Retirement planning advice abounds, and you’ve probably heard or read a variety of theories on this subject. But one rule definitely stands out as solid, practical advice that applies equally to everyone: Save as much as you can.
After all, we’ve never heard of a retiree complaining, “gosh, I saved too much money!”
Not only is saving a powerful step toward planning for a secure future; stashing funds in your 401(k) earns you a valuable tax break each year. Because all contributions up to the annual limit are tax-free, you essentially lower your taxable income for the year. You’re saving for your future, but also saving money right now.
That’s why we were pleased to hear the news that 401(k) contribution limits will increase in 2019. In 2018, you were able to max out your contribution at $18,500. In 2019, that limit will increase to $19,000. This threshold also applies to 403(b) and Governmental Section 457 plans.
For those age 50 and older, you can make an additional “catch-up” contribution to your qualified retirement account each year, in the amount of $6,000. This limit hasn’t changed for 2019, but catch-up contributions still serve as a valuable tool in your last decade or so before retirement. Make sure you’re taking full advantage of this opportunity.
One last note about increasing limits for 2019: The Social Security taxable wage base will jump from $128,700 to $132,300 next year. Yes, that means a bit more of your income could be subject to Social Security taxes. All the more reason to take advantage of those tax savings from your qualified retirement plan!
For more information on contribution limits, or if you have questions about your 401(k) in general, give us a call. If you own a business, we can even help you set up a 401(k) plan for your employees.
Ask people about their financial concerns these days, and you’ll notice that most have something in common: We all tend to worry about the same things! For many of us, the cost of healthcare (particularly rising health insurance premiums) will fall near the top of our priority list. At the same time, you might also hear that retirement is a common concern. The, of course, there are taxes.
What if we told you there might be one way to address all three of these concerns?
With regard to health insurance, many of you face a dilemma: Pay higher premiums for a low-deductible plan, or opt for the lower premiums on a high-deductible plan. The first choice can strain some budgets, while the other leaves you vulnerable to large medical bills before your insurance kicks in to cover the rest.
That’s why health savings accounts (HSAs) are becoming more popular. With this type of account, you can save money to be used toward qualified healthcare expenses. So, you don’t have to worry about meeting your deductible when you have money in the bank. Since the funds roll over from year to year, you can enjoy peace of mind knowing that you’re prepared for this occasion in the future.
What if you never use all of the funds in your account? Don’t worry; that money isn’t lost. You can keep rolling it over all the way into retirement. At that point you can use the funds for certain expenses like Medicare premiums, dental care, vision check-ups and supplies, medications, and more. Essentially, an HSA could actually help you save a bit more for retirement!
At the same time, the money you’re stashing in your HSA can be deducted from your paycheck on a pre-tax basis. That means you lower your overall income tax liability just a bit, and you don’t have to pay taxes on the money you set aside for qualified medical expenses.
As you can see, a health savings account is a way to “kill two birds with one stone” – except, in this case, it’s three birds!
A health savings account is only eligible to certain people who are enrolled in lower-premium, high-deductible healthcare plans. Give us a call to learn more about this money-saving opportunity, and we can help you decide if an HSA is right for you.
As a business owner, Fall will become a busy time for you. As you guide employees through their health insurance enrollment choices, remember that this task is more than a courtesy. You are required by law to issue certain reminders to them, such as this one regarding Medicare Part D.
Essentially, this notice applies to employees who are eligible for Medicare. If you provide prescription drug coverage to these workers, you must provide notice informing them whether your drug plan is creditable or non-creditable.
“Creditable” means that the prescription plan provided by the employer is equivalent to, or richer than, the level of coverage provided by Medicare Part D. “Non-creditable” mean that your provided plan will offer, on average, less coverage for prescription drugs than Part D would provide.
This is called the Medicare Part D Disclosure Notice, and you must provide it to all Medicare-eligible employees before the Annual Enrollment Period begins on October 15, 2018.
This notice will allow your Medicare-eligible employees the opportunity to evaluate their options, and enroll in Part D prescription drug coverage if they so desire. If these employees do not maintain creditable prescription drug coverage for more than 62 days from their initial Medicare enrollment period, they will be subject to a late enrollment penalty if they later choose to enroll in Part D. This enrollment penalty is permanent, so allowing these employees the opportunity to make this decision is of utmost importance.
