New Tools Make It Easier to Save for Retirement

Employee contribution rates and account balances have gotten a boost from enhanced offerings that make it easier to save for retirement, according to a Deloitte survey. Plan sponsors and providers have expanded offerings to include automatic enrollment, step-up contributions, individual financial counseling, and mobile transaction processing. The number of plans offering step-up contributions increased substantially from 46% last year to 62% in 2015. Mobile transaction processing is available in 59% of plans (up from 52% in 2013 to 2014 and 25% in 2012.) This year’s survey was conducted with the International Foundation of Employee Benefit Plans and the International Society of Certified Employee Benefit Specialists.

Forty percent of plan sponsors said that the number one reason for employees give for participating in retirement plans this year is to save for retirement, surpassing last year’s top reason of taking advantage of the company match. Only 19% of plan sponsors expect most employees to be ready for retirement. Average account balances of participants grew in 2015 to $99,011, up almost 4% from $95,227 in 2013 to 2014. Employee contribution rates also increased. The median actual deferral percentage for non-highly compensated employees rose to 5.9%, a 13% increase over last year.

Plan sponsors and providers are using multiple tactics to encourage retirement savings and raise awareness of the income needed in retirement. The highest rated approaches are general and multiple communications/education at 83% (up from 73% in 2013 to 2014), followed by targeted communications at 68%, up from 56% in 2013 to 2014. Group meetings remained in the top three at 66%, up from 60% in 2013 to 2014.

Ninety-four percent of plan sponsors are offering some form of matching or profit-sharing contribution in their defined contribution plans, with 6% increasing the match. For the first time in five surveys dating back to 2009, 100% of respondent plan sponsors with discretionary matching made the matching contributions.

How Telehealth Could Save Big Money for in Medicare

Telehealth can help achieve savings in the Medicare program, according to an actuarial study by Alliance for Connected Care. The study found that 83% of telehealth visits require no additional follow-up care. Replacing in-person acute care services with a telehealth could save the Medicare program $45 per visit. “Reimbursing for telehealth will not increase Medicare expenditures; it will provide an easy alternative for beneficiaries to get quality health care. Telehealth can often replace an in-person visit to the emergency room or urgent care center and resolve the issue so no further care is needed,” said Dale Yamamoto of Red Quill Consulting.

Some Medicare Advantage plans have started offering telehealth services. Most seniors in fee-for-service Medicare lack access to telehealth services because of the restrictions in the Affordable Care Act. Generally, covered telehealth services must be provided in rural areas as determined by the Dept. of Health and Human Services (HHS). The Alliance says that telehealth can play a critical role in meeting the primary care needs of the incoming influx of Baby Boomers. For more information, visit Alliance for Connected Care.

Tax Credit Helps Low- and Moderate-Income Workers Save for Retirement

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By Leila Morris – Low- and moderate-income workers can take steps now to save for retirement and earn a special tax credit in 2014 and years ahead, according to the Internal Revenue Service.

The saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to IRAs and 401(k) plans and similar workplace retirement programs. Also known as the “retirement savings contributions credit,” the saver’s credit is available in addition to any other tax savings that apply.

Eligible workers still have time to make qualifying retirement contributions and get the saver’s credit on their 2014 tax return. People have until April 15, 2015, to set up a new individual retirement arrangement or add money to an existing IRA for 2014. However, elective deferrals (contributions) must be made by the end of the year to a 401(k) plan or similar workplace program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, or the Thrift Savings Plan for federal employees. Employees who are unable to set aside money for this year may want to schedule their 2015 contributions soon so their employer can begin withholding them in January.
The following people can claim the saver’s credit:
• Married couples filing jointly with incomes up to $60,000 in 2014 or $61,000 in 2015.
• Heads of household with incomes up to $45,000 in 2014 or $45,750 in 2015.
• Married individuals filing separately and singles with incomes up to $30,000 in 2014 or $30,500 in 2015.

Like other tax credits, the saver’s credit can increase a taxpayer’s refund or reduce the tax owed. Though the maximum saver’s credit is $1,000, $2,000 for married couples, the IRS cautioned that it is often much less and, due in part to the impact of other deductions and credits, may, in fact, be zero for some taxpayers.
A taxpayer’s credit amount is based on filing status, adjusted gross income, tax liability and amount contributed to qualifying retirement programs. Form 8880 is used to claim the saver’s credit, and its instructions have details on figuring the credit correctly.

In tax year 2012, saver’s credits averaged $215 for joint filers, $165 for heads of household and $127 for single filers. The saver’s credit supplements other tax benefits available to people who set money aside for retirement. For example, most workers may deduct their contributions to a traditional IRA. Though Roth IRA contributions are not deductible, qualifying withdrawals, usually after retirement, are tax-free. Normally, contributions to 401(k) and similar workplace plans are not taxed until withdrawn. Other special rules that apply to the saver’s credit include the following:
• Eligible taxpayers must be at least 18.
• Anyone who is claimed as a dependent on someone else’s return cannot take the credit.
• A student cannot take the credit. A person enrolled as a full-time student during any part of 5 calendar months during the year is considered a student.

