Month: April 2019

by Carlos Garcia, Founder & CEO of Finhabits

Americans are not saving enough for retirement and relying on social security will not be enough to provide for a comfortable future. States are chiming with legislation that compels businesses to offer retirement benefits to their employees. California, Oregon and Illinois are leading the charge with their programs and 11 others, including New York, Connecticut and Maryland have plans under way.

As a business owner, you want to take care of the people who work hard at making your business succeed. But figuring out how to offer a retirement savings benefit that makes sense for you and your staff members is not for the faint of heart. In fact, when the Pew Research Center conducted a survey on this topic, they found that the main reason employers were not offering retirement benefits was that they were deterred by the cost and time involved.

So whether you have to comply with a state mandate or just believe that it’s good for your business, here are a couple of things you should consider as you dive in:

  1. A 401(k) isn’t a one-size-fits all solution.

When most employers think of providing a retirement benefits they start looking into 401(k) plans. But that’s not the only option to consider. Did you know that as a business you can choose to offer an IRA-based retirement benefit to your staff? And that you can offer it alongside an existing 401(k) plan? It’s not an either/or scenario when it comes to offering work-based retirement savings. Both options can complement each other and be a great solution for many workplaces.

So if you run a business that has a diverse workforce, including part-time and contract workers, you might want to consider providing  an IRA-based retirement savings option. The fees are lower than the typical 401(k), you don’t need to have a plan sponsor, and when your employee leaves, you don’t carry the burden of their account maintenance costs. To find out more, check out our IRA offering from Finhabits™.

  1. Work is the best place to get in the habit of saving for retirement.

If you’re not saving for retirement through a workplace benefit then you’re likely not saving for retirement at all. In fact, research shows that people are 10 to 15 times more likely to save for retirement if they are offered an option through work.

That’s great news for employees who already have access to their company’s 401(k). But for people who work for smaller businesses (especially those with under 100 employees) accessing a retirement plan through work is just not an option.

Financial experts and policymakers are recognizing this problem and have determined that mandated state programs are the way to address this. As each state is rolling out their plan, keep updated on what your state expects of you in your role in solving this societal challenge.

  1. To ensure participation, make it easy to enroll and contribute regularly.

These days anyone can start saving and investing in mere minutes with a mobile app. So why not look for the same feature in whatever retirement solution you offer?

Thanks to mobile-based financial apps like Finhabits, it is easier than ever for businesses of all sizes to offer retirement options. And your staff will really appreciate being able to easily control their contributions and manage their accounts through their phones.

  1. Be prepared for what’s coming by knowing your options.

In an effort to close the retirement gap for hard-working Americans, states have put their best foot forward in implementing state-mandated retirement programs. While they are designing their programs to get workers to start saving for retirement, they don’t necessarily offer a solution that makes sense for every business.

Knowing the essentials of your state’s plan is a good place to start. Find out which deadlines apply to your business and the program fees. Remember,you don’t have to enroll in the state’s program. States allow businesses to opt-out of their program if employers  already have a retirement benefit in place such a 401(k) or an IRA.

State plans have the right intentions, but they don’t necessarily have the right solution for all businesses. Signing up for a retirement benefit now means you can even get ahead of your state’s mandate so you don’t have to worry about it later.

We are here to help you choose the right retirement solution based on your business’ specific needs.  Want to learn more? Check out our Retirement Solutions

 

Finhabits is the first bilingual retirement savings platform focused in the 55 million U.S. workers without access to a 401(k) plan. Finhabits offers an easy to enroll IRA solution for small business employees across the US.

 

On March 28, 2019, the U.S. District Court for the District of Columbia found in favor of the State of New York (and 11 other participating states), who sued the Department of Labor over portions of the new Association Health Plan regulations issued in 2018. The Court’s ruling can be found at here  

 

What does the ruling mean for those who are considering or already have an Association Health Plan?

First, and most importantly, the ruling struck down two of the new (2018) expansions to existing Association Health Plan regulations:
(1) Geography-based programs: (i.e., “Chambers of Commerce” plans) where the new AHP regulation allowed non-same trade or businesses to form AHPs within a city or state to source a single health plan, and  (2) Sole Proprietor Inclusion: (employers with no employees other than the owner) participation in AHPs.

Both of these together are commonly called “New Rule” AHPs.

 

How does this impact Decisely Programs?

