by Pete McAllister | Accounting News, Audit and Accounting, Healthcare, IRS, News, Professional Services, Resources, Retail & Distribution, Tax Consulting, Tax Planning, Tax Planning - Individual, Tax Preparation - Individual
As the third year of the Patient Protection and Affordable Care Act (PPACA) approaches, employers need to be aware of additional fees that will be assessed on insurers and plan administrators of self-insured plans beginning in 2013. In addition, reporting health care costs to the government begins.
The new fees will increase the cost of providing group health plans for employees. They include:
- Fees to fund research on patient-centered outcomes
- Transitional reinsurance fees
- Pay or play penalties
- Cadillac tax
Fees to fund research on patient-centered outcomes
Health care reform created the Patient-Centered Outcomes Research Institute (PCORI), which is charged with promoting research to evaluate and compare the health outcomes and clinical effectiveness, risks, and benefits of medical treatments, services, procedures, and drugs. PCORI is to be funded in part by fees assessed on health insurers and sponsors of self-insured group health plans. This fee is commonly referred to as the “comparative effectiveness fee” or “PCORI fee.” The PCORI fee will be assessed at $1.00 times the average number of covered lives (employees and dependents) for the first plan or policy year ending on or after October 1, 2012. Employer plan sponsors must choose a method for calculating the average number of covered lives for their required annual fees by December 31, 2012, for calendar year plans.
Transitional reinsurance fees
The transitional reinsurance program will require health insurance issuers, as well as certain plan administrators on behalf of self-insured group health plans, to make contributions to a transitional reinsurance program for the three-year period beginning January 1, 2014. This fee is likely to result in additional costs for employer plan sponsors and – depending on whether the plan at issue is self-administered – certain additional reporting obligations.
Pay or play penalties
In 2014, large employers with fifty or more full-time equivalent employees could be subject to two potential penalties: the No Coverage Penalty and the Unaffordable Coverage Penalty. The No Insurance Penalty subjects certain employers to a $2,000 per full-time employee penalty (excluding the first thirty full-time employees) under specific conditions. The Unaffordable Coverage Penalty applies if an employer offers its full-time employees the opportunity to enroll in coverage under an employer plan that either is unaffordable (relative to an employee’s household income) or does not provide minimum value. This penalty is $3,000 for every full-time employee who receives a subsidy for coverage in a state exchange.
In some cases, the total cost of these penalties may be less than the total cost of providing coverage. CliftonLarsonAllen’s Health Insurance and Penalty Calculator provides information about the impact of reform on individual companies.
Cadillac tax
Starting in 2018, insurers of employer-sponsored plans or companies that self-insure their own plans will be subject to an excise tax if their premiums are in excess of $10,200 for individual coverage and $27,500 for family coverage. Roughly 60 percent of large employers believe their plans would trigger the tax unless they take action to avoid it, according to a 2011 survey by Mercer, a human resources consulting firm. Although the tax is to be imposed on insurers, the effects are likely to trickle down to consumers.
Many health care reform provisions will impact the cost to provide health care coverage for employees. Employers should be aware of the additional fees and reporting requirements and work with their benefits consultants to determine the financial impact of health care on their businesses. Plan sponsors should have already verified that they have the systems in place to determine and report the aggregate cost of applicable employer-sponsored coverage for 2012 on employees’ Forms W-2.
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by Amanda O'Brien | Accounting News, Bookkeeping, CPA, Tax Consulting, Tax Planning, Tax Planning - Individual
Many American families are struggling to make ends meet and save for their future needs, according to a report from the Consumer Federation of America (CFA) and Certified Financial Planner Board of Standards, Inc. (CFP Board), but those with a financial plan do better and are more confident about meeting their goals.
But only 36 percent of the 1,508 household financial decision makers who participated in the CFA/CFP Board 2012 Household Financial Planning Survey have ever prepared a comprehensive financial plan. Respondents with higher annual incomes and older respondents were more likely than middle-income families to have a financial plan.
Survey responses reflected the effects of the recession that began in 2008. Nearly 38 percent of households said they live paycheck to paycheck. Less than 30 percent indicated they felt comfortable financially, and only 34 percent think they can afford to retire by age 65. The survey was conducted by Princeton Survey Research Associates International (PSRAI).
Regardless of income, decision makers with a financial plan, whether it is one they have prepared on their own or with a professional, are more likely to feel they are on pace to meet all of their financial goals by a margin of 50 percent to 32 percent. By an even larger margin (52 percent to 30 percent), and across all income brackets, families with a financial plan are more likely to feel “very confident” about managing money, savings and investments.
What Is a Comprehensive Financial Plan?
The survey assumes that a comprehensive financial plan will identify a family’s financial goals, and a plan for savings and investments that will help them meet those goals. For most families, those goals will be income in retirement, college education for children, insurance needs, emergencies, and other expenses (e.g., assisting parents). The plan should include paying off credit card debt.
Most Americans have spending plans, the report says, but few have savings plans except for employer-sponsored retirement plans. Many respondents say that they do not earn enough money to save. “Advances in technology have made accessing and analyzing financial information much easier, but a lack of understanding about savings and investment options and how to best manage household finances remains a serious obstacle to Americans’ financial preparedness,” the survey reported.
Comparison with 1997 Survey
The CFA/CFP Board survey utilized a number of questions asked by a 1997 CFA-NationsBank survey, also developed with and administered by PSRAI. This made possible a comparison of consumer attitudes and habits in the more optimistic, low unemployment year of 1997, with attitudes and habits in 2012, in the aftermath of the recent severe recession.
The number of Americans who reported living paycheck to paycheck rose from 31 percent to 38 percent from 1997 to 2012, and the percentage who indicated they felt comfortable financially fell from 38 percent in 1997 to 30 percent in 2012.
Other comparisons include:
- In 1997, only 38 percent felt [they were] behind in saving for retirement compared to 51 percent this year.
- In 1997, half (50 percent) said they thought they could retire by age 65 compared to only 34 percent this year.
- In 1997, more families with college-bound children were saving for higher education (56 percent) compared to this year (48 percent).
- However, the proportion of those who say they have a retirement investment plan in place is about the same (51 percent in 1997 and 49 percent this year).
Getting Help When Preparing a Financial Plan
The 2012 survey revealed that slightly more than half of respondents said “it’s hard for me to know who to trust for financial advice” (55 percent); “to me, investing seems complicated” (52 percent); and “I’m worried about losing my money if I invest it” (55 percent), a significant increase from the 45 percent who expressed this worry in 1997.
Kevin R. Keller, CEO of CFP Board said, “Consumers understandably are more nervous about investing their money given recent revelations about financial fraud, manipulation, and abuse of clients. This doesn’t mean that people shouldn’t create a financial plan and be prepared. We encourage consumers to do their homework and find a financial professional who always puts the clients’ best interests first and abides by a fiduciary standard of care.”
Both the CFA and CFP Board recommend that consumers begin by assessing their own financial condition and develop a plan. One useful tool is the website LetsMakeaPlan.org, where interested consumers can learn more about preparing a financial plan. The site also lists questions an individual might ask of a financial planner and some red flags.
CFA executive director Stephen Brobeck said that financial planning is an important component of financial literacy. Financial planners need to get the message out.
Full Article: http://www.accountingweb.com/article/personal-financial-plans-saving-future/219569