Certain retirement plan distributions reduce the contribution amount used to figure the credit. For 2014, this rule applies to distributions received after 2011 and before the due date, including extensions, of the 2014 return. Form 8880 and its instructions have details on making this computation. More information about the credit is on IRS.gov.

Biosimilar Medications Could Save Billions

Over the next decade, the United States could save $44 billion by introducing competing biosimilar versions of complex biologic drugs, according to a report by the RAND Corporation. Biologics, which treat conditions, such as cancer and rheumatoid arthritis, are often effective, but expensive. Patient copays can be several thousand dollars a year. In 2011, eight of the 20 best selling drugs were biologics. Also, annual spending on the drugs has grown three times faster than spending for other prescription medications. Introducing biosimilar drugs into the U.S. marketplace is expected to increase competition and drive down prices, saving money for patients, health care payers, and taxpayers. However, savings are not expected to be as dramatic the as savings we have seen for an earlier generation of less-complex generic drugs.

The Affordable Care Act authorizes the FDA to develop a regulatory framework for approving biosimilar drugs. Draft materials released by the FDA suggest that not all biosimilars will be interchangeable with their original counterparts. In addition, nearly all biosimilars will require at least one head-to-head clinical trial to confirm similarity to the original biologic, which is a more-strenuous process than what is required for standard generics. A number of issues will determine the savings and who will benefit. One issue is how much the use of biologics grows as some patients switch to biosimilar drugs as they become more affordable. Patients will see some cost savings. But physicians and hospitals may also benefit because biologicals are often purchased by health providers and administered in clinics and other treatment settings. For more information, visit www.rand.org.

Majority of Workers Feel Responsible To Save for Their Retirement

Seventy-eight percent of workers say it’s their responsibility to save for their retirement. Also, 84% of defined contribution plan participants say it’s their responsibility to save for their retirement, according to a LIMRA survey. The survey also found the following:

  • 77% say that all workers should have access to a retirement savings plan at work and that these plans offer an effective way to save for retirement.
  • 60% say that those who save in a defined contribution retirement plan are likely to achieve a secure retirement.
  • 85% of defined contribution plan participants say these plans provide an effective way to save for retirement. Thirty percent say that their defined contribution plan savings will represent the primary source of retirement income.
  • 50%  of defined contribution plan participants and nearly 40% of plan participants under 45 say that savings in their defined contribution plans will be their primary source of retirement income.
  • 45% of workers who participate in their defined contribution retirement plan are more confident that they will realize their chosen retirement lifestyle compared to 32% of non-participating workers.

Workplace efforts to stem chronic disease could save save billions

If businesses embraced efforts to prevent chronic disease, the result could be up to $303 billion in savings, according to the Robert Wood Johnson Foundation. The nation spends $2.7 trillion each year on health care, mostly to treat rather than prevent problems. Employee Benefit News (6/19)

ACA Has Helped Seniors Save $8.9 Billion On Prescription Drugs

Seniors and people with disabilities with Medicare prescription drug plan coverage have saved $8.9 billion on their prescription drugs thanks to the Affordable Care Act, according to new data by the Centers for Medicare & Medicaid Services (CMS). At the same time, these seniors will be free to use more of their Social Security benefit cost of living adjustment on what they choose because the Medicare Part B premium will not increase in 2014, thanks to the health care law’s successful efforts to keep cost growth low.

Since the Affordable Care Act was enacted, more than 7.3 million seniors and people with disabilities who reached the “donut hole” in their Medicare Part D (Medicare Prescription Drug Coverage) plans have saved $8.9 billion on their prescription drugs, an average of $1,209 per person since the program began. During the first 10 months of 2013, nearly 3.4 million people nationwide who reached the coverage gap — known as the donut hole. This year they have saved $2.9 billion, an average of $866 per beneficiary. These figures are higher than at this same point last year, when 2.8 million beneficiaries had saved $1.8 billion for an average of $677 per beneficiary. CMS recently announced that the Medicare’s Part B premium will not increase in 2014, and that the last five years have been among the slowest periods of average Part B premium growth in the program’s history. The Part B deductible will also not increase, having decreased in 2014. The Part B premium and deductible for 2014 are 15% below what was projected in 2010, the year the Affordable Care Act was enacted.

Also as a result of the Affordable Care Act, Medicare Advantage and Prescription Drug Plans remain stable and strong. Earlier this year, CMS announced that the average Medicare Advantage (MA) premium in 2014 is projected to be $32.60. CMS also estimated that the average basic Medicare prescription drug plan premium in 2014 is projected to be $31 per month, holding steady for 4 years in a row. The deductible for standard Part D plans will decline by $15 in 2014, to $310. Since the passage of the Affordable Care Act, average MA premiums are down by 9.8%.

Since enactment of the Affordable Care Act, the life of the Medicare trust fund has been extended by nearly ten years, till 2026.
For state-by-state information on savings in the donut hole, please visit:http://downloads.cms.gov/files/SummaryChart2010_October_2013.pdf

Study: Planning long-term care can save $11,000 a year

Making long-term care arrangements before a family member needs the care could save family members almost $11,000 a year in out-of-pocket expenses, according to new data. Among family members who acted as the primary caregiver for a person requiring long-term care, 53% have lost income because they assumed those duties, the study found. National Underwriter Life & Health (10/21)

Last Updated 05/25/2022

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