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.

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.

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.

For open enrollment season, the menu of options will feature an increased emphasis on personal health behaviors as well as enhancements that give workers access to new health services and programs, according to benefit consultants at Watson Wyatt Worldwide.

Watson Wyatt finds that the number of employers offering financial incentives to maintain healthy lifestyles or participate in wellness programs continues to grow, but some employers are starting to require that employees complete health risk assessments to receive an incentive award or participate in the plan, while other employers are asking workers to go even farther by activating a personal health record or participating in a lifestyle or health improvement program.

Other findings from Watson Wyatt regarding health plan trends: employers are reducing copayments on certain prescription drug therapies that can help lower health costs and hospitalizations, such as antidiabetic drugs and those that treat cardiovascular disease; greater access to onsite clinics, retail clinics and health coaches; health savings accounts linked to high-deductible health plans; full coverage or low copayments for preventive screenings and tests; greater use of new media (web sites, interactive web casts, etc.) to communicate benefit information; and spousal surcharges for employees whose working spouses have access to other health care coverage but who choose to keep them on their plan. Additionally, more employers plan to conduct audits to ensure that dependents of covered workers are legal dependents, Watson Wyatt says.

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.

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.

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.

According to a survey by Transamerica Retirement Services, small business employees are less likely to have access to a 401(k) or employee-funded retirement plan, and do not save as much for retirement compared to employees of large companies (500+ employees). According to the results, 18 percent of small business employees reported saving $100,000 or more in all household retirement accounts, compared to 29 percent of employees in large companies. A greater number of small business employees expect to rely on Social Security as their primary form of income in retirement, says Transamerica. Although small business employees tend to earn less than their large company counterparts, they are only slightly less likely to cite financial reasons for not participating in their company’s retirement plan. See Small Business Employee Significantly Trail Their Large Company Counterparts in Retirement Savings and Preparedness and the Retirement Survey results.

Americans spend less time reviewing their employee benefits than managing their taxes and preparing for the holidays, according to a survey conducted by The Guardian Life Insurance Company. Almost half of workers spend either no time or less than an hour per year reviewing their benefits, and the company says this lead to over-confidence and widespread confusion about workplace coverage. The study shows that many do not understand the basic advantages of group products such as relaxed underwriting requirements, and mistakenly believe they know the difference between group and individual coverage.