential Financial, Inc. The study explores
current and future employee needs and how employers
plan to respond to those needs. As employers, ECPs
should take note of the results from the study and
some of the guidance issued in order to improve their
management plans.
Benefits matter. Employers are facing higher medical insurance costs. Yet, most feel it is important to offer a competitive benefits package and subsidize as much of the cost as possible in order to attract and retain talent. In fact, eight in 10 plan sponsors say it is important to offer and subsidize a wide range of employee benefits. And twice as many companies believe it is "highly important" (44 percent) compared to those who feel it is "less important" (22 percent) to offer their employees competitive benefits programs. This trend is true among companies of all size categories, not just for larger firms. However, as plan sponsors look to balance employee needs with the bottom line, many will reduce their benefits expenses by increasing employee cost-sharing on contributory plans, offering a wider range of voluntary benefits and introducing more flexible plan designs.
Benefits cost-sharing expected to double by
2010. To maintain their current benefits offerings
and coverage levels, most plan sponsors will shift costs
to employees over the next several years. In fact, twice
as many employers expect to increase employee cost-sharing
by 2010.
Top
cost-sharing strategies include asking employees
to assume a greater proportion of contributory benefits
costs (37 percent) and offering more voluntary benefits,
where the employee pays 100 percent of the cost (31
percent). Many plan sponsors (75 percent) also expect
to implement consumer-driven health plans and integrated
health and disability management initiatives.
Benefits decision making is broadening. As
benefits costs continue to increase as a percentage
of payroll, the benefits decision making process is
becoming more complex. As benefit choices become more
complex and employees shoulder more of the expense,
businesses will seek external guidance from benefits
brokers/consultants (27 percent) and insurance carriers
(27 percent) to help build the right solutions.
On
average, 11 percent of employers (about 68,000 businesses
nationwide) consider themselves "progressive." Thirty-one
percent consider themselves "above average," meaning
they have a progressive benefit philosophy, but take
a slightly more conservative approach in adopting new
programs, communication strategies, technology and outsourcing.
Across all plan sponsors surveyed, the percent of progressive
and forward-thinking companies are expected to increase
by 2010 to more that 50 percent of all employers.
--Hedley
Lawson, Jr. |
Back
to Top |
|
|
|
|
|
|
|
Congress Expands Health Savings Accounts in Final Days
 On
Dec. 9, Congress approved H.R. 6111, the Tax Relief and Health
Care Act, which includes provisions that may make Health Savings
Accounts (HSAs) more appealing to employers and employees. The bill’s
focus: an increase in the financial amount that may be contributed
to HSAs to pay for medical expenses and to save for future health
care needs.
"HSAs are still relatively new, but we are already
seeing them quickly grow in popularity in the early stages of their
existence," Ways and Means
Chairman Bill Thomas, R-Calif., said in a statement. "The adjustments in
this bill will make HSAs more attractive as Americans consider their health insurance
options."
The newly enacted
provisions will expand funding sources for HSAs by:
- Allowing
an employee a one-time opportunity to roll over
unused funds from an existing flexible spending account (FSA)
and/or health reimbursement arrangement (HRA) to deposit in their
HSA. Under
this bill, employees would have the ability to start an HSA by making a
one-time, tax-free transfer of FSA and HRA amounts in their accounts
to an HSA that would belong to the employee. The transfer must
be made before Jan. 1, 2012.
- Allowing one-time transfers
from individual retirement accounts (IRAs) to HSAs. The
bill permits taxpayers to make a one-time distribution from an IRA to
an HSA so HSA funds are immediately available to meet family
health needs. The rollover cannot exceed the HSA contribution
limit for the year and is subject to the recapture taxes applicable
to a part-year coverage provision.
The bill will also expand the annual limits on HSA contributions by:
- Repealing
the annual deductible limitation on HSA contributions. The
bill allows individuals with HSA-qualified policies that have deductibles
below the annual contribution limits (currently $2,700 for self-only coverage
and $5,450 for family coverage) to contribute up to these maximum amounts
each year. Currently, contributions are limited to the policy deductible
if below the annual contribution limits.
- Allowing full-year contributions
for part-year coverage. The
bill would permit taxpayers whose HSA-qualified coverage begins
mid-year to make a contribution equal to their policy deductible for the year
(or the annual contribution limit, if higher). This will help people who begin
their HSA-qualified coverage partway through the year and who are subject to
the entire calendar-year deductible by allowing them to make a full annual
contribution, rather than prorating their contribution for the number
of months of HSA-qualified coverage. Taxpayers would be required to
maintain a high-deductible plan for a full year beginning in the month
the HSA begins or pay tax on the contribution and a 10 percent penalty.
And lastly, the bill will provide additional flexibility for employers
to help lower-paid employees by:
- Allowing
employers to make additional contributions for
 lower-paid
employees. The bill provides an exception to the current "comparability
rules" that require companies to make equal dollar contributions
to all HSA-eligible employees with similar coverage (single or family)
and work status (full time or part time). This provision will give employers
flexibility to provide greater assistance to their lower-paid workers
in the form of contributions to their HSA accounts.
- Requiring earlier
notification of cost-of-living adjustments. Under
current law, the minimum deductible and out-of-pocket limits for HSA-qualified
policies, as well as the annual contribution limits, are indexed for inflation.
The bill requires the Secretary of the Treasury to announce adjustments to
the amounts by June 1 of each year. Currently, the adjustments are not
announced until November each year. Earlier notification is intended
to simplify planning decisions for employers and taxpayers.