Second, if you do provide prescription drug coverage to Medicare-eligible employees, you must submit an online disclosure to the Centers for Medicare and Medicaid Services (CMS) each year, and any time a change in coverage affects creditable status. The deadlines for providing this notice are as follows:
- Within 60 days of the start of the coverage year
- Within 30 days after termination of prescription drug coverage
- Within 30 days after changes in creditable coverage status
If you have further questions about either of these notices, please contact us for more information. We can guide you through the process, and help you evaluate all of your health insurance options as Open Enrollment and the Annual Election Period get underway this Fall.
Silver and Bronze-tier plans often make excellent choices for group health insurance policies. You’re able to offer your employees important healthcare benefits, while keeping your own costs in line with your budget. Unfortunately, some employees might feel less than thrilled with the high deductibles inherent within these plans. Luckily we have several options to help you deal with that problem.
Aflac actually offers a couple different add-on insurance options, that can help your employees manage situations in which high deductibles can become a problem for them.
Hospital Insurance is designed to address some of the costs associated with a hospital stay, which might not be covered by the employee’s primary health insurance policy. Many different conditions, even seemingly common ones, can result in expensive care within a hospital setting. For example, a first-time asthma attack costs an average of $11,285. It’s easy to imagine the financial burden that would befall an employee in the event one of their children develops asthma, a relatively commonplace condition.
Several different types of Hospital Insurance policies are available, and these plans can be customized with add-ons.
Accident Insurance can accomplish a similar goal, but is designed to cover expenses relating to accidental injuries only. These plans even offer additional benefits for injuries sustained while participating in organized sports, making them a great addition to family healthcare plans.
Just consider the average cost of one common injury: A broken leg can trigger $9,300 in medical bills, only part of which will be covered by the patient’s primary health insurance policy. Yet for approximately the cost of a box of adhesive bandages each week, your employees could enjoy the extra coverage of Accident Insurance.
These add-ons can be paid by the employer, or by the employees themselves. Even if your workers pick up the cost, they will be grateful for the opportunity to elect the additional coverage they need.
Give us a call to learn more about programs such as Aflac’s Hospital and Accident Insurance, and we will explain how these extra types of insurance make a perfect complement to higher-deductible Bronze and Silver-tier healthcare plans.
October 15 will arrive more quickly than you might think. That’s the date Medicare opens up their Annual Election Period, during which you can change between one plan to another or add additional coverage. Since the AEP only lasts from October 15 to December 7, you won’t have a lot of time to make a decision about your coverage. That’s why we urge all of our clients to think about these issues now. Review your current coverage and compare plans to see if there might be a better deal for you.
With time running short, you might rush into a decision that isn’t just right for you. So, in addition to researching the Medicare plans available to you, we urge you to watch out for these mistakes.
Don’t base your decision solely on premiums. It’s tempting to go with the lowest price. But because Medicare Advantage plans can vary, with different deductibles and even offering different types of coverage, it would be wise to consider whether paying just a bit more per month would actually be the better deal in the long run.
Don’t overlook plan benefits. Not all plans are created equally. Some offer benefits that might or might not appeal to you specifically. Check the coverage details carefully, to see if your plan offers coverage for services you need and value, and whether additional benefits are offered (like a fitness membership, for example). Another plan might be a better fit for your health needs and personal priorities.
Don’t overlook Medicare Supplement Insurance (Medigap). This policy can cover your out of pocket expenses for Medicare Parts A and B plans, like co-pays and deductibles. Medigap can be a good idea for those who anticipate frequent medical care. If you’re accepted now, your Medigap provider can’t charge you more when you develop a serious or expensive health condition.
Don’t forget about prescription (Part D) coverage. Premiums for this type of coverage are calculated based on how long you were eligible, but did not enroll. In other words, if you delay enrolling in Part D, your premiums will be higher when you decide to enroll later. Consider carefully whether you anticipate the need for drug coverage in the future.
Don’t miss the deadline. If you don’t make a decision by December 7, you will be automatically re-enrolled in your current plan. That means you will miss the opportunity to identify coverage that might actually be a better fit for you, and save you money in 2019. Give us a call if you need help, and we will be happy to assist you in identifying your needs and comparing different Medicare plans.
