:: IRC Section 403(b) ::
New Section 403(b) Regulatory Changes
Starting January 1, 2009, eligible Employers (Schools, Colleges, and Hospitals) will assume full responsibility for administering and regulating retirement savings 403(b) plans, commonly known as Tax Deferred Accounts (TDAs), or Tax Sheltered Annuities (TSAs). New regulations implemented by the Internal Revenue Service have been amended Section 403(b) of the Internal Revenue Code.
These new regulations, which are part of a major overhaul of non-profit retirement plans implemented by the IRS, represent a significant increase in administrative responsibilities, compliance, and liability and risk issues for business leaders. The regulations are intended to bring the requirements for Section 403(b) plans in line with the requirements for Section 401(k) and public Section 457(b) plans. This increased responsibility comes at a time when administrators and School Districts have limited resources to assume new responsibilities for employee benefits.
On July 26, 2008, the Internal Revenue Service introduced the significantly revised regulations for governing the 403(b) plans. This update reflects over 40 years of tax acts into these comprehensive new regulations. The new regulations are effective July 26, 2007 and the applicability date for plans after December 31, 2008.
At DeHEY McANDREW, we recognize the significant administrative impact the regulations have on public business administrators and plan participants both of whom have many competing priorities. DeHEY McANDREW has adopted a system to fully support its clients as they manage through the significant 403(b) plan regulations. We are well prepared for these regulations with robust infrastructure to assist School Districts, Hospitals and all non-profit organizations with whatever needs they have in meeting the regulatory requirements.
DeHEY McANDREW has pinpointed the most important and most policed provisions, found in the 140 pages of the S. 403(b) Final Regulations. DeHEY McANDREW has compiled a general list of several responsibilities and look forward to support your organization in the following:
- Written Plan document
- Universal Availability Rule
- Auditing “Orphan Plans” (Plans that are established by a previous employer.)
- Testing Non-Discrimination Rules
- New changes for certain transfers on exchanges of TSA accounts, some effective by September 25, 2007
- Formal Pension Plan, similar to 401(k), with form and function
- More Complex Employer Fiduciary Responsibility
- Monitoring Participants Annual Contribution Limit
- Choosing the Most Dedicated and Experienced Investment Providers
- New Payment Periods / Employer Responsibility
- Explanation and Communication with Participants about Regulatory 403(b) account changes
- Separate Account or Trust for contributions in excess of Section 415 limitations under S. 403(b), if not no amounts will be qualified for tax deferrals under S. 403(b)
- Roth Accounts administration with 403(b) accounts
- Distributions – the plan keeps responsibility for its retirees after retirement
- Loans and Hardship Withdrawals, including QDRO’s
- Catch-Up Rules
- New Annual Special Maximum Contribution Limits
- Establishment of Early Retirement Incentive/Employer Contributed Post Retirement 403(b)
:: IRC Section 125 Cafeteria Benefit Plans ::
The combination of Internal Revenue Code Sec. 125 and the Tax Reform Act brought some important, basic allowances for employers. They created an important tool for employers to assist in the administration of benefit programs. These allowances are already being taken advantage of by employers looking to attain their employee benefits’ goals. Specifically IRC S.125 allows:
- Reduction in tax liability for both the employee and employer.
- Alternative funding mechanisms for qualified benefits.
- Expanded benefits choices including “cash” in exchange for health insurance benefits.
From these three allowances comes the process of Cafeteria Plans, also known as Flexible Benefit Plans. DeHEY McANDREW designs, qualifies and administers “cafeteria benefit plans”. DeHEY McANDREW can imbue the design with specific medical plan cost containment goals. We will utilize available managed care options, alternative deductibles and co-payment scales and strategic payroll price schematics to engender enrollment patterns while keeping cost containment goals. Design features run the gamut from simpler salary reduction arrangements to more esoteric defined contribution programs with several plan options. This process can provide any employer the strategy of managing the escalating costs of its benefits program. There are three types or stages of IRC Section 125 Flexible Benefit Plans/Cafeteria Plans: Salary Conversion Plans, Benefit Exchange Plans and Full Flexible Benefit Plans.
:: Flexible Spending Arrangements ::
DeHEY McANDREW designs, qualifies and administers Flexible Spending Arrangements (FSAs) in-house. FSAs are accounts which employees fund tax-free for qualified expenses. Employees save money by contributing to these accounts prior to taxes being calculated thus lowering taxable income and can even bump the employee down to a lower tax bracket. Contributions to these accounts save employers money, too. Since contributions are tax-free, employers do not have to pay their portion of FICA on amounts contributed to FSAs.
There are two types of accounts:
- Medical Spending Account – reimbursable for qualifying medicals expenses not covered under the employee’s Health Insurance Plan
- Dependent Care Spending Account – reimbursable for qualifying expenses for the care of dependents while an employee is at work
Since DeHEY McANDREW’s FSAs are administered in-house, employee participants and employers can easily obtain information on the status of their accounts. Claims are paid weekly so employees do not have to wait an extended period of time to receive their money. DeHEY McANDREW’s FSAs also have a feature where participants can setup Scheduled Provider Payments. Scheduled Provider Payments authorize DeHEY McANDREW to send a participant’s FSA funds to a provider or the directly to the participant on a schedule (weekly, bi-weekly or monthly) in order to eliminate repetitive submission of paperwork for the same on-going service.
