The new law requires companies with defined benefits plans to fully fund their plans within seven years beginning in 2008, and encourages 401(k) coverage as well as individual retirement accounts. Click on the bill summary for a synopsis or Pension Protection Act of 2006 for the full details of the bill.

Preliminary information received by the HEC indicates that the maximum weekly benefit amount for temporary disability insurance will be $510, and will be $710 for workers’ compensation in 2009. The calculation is based on the State Average Annual Wage, which will be $37,718.93 in 2009.

Employers will be allowed to deduct up to $4.39 per week for TDI coverage, according to the preliminary information from the Disability Compensation Division. The figures will be posted on the Dept. of Labor and Industrial Relations website on Dec. 15.

Beginning January 1, 2008, the standard mileage rates for use of vehicles including vans, pickups or panel trucks will be 50.5 cents for business miles driven, 19 cents per mile driven for medical or moving purposes, and 14 cents per mile driven in service to a charitable organization, the Internal Revenue Service says.

The new rate for business miles was increased from 48.5 cents per mile for 2007, but the new rate for medical and moving purposes is one cent lower than the 20 cents in 2007. The rate for miles driven in service of charitable organizations has remained the same as it is set by law. See Revenue Procedure 2007-70 for more information.

According to the Internal Revenue Service, the 2009 standard mileage rates for operating vehicles will be 55 cents per mile for business miles driven; 24 cents per mile driven for medical or moving purposes; and 14 cents per mile driven in service of charitable organizations.

The new rates for business, medical and moving purposes are slightly lower than rates for the second half of 2008 that were raised by a special adjustment mid-year in response to a spike in gasoline prices. The business mileage rate was 58.5 cents and the medical and moving rate was 27 cents in the second half of 2008. The rate for charitable purposes is set by law and is unchanged from 2008.

Employer costs for employee health insurance rose almost 62 percent during the 1999 to 2005 period, according to an analysis by the Kaiser Family Foundation. The study shows that health insurance premiums grew a cumulative 78 percent between 2001 and 2007, outpacing cumulative wage growth of 19 percent over the same period. The analysis shows the “large variation” in health benefit costs among establishments and occupations, and “helps policy makers better understand the issues facing different types of businesses and workers.” According to the Kaiser researchers, since health care reform proposals often contain requirements for companies to contribute financially towards the costs of expanding coverage, policy makers will face challenges in trying to establish a percentage of payroll that may be considered equitable across different settings.

The percentage of Hawaii companies reporting a paid time off plan in lieu of vacation, sick leave and holidays grew from 15.3 percent in 2002 to 22.6 percent in 2006, according to HEC’s recently released 2006 Employee Benefit Plans in Hawaii. Perhaps reflecting the increasing cost of health care premiums, the percentage of companies paying all of the premium for employees has declined sharply since 2002. The survey also covers holidays, vacation, sick leave, and voluntary insurance plans. HEC members can download the 88-page publication from What’s New or by using the drop down box under Resources or HEC Survey.

The Emergency Economic Stabilization Act of 2008 adds qualified bicycle commuting reimbursements to the list of qualified transportation fringe benefits an employer may provide to employees who commute to work using a bicycle. Qualified bike commuters could receive up to $20 per month for a calendar year under the provision.

A "qualified bicycle commuting reimbursement" will cover employer reimbursement for reasonable expenses incurred by the employee during the calendar year for the purchase of a bike and bike accessories, repair and storage of a bike that is regularly used to ride to and from work. The provision will apply to tax years beginning after December 31, 2008.

Due to rapidly escalating gas prices, the Internal Revenue Service has announced an increase to 58.5 cents a mile for all business miles driven from July 1, 2008, through Dec. 31, 2008. This is an increase of eight cents from the 50.5-cent rate in effect for the first six months of 2008. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

"Rising gas prices are having a major impact on individual Americans. Given the increase in prices, the IRS is adjusting the standard mileage rates to better reflect the real cost of operating an automobile," says IRS Commissioner Doug Shulman. "We want the reimbursement rate to be fair to taxpayers."

By wide margins — and regardless of personal political affiliation — those who design and administer employer health plans are concerned with both Presidential candidates’ health care proposals, saying that Senator John McCain’s proposal to repeal the tax exclusion for employer-provided health coverage and Senator Barack Obama's proposal to compel employers to "pay or play" would have strong negative impacts on American workers, according to the American Benefits Council.