Beginning in 2022, many employers will face an excise tax on high-cost healthcare plans, commonly called the Cadillac Tax, as a part of the continuing changes rolled out by the Affordable Care Act. Congress has also debated plans to completely eliminate the tax, an idea often touted by President Trump, but so far the tax stands. Employers who want to make changes to avoid the Cadillac Tax are getting started now.
The tax won’t apply to everyone. It was specifically designed to target employer-provided healthcare plans that exceed certain annual thresholds for contributions from both employers and employees. Currently, that threshold remains at $10,200 for individual plans, and $27,500 for family plans, in most situations. Payments above those amounts will be taxed at a rate of 40 percent. However, deductibles and co-pays are not included within these limits.
For certain situations the thresholds will be higher, such as when the majority of employees are engaged in high-risk professions, or for retirees who haven’t reached the age of 65 (Medicare eligibility).
In order to avoid the Cadillac tax, many employers are considering a switch to higher-deductible, lower-premium plans. These plans do assign more responsibility for healthcare costs to the employee, but we have ways of mitigating that situation.
A common option, which has proven effective, is to pair a high-deductible healthcare plan with a tax-exempt health savings account. This pairing keeps costs lower for both employer and employee, while allowing the employee to set aside pre-tax money in a savings account to handle the annual deductible. If the money in that HSA is not used in a particular year, it rolls over to the next year. In fact, unused funds in an HSA can be rolled over all the way to retirement, when the money can then be used for qualified medical expenses.
Employers are also exploring other improvements to reduce overall healthcare costs, such as worksite clinics or tele-health options. In many cases, these cost reductions result in more convenient healthcare for employees; a win-win situation for everyone.
For more information on the Cadillac Tax, and how it will be calculated, give us a call. We can assess your current healthcare expenditure, anticipate future increases, and help you assess your options to keep costs in line with your budget.
Believe it or not, it’s almost that time of year again! Soon your enrollment period for Individual & Family health insurance will open, depending upon which type of insurance you have, so now is the time to begin evaluating your options. But before we get into that, let’s review the two types of enrollment periods, with regard to health insurance.
If you are a Medicare recipient…
Your Annual Election Period will begin October 15 and run through December 7. During this time you can switch from Original Medicare to an Advantage plan, or vice versa. Or, you can change from one Advantage plan to another.
This is also the time to evaluate whether you need Part D (prescription drug) coverage, and opt in or out of that. Opting out will lead to a penalty when enrolling later on.
If your current coverage will be changing at all, you will receive a letter about those changes. Watch your mail for notices from Medicare or your Advantage plan administrator. Then, you can decide whether this plan continues to meet your needs, or if you need to make a switch.
If you like your current plan, you don’t have to do anything. You will be automatically re-enrolled.
If you have any other type of health insurance…
Open Enrollment for Individuals & Families runs from November 1 through December 15. Take note of this end date. In the past, Open Enrollment periods have extended into January, but now you only have about a month and a half to make your decision.
If you don’t want to make changes to your plan, you will be automatically re-enrolled in the same one. Keep in mind that premiums and various elements of your coverage can change from one year to the next, so do your research carefully (and open any mail you receive from your provider).
If you miss the Open Enrollment deadline of December 15, you can’t enroll in a new plan or make changes to your current plan unless you experience a qualifying life event at some point next year. That’s why we’re reminding you of Open Enrollment now. Start evaluating your healthcare plan, and considering your future needs, right now. Then when November rolls around you will be ready to make a decision.
Make sure to remind your family and friends of this year’s Open Enrollment dates, and tell them to call us if they have any questions. We appreciate and value your referrals.
As you know, the Employee Retirement Income Security Act (ERISA) issues requirements governing private pension, group life, and all health plans offered to your employees. One of those requirements involves a Summary Plan Description (SPD) for those benefits, issued when a new plan takes effect or when an employee becomes eligible to participate in the plan. These SPDs must also be issued upon request of any plan participant or beneficiary.
Failure to follow procedures set forth by ERISA can result in litigation. Luckily these issues are easily avoided by keeping all SPDs up to date.
What information is covered by the SPD?