--Hedley
Lawson, Jr. |
|
Back
to Top |
 |
| |
| H
E A L T H P L A N W A T C H |
|
Old Ideas Viewed Anew
 Employers were confronted with increasing healthcare costs well before Medical Reimbursement Accounts (MRA), Healthcare Reimbursement Accounts (HRA), Health Saving Accounts, (HSA) or even Flexible Spending Accounts (FSA).
As insurance costs
increased in the 1970s and 1980s, many employers opted for “high
deductible partial self-funded” plan designs. Employers purchased
fully insured high deductible major medical plans at inexpensive rates,
and self-insured some portion of the first $2,000 or $5,000 of the
deductible. These plans worked well; however, the Employee Retirement
and Income Security Act of 1974 (ERISA) required formal plan documentation,
disclosure, and other related compliance requirements. Some employers
continue to utilize this approach today.
There is an easier way to achieve such cost savings without the complexities of the HSAs’ or HRAs’ inherent plan design restrictions. The solution is a Supplemental Medical Reimbursement Account (SMRA). It operates similar to an FSA, but is funded exclusively with employer dollars.
The plan works as follows:
- Employers purchase a high deductible health plan. (Without HSA restrictions)
- The SMRA benefits can be restricted at the employer’s discretion. (Reimburse 90 percent of claims applied to the deductible)
- Employees may continue to participate in their regular FSA. (Not allowed with an HSA)
- Unused dollars in the SMRA are not an employer expense.
Since the SMRA is an employer-funded account under a Section 125 Plan, there is no need for separate ERISA documentation or regulatory compliance.
Victor Deksnys is the executive vice president of GallagherBPI, a group insurance agency based in Lakespur, Calif., specializing in insurance plans, human resources services and compliance issues for large employers. To contact Deksnys call (415) 925-2079 or go to their Web site by
clicking here. |
| |
 |
| |
| D
O L L A R S & S E N S E |
|
2007 Dollar Limit for Retirement Plans
 The Internal Revenue Service has announced cost-of-living adjustments to the dollar limits for tax-qualified retirement plans and individual retirement accounts, for calendar year 2007. Many of the limitations have changed for 2007, since the increase in the cost-of-living index exceeded many of the statutory thresholds that triggered their adjustment. Other limitations are increased for 2007, as a result of provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA).
|
YEAR |
2007 |
|
Defined Benefit Maximum Annual Benefit |
$180,000 |
|
Defined Contribution Maximum Annual Addition |
$45,000 |
|
402(g)(1) Maximum 401 (k), 403 (b) and 457 (b) Deferrals |
$15,000 |
|
Age 50 or Over Catch Up Contribution |
$5,000 |
|
414(q)(1) Highly Compensation Threshold |
$100,000 |
|
401(a)(17) Limit on Compensation |
$225,000 |
|
Social Security Contribution and Benefit Base |
$97,500 |
|
PGBC Flat Premium Rate (per participant) |
$31.00 |
|
| |
|
DEFINED-CONTRIBUTION
PLANS GAIN POPULARITY
Percent of employees
enrolled in either defined-contribution pension plans or defined-benefit
pension plans:
| 2005 |
Defined-Contribution
Plans |
42% |
| |
Defined-Benefit
Plans |
21% |
| |
|
|
| 2000 |
Defined-Contribution
Plans |
36% |
| |
Defined-Benefit
Plans |
19% |
| |
|
|
| 1990 |
Defined-Contribution
Plans |
34% |
| |
Defined-Benefit
Plans |
35% |
Source:
Mintel 2006 Annuities Study |
|
| In this edition... |
|
 It's Your Business
Striking a Balance for the
New Year
From the Top
US Companies' Commitment to
Employee Benefits Remains Strong
Ask the Experts
Explanation of Benefits
Rules
& Regulations
Congress Expands Health Savings Accounts in Final Days
Resource Corner
Links to Important Resources |
| |
|
 Subscribe to Business Essentials
The monthly update about day-to-day management issues for optical ECPs and retailers.
Print this issue of Business Essentials
Stay on top of optical industry news by going to
www.visionmonday.com.
Subscribe to our other
e-newsletters:
VMail Extra
Sun Advisor
LabAdvisor
|
 |
 |
| Benefit Costs Outpace Salaries |
|
Benefits costs rose more quickly than salaries for the period June 2006 to September 2006, according to the most recent Employment Cost Index from the Department of Labor’s Bureau of Labor Statistics (BLS). This continues a trend broken only once in the last five years, when in June 2006 benefits costs rose less quickly than salaries.
For the period
from June 2006 to September 2006, for civilian employees, benefit costs
increased 1.1 percent in the March quarter, compared with a 0.8 percent
gain in the June 2006 quarter. Private sector benefit costs rose 1 percent
for the September quarter, following a 0.7 percent gain in the previous
quarter.
Increases in benefit costs accounted for one-third of the rise in compensation costs for civilian employees from June to September 2006. Among private industry employees, benefit costs accounted for about one-fourth of the compensation gains during the quarter.
The benefits covered by the Employment Cost Index are the following:
- Paid
leave— vacations,
holidays, sick leave, and other leave;
- Supplemental
pay—premium pay for work in addition to the regular work schedule (such as overtime, weekends, and holidays), shift differentials, and non-production bonuses (such as referral bonuses and attendance bonuses);
- Insurance
benefits—life, health, short-term disability, and long- term disability;
- Retirement
and savings benefits—defined benefit and defined contribution plans; and
- Legally
required benefits—Social Security, Medicare, and federal and state unemployment insurance.
|
Source: Bureau of Labor Statistics
|