“Old Rule” AHPs remain viable under long-standing ERISA law and interpretations. This includes plans for employers with 2 or more W-2 employees in same trade or business to come together for medical insurance sourcing purposes. This ruling does not affect traditional bona fide Associations or Franchisors whose members or franchisees employ two or more W-2 employees in the same trade or business. Practically, this means AHPs for trade associations from the same industry, or collections of particular franchisees are still able to form AHPs.

“Old Rule” Association Health Plans have been around for decades, and are allowed under existing ERISA law not impacted by this ruling. It is this foundational, historical framework that the vast majority of Decisely AHP Franchise and Association partnerships rest upon.

The Decisely Program and AHP Solution for Associations and Franchises are a model of responsible “Old Rules” AHPs, and is not impacted by this ruling. Our Program’s solutions for clients is based upon the four foundational requirements of traditional AHPs:

  • Must Be Related Trade/Business. We partner with Associations and Franchises that meet the “same trade or business” criteria, either as a long-standing trade association of similar businesses, or franchises of common brands.
  • Delivering Medical and Other Benefits For Traditional Employers and their Employees. When there is clear regulatory and carrier support for including sole proprietors and 1099s, we will consider it, but only where success is certain.
  • Through Association AHPs created for a Primary Purpose other than sourcing Medical Insurance: Part of the answer to this point is Decisely itself. Our “Recruit to Retire” solution for businesses, as well as other employee benefits, helps fulfill this association AHP requirement.
  • For Well-Governed, Independent AHPs . An AHP cannot be broker or insurer owned/managed. It must be governed by members, for members; good governance and independent oversight matters.

Finally, while others may pursue self-funded or self-insured AHP medical benefits solutions, and there are appropriate places for such solutions, Decisely is focused on delivering within its AHPs and Program Solutions, fully insured medical insurance solutions (not self-funded) that comply with ACA (and State-level) requirements for essential coverages, and other ACA requirements that meet the demands of ACA qualified products under existing law.

 

Lawsuit Background

It’s helpful to review the background and objections to the rule in the suit.

Twelve states, led by New York, with support from Attorneys Generals in MA, DC, CA, DE, KY, MD, NJ, OR, PA, VA, and WA, filed a lawsuit in US District Court of the District of Columbia against the Department of Labor’s 2018 regulation expanding Association Health Plans (AHPs) (the “New AHP” Rule). All of the states participating were Democrat-led states. These same states (and an additional five states who did not join the litigation) submitted a joint comment letter to the DOL opposing the New AHP Rule.

The lawsuit specifically called out Trump Administration’s stated desire to unravel the ACA and ties the New AHP Rule as another effort by the Administration’s to dismantle ACA. “Since taking office, the Trump Administration has engaged in a sustained effort to ’explode’ the ACA.” Announcing the Final Rule, the President proclaimed that it was another “truly historic step in our efforts to rescue Americans from ObamaCare and the ObamaCare nightmare” and would “escape some of ObamaCare’s most burdensome mandates.”

The lawsuit expressed concern that small group employees and individuals will be left unprotected, if AHP collective sourcing migrates them to the large group market, because they will not have the benefits of the small group and individual market protections. Practically, their concerns as stated revolve around the reduction of benefits (potential of eliminating 10 essential benefits under ACA policies), “cherry picking” underwriting (and advantageous pricing) of healthiest groups, eliminating pre-existing conditions, lower actuarially-valued benefits (lower coverage per dollar spent)…in short “The Final Rule would return the country to the pre-ACA world where people with pre-existing conditions will lack federal protections that enable them to obtain quality, affordable health insurance.”

The lawsuit as filed actually affirms the stance that traditional (or Old Rules) AHPs are valid as “federal courts for decades have interpreted that phrase to cover only associations whose members share a true commonality of interest, or close nexus, with one another”.

What happens next on the Lawsuit?

The Administration is expected to appeal this decision, and it is highly likely that the Court’s decision will be stayed pending appeal. If this is in fact the case, then the existing “geography” AHPs will likely continue to operate, but new geography-based AHPs will probably slow down until the case is finally resolved. The same is also true for AHPs that include sole proprietors. We also expect that individual states may respond with their own actions (regulatory and legislatively) over time with regard to AHPs operating in their states.

Questions or concerns can be directed to:  Chris Duncan, EVP/COO Decisely Chris@decisely.com