News about fee disclosure and excessive fee lawsuits are nothing new in the workplace retirement plan arena. In 2012 the U.S. Department of Labor (DOL) passed rule 408(b)(2) requiring retirement plan services providers to disclose plan fees. Each year since participants in 401(k)-style retirement plans receive these notices. Fee notices are important because for the first time plan participants can see how fees impact retirement plan balances. And they see that the higher the fee, the greater the reduction to their retirement plan balance.
Not so surprisingly, the retirement plan services community did not respond positively to this new requirement. They’ll never admit it but the system they created made fee disclosure harder work than it needed to be. In particular, 12b-1 fees, also known as revenue sharing, an opaque practice by design proved difficult to untangle. Also, service providers felt like they were doing a lot of work to produce notices that very few workers would even look at. By some estimates, they claimed that about 1% of the workers receiving the notices would read it in its entirety and ask questions about it.
No one knows if these estimates were right, but what did happen was an increase in retirement plan fee litigation. Workers started questioning plan decisions and non-decisions that led to what they considered excessive plan fees. Plan participants are suing both retirement plan service providers and employers for having excessive plan fees. Continue Reading...
Every year workers save thousands of dollars by participating in workplace pre-tax employee benefit plans. Most of these workers know they are saving money by participating in these plans because someone told them so. However, many do not know why or how much they are saving. But if these benefits vanished, the effect would be immediate and painful.
If this all sounds confusing, that’s because it is confusing. For decades, workers who participate in employer-sponsored cafeteria plans enjoy tax savings that non-participants do not. But that may be changing. The passage of Obamacare, along with several White House tax-reform proposals, and tax recommendations by politicians and thinkers from all political parties is threatening to change this confusing and unequal system.
Employer-Based Cafeteria Plans
Cafeteria Plans are difficult to explain and even more to understand. They are also known as Section 125 plans because they are part of and subject to provisions of Section 125 of the Internal Revenue Code. As part of the tax code, they have specific features that allow employees who purchase benefits under the plan to reduce their gross income and, therefore, the amount of taxes they pay.
Cafeteria plans may include a suite of underlying employee benefits such as medical, dental, vision and group term life insurance, and flexible spending accounts.
A cafeteria plan arrangement is a complicated way of incenting employers to offer workplace health and welfare benefits and for employees to participate in them. However, now that Americans have different options for purchasing insurance and given the fact that millions do not have access to these workplace-only benefits, proponents of employee benefit tax reform are looking to change the system.
Times Are Changing
Obamacare did not address the unequal tax treatment of health insurance in the workplace versus the individual market, however, several Obamacare “alternatives” drafted by conservatives do. Continue Reading...
Despite relentless criticism, the Obama administration continues to propose and create policies and programs relating to health insurance and retirement savings plans. For sure, much of the criticism is due to fear of change by an industry that is doing well for itself. If brokers are able to briefly contain their fear of the unknown, they will see that they have a lot to gain from the Administration’s many proposals.
There are three main themes to the White House’s health insurance and retirement plan proposals:
- Increase Access
- Increase Legal Protections
- Increase “Tax” Fairness
It’s a fact that more Americans have access to health insurance because of the Affordable Care Act (aka Obamacare). And while most everyone agrees that increasing access to health insurance is a good thing, Obamacare was a challenge for one group in particular—insurance brokers. After Obamacare, many insurance brokers expressed concern for their livelihood and if they could transition to a new, more drawn-out way of doing business. They also had legitimate concerns about their commissions. There is talk that some independent agents transitioned to other professions or retired, but for the most part insurance brokers did not lose their livelihood and now have a larger customer base to assist. Continue Reading...
I am committed to discovering and learning from every Obamacare alternative available. So far I uncovered two conservative proposals—The 2017 Project Proposal and the Save Our Healthcare Proposal. But after reading two proposals from conservative elites, one (2017) a lot more detailed than the other (SOH), I am already feeling distracted. So I went searching for something else, something different, and something unique. And I found it—two very different “alternatives” to Obamacare… The first alternative comes from Whole Foods (supermarkets) co-founder and libertarian, John Mackey. The other alternative is health care sharing ministries.
Everyone who visits a Whole Foods market knows it is an experience. The staff is nice, friendly and helpful. The food is super fresh and a lot of it is organic. They offer products you cannot find elsewhere. And you can easily spend $100 and not have enough food for one meal, but still walk away smiling. Now Whole Foods is not the only high-price supermarket, but it’s owner is the only corporate big shot that has his own health care reform plan.
John Mackey, Whole Foods co-founder, got in a lot of trouble for his comment that Obamacare is fascism. He later apologized for his poor choice of words, but he no doubt still believes them to be true. In true libertarian fashion his health care reform plan calls for more personal responsibility and less (really, no) government intervention, unless it is pro-market intervention.
The Mackey (8-point) Health Care Reform Plan
- More high deductible health plans and health savings accounts (HSAs)
- Same tax treatment for individually purchased and employer-provided health insurance
- Right to purchase health insurance from any state
- Abolish all health insurance plan mandates (these are benefits that a state or the federal government requires a health plan to offer. For example, alcohol and drug treatment, hearing aids, mental health benefits, etc.)
- Implement medical tort reform to limit the amount of damages patients can collect
- Health care costs transparency
- Reform Medicare (that’s all it says…)
- Allow tax deductible charitable donations to help others who do not have private or publicly provided health insurance