According to HGLaw.org, your SPD must include the following information:
- A description or summary of the benefits
- The plan name, sponsor, and administrator
- Funding mechanisms
- Participation and qualification guidelines
- Calculation methods for service and benefits
- Benefit vesting schedules
- Benefit payment procedures and timing
- Claims submission process
- Claims appeal process
- Address for service of legal process
- Circumstances that may result in ineligibility or a denial of benefits
- A statement of participants’ ERISA rights and other technical notices
How often must I provide employees with a copy of their SPD?
Providing this information to employees is your legal responsibility, and a new copy must be issued every ten years. Or, if any plan is amended or modified during a five-year period, a new SPD must be distributed.
What else should I do?
All ERISA compliance issues are complicated legal matters, and assistance from an ERISA compliance specialist is highly recommended. Your tax and legal advisors can guide you in matters regarding 1095 A forms, 1095 C forms, Affordability Calculations, and other related topics.
You should also contact us about ERISA Summary Plan Description Wraps, to create one overall plan document and SPD. For more information, we can refer you to an ACA and ERISA Compliance company that has an expertise in this area.
Retirement planning always involves your spouse, so that the two of you can plan for the future together. But when a large age gap exists between you, you will face a few more challenges. You’re less likely to retire at the same time, and this can lead to more consequences than you might think. So, if one of you is much older than the other, look more closely at these three areas of retirement planning.
Social Security. If your spouse is much younger, then there is a good chance he or she will outlive you. Therefore, there might come a time during which they need Social Security survivor benefits. If you’re the higher income earner, or if your spouse doesn’t have a work record at all, then claiming your benefits too early can leave them with less to live on.
Timing of Social Security claims is complicated for everyone, and even more so when there is a wide age gap between spouses. Examining all of your options carefully, and working with a financial professional, can help you decide which path to take.
Long-term care. An estimated 70 percent of retirees will need long-term care at some point. You might plan to rely upon your spouse for your care, but there are two problems with this plan:
- He or she might not possess the nursing skills required, meaning you still need a nursing home or in-home nursing provider
- Your spouse will likely outlive you, and who will provide their nursing care when the time comes?
The average annual cost of a nursing care facility is $82,000 to $92,000 per year. Luckily, long-term care insurance can cover this cost, if you had the foresight to enroll in a policy. Let’s talk about that now, before you retire, because enrolling in a policy at a younger age will mean more affordable premiums.
Health insurance. What if your spouse relies upon your health insurance, provided through an employer? If you retire at 65 or later, you will enroll in Medicare… But what about your spouse? They will be left without health insurance, and taking on that expense can be risky.
You have several options, such as working until they are eligible for Medicare, but that might not seem realistic if your spouse is a decade (or more) younger. Purchasing a health insurance plan independently is probably the safer way to go. Give us a call and we can walk you through your health insurance options.
When you’re suffering a minor health condition, the last thing you want to do is get dressed and drag yourself into a stuffy doctor’s office. You don’t want to infect other people, and you certainly don’t want to expose yourself to even more germs. But in the past, that was our only option.
Finally, we have a solution for these situations. The healthcare field has evolved to allow phone consultations for many minor conditions. This option can be better for all of us, reducing the unnecessary spread of colds and other minor illnesses. Plus, it’s much more comfortable and convenient for you, the patient.
These appointments are now available in California, depending upon your provider and insurance plan provisions.
It’s important to remember that there will always be some situations in which an in-person visit is necessary. Phone appointments are best used for conditions such as:
- Colds or respiratory infections
- Follow-up appointments regarding previous treatment
- Other minor, non-emergency illnesses
Telephone consultations are not appropriate for:
- Possible broken bones or sprains
- Severe shortness of breath
- Chest pains
- Severe abdominal pain
- Psychiatric emergencies
- If urgent care is required, call 911 or go to the closest emergency room.
How it works. When you call for a phone consultation, you will be asked to confirm that you are at least 18 years old and that you have previously attended one face-to-face meeting with this provider. If so, a one-hour window will be scheduled for you, during which your doctor will call you back.
It’s really that simple! And the best part is, you won’t even have to change out of your pajamas. For more information on telephone appointments, call your primary care provider or your health insurance representative.