Based on a survey of corporate health care executives at large and small organizations, 74 percent said that a repeal of the employee tax exclusion for employer-sponsored health coverage (a McCain proposal) would have a strong negative impact on their workforce; 46 percent said requiring employers to "pay or play" (an Obama proposal) would have a strong negative effect on their workforce; 58 percent said they would like to see the candidates focus more on cost issues, and 74 percent would like more focus on quality.

Although over 80 percent of companies fund tuition assistance for employees, “the whopping majority have no idea if it's worth it,” says the Institute for Corporate Productivity. According to the Institute, only 5 percent of organizations of the surveyed companies actually track program effectiveness, or the return on their investment.

"A lot of companies seem to feel that tuition assistance programs are a staple of employee benefits, one that is likely to influence future productivity, engagement and retention," says Institute spokesperson Jay Jamrog. "Which is what makes the total lack of measuring the return on these programs such a shock. While companies look at layoffs and other cost-cutting measures, they better focus their attention on measuring the effectiveness of programs where large sums of money are dedicated, like tuition reimbursement."

Employers will continue to take aggressive steps in 2009 to mitigate the impact of high HMO premium increases on their health care budgets, Hewitt Associates reports.

According to Hewitt, an increasing number of companies are consolidating vendors, moving from smaller, less efficient plans to consolidated risk pools with their more efficient administration; and consolidating plan participants under self-insured arrangements where they assume the full financial risk for medical claim costs and pay the health plan an administrative fee for services such as claims processing and provider network management.

Hewitt also finds that companies are increasing their focus on employee health, aggressively negotiating with health plans, and shifting costs to dependents.

The U.S. Treasury Dept. and Internal Revenue Service has issued a notice, protecting military reservists from losing funds in their health Flexible Spending Arrangement accounts after being called to active duty.

The Heroes Earnings Assistance and Relief Tax Act of 2008 enacted in June allows "qualified reservist distributions" of unused amounts in a health FSA to reservists called to active duty. Under the existing rules for health FSAs, distributions could only be made to reimburse substantiated medical expenses, and any funds left unspent at the end of the plan year would be lost. The change allows reservists to make a distribution before leaving for active duty so as not to lose those savings.

Health savings accounts, which allow individuals to make tax-deductible contributions to an account that can be used to pay for qualified medical expenses, have current statutory contribution limits that are too low to be a significant part in savings for retirement health care costs, says a new study by the Employee Benefit Research Institute.

HSAs are sometimes recommended as a vehicle for funding future retiree health care costs, but EBRI says that the “maximum savings that can be accumulated in an HSA will be far from sufficient to fully cover the savings needed in retirement for insurance premiums and out-of-pocket expenses.” According to EBRI, a married couple both age 55 this year would be able to save $118,000 in a health savings account by 2018 if both made the maximum contributions allowed by law, including catch-up contributions. The same couple would need to save a combined $325,000–$654,000 by the time they both reach age 65 to have enough money to cover health premiums and out-of-pocket expenses 50 percent of the time. If the couple wanted to have a 90 percent chance of having enough money to cover premiums and out-of-pocket expenses, they would need to save from $511,000 to just over $1 million, according to EBRI.

According to a Watson Wyatt survey, many employees don’t understand how their health coverage works or what it covers, and that less than half are comfortable explaining health benefit terms such as co-pay or deductible to a friend or co-worker. The survey finds that fewer than one in four workers feel comfortable describing health savings accounts and co-insurance.

Although seven out of ten employees say they like to receive communication about their health benefits in writing, only 52 percent of the employees say they read all the materials provided by their employer during the annual health care enrollment process; 3 percent do not read any of the materials, and the remainder reads either only what is needed to enroll or only information about changes to the plans. A mix of communication channels and formats was recommended by Watson Wyatt to increase employee understanding.

Hawaii faces increasing pressure on its health care systems and plans due to its growing elderly population and the prevalence of obesity, according to Mercer Health & Benefits Principal Gary L. Lee. “Consumer engagement and understanding of value in health care, as well as personal responsibility in self-care and healthy behaviors are important elements in addressing health care expenditures,” Lee told HEC members at a June 12 briefing. He said one of the key findings of Mercer’s national survey of employer-sponsored health plans was that health management and consumerism were deemed very important in cost management strategies. HEC members who were unable to attend the briefing can obtain the handout material in What’s New.