:: Health Reimbursement Arrangement ::
Health Reimbursement Arrangements (HRAs) coincide with a high deductible health insurance plan. HRAs are usually funded by the employer to offset these high deductibles. This technique incorporates the cost saving benefit of a self-insured plan on a smaller scale. For companies who are not quite large enough to apply a fully self-insured plan, the HRA allows companies to utilize the “pay-as-you-go” method without exposing itself to the liability of a fully self-insured plan. An HRA can save employers in two areas: (1) unused deductibles and (2) lower increase in premiums for future plan years.
An HRA immediately lowers plan premiums (the fixed expense of the plan); although, deductibles are increased (the variable expense of the plan). When usage within the plan is controlled, the plan saves. Furthermore, an HRA has been known to increase awareness of the costs of health care, which in and of itself can lower usage. Lastly, as usage from one year to the next decreases, premiums for the ensuing plan year will not experience as large an increase as has the past.
:: Health Plan Insurance Premium Audit ::
DeHEY McANDREW has developed many programs through the years that have helped corral the ever-inflationary expenses of medical/health plans. As a firm who counsels its Clients in the realm of employee benefits and Human Resources functions, medical plan cost-containment was always in the forefront with our Clients.
DeHEY McANDREW was the first firm in the state of Pennsylvania to negotiate an Employee-shared health plan arrangement with a powerful teachers union. Furthermore, our firm was the first third party administrator in this state when we designed and negotiated a singular health plan arrangement among a large employer, a local hospital, a national pharmaceutical chain and a physician association to establish a one-source health plan, with significant discounts in a unionized setting.
Most Employers do not need a complex and lengthy negotiation to combat health cost inflation. On the other hand, most Employers are stuck in the quagmire of the inflationary health costs. Double-digit increases in medical premium rates are commonplace. While banks are in crisis and insurance companies are reaping larger profits, health care benefits have become one of the largest, fastest growing and most significant expenses for employers.
Many Employers throughout the country are using a simple cost-cutting strategy that has instant savings and zero deployment cost. This strategy is called a Health Plan Premium Audit. A Health Plan Premium Audit is a complete, unbiased “re-underwriting” of an organization’s health care package by reviewing the underlying assumptions of risk made by the insurance carriers and examining the underwriting formulas that a carrier uses to set insurance premium rates. Audits find discrepancies such as math errors, incorrect or unreasonable assumptions and subjective rating practices. In today’s high-cost health care world, health insurance premium audits can provide a financially risk-free method of ensuring the best possible rate of your plan’s premiums.
:: COBRA Administration ::
DeHEY McANDREW provides full, ongoing COBRA administration, protecting its client from possible sanctions by diligent communications and administration, as well as staying current with ever changing rules. When employers were scrambling to what to do regarding the American Recovery and Reinvestment Act of 2009 (ARRA) and the subsidized COBRA and the revised Form 941, DeHEY McANDREW was poised to help its Clients on the first day (March 1, 2009).
:: Self-insured Plans ::
DeHEY McANDREW provides the where-with-all to administer or help administer benefit programs to be self-insured or funded by the employer’s general assets.
:: Tax/Regulatory Reporting ::
DeHEY McANDREW conducts ERISA compliance, develop Summary Plan Documents and file IRS Form Series 5500, in addition to the Department of Labor, EEOC and Affirmative Action filings.
:: Pension Plans ::
DeHEY McANDREW reviews pension plans’ legal productivity and provides a financial analysis of the investment’s performance.
:: General Consulting ::
DeHEY McANDREW establishes consultation retainer contracts with a large number of its clients to keep them “on-line” for information and necessary filings. Retained clients depend on DeHEY McANDREW for information, opinion and various requirements in the HR & EB realm.
:: Health Plan Cost Containment ::
Innovative strategies to help control the escalating costs of health insurance. DeHEY McANDREW also audits experience-related premium adjustments.
:: Benefits “Shopping”::
Although the firm does not sell insurance, it can conduct a survey of carriers and provide a detailed report on carriers which match the client’s demographics and needs.
:: Individual Benefit Statements ::
DeHEY McANDREW creates a summary of benefits and their costs for each eligible employee, creating employee empathy and awareness for the employer’s “cost of doing business”.
:: Personnel Manuals ::
DeHEY McANDREW, in conjunction with the client’s goals, establishes employment practices and writes clear and concise Personnel Manuals consistent with state and federal labor regulations, mindful of past employment precedence.
:: Performance Evaluation Programs ::
DeHEY McANDREW can either develops, administrates or review the evaluation process, emphasizing improved employee performance, training and support needs and individual eligibility for salary changes/promotions.
:: Wage and Salary Scale Assessment/Strategy::
DeHEY McANDREW can determine whether existing salary ranges are competitive to attract qualified personnel and employees accurately reflect job performance and responsibilities.
:: Collective Bargaining Support ::
DeHEY McANDREW provides a ‘hand-on’ consultative assistance in collective bargaining negotiation, grievance processes and arbitration. As most employers’ negotiators are versed in the labor side of the collectively bargaining arena, DeHEY McANDREW can assist with the employee benefits arena, making the right decisions for its Clients in cost and legality.
:: ADA Compliance Services:
DeHEY McANDREW can assist you through the complexities of ADA, providing cost-effective guidance. Services include Titles I, II, III, and V consulting.
:: Third Party HR Function:
DeHEY McANDREW can assist in providing consultative services to management in planning, formulation and administration of personnel policies and regulatory compliance activities. DeHEY McANDREW can be an employer’s on-site or off-site, HR professional “department” in the short term or the long term.