Volume Fifteen, Issue Seven December 2012

Transcription

1 Volume Fifteen, Issue Seven December 2012 In This Issue 2012 Year-End Review This final issue of our Benefit Advisor for 2012 reviews the important developments that affected employee benefit programs this year. It also reviews the year-end housekeeping issues that organizations should revisit annually. We welcome your comments and suggestions regarding this issue of our technical bulletin. For more information on this Benefit Advisor, please contact your Account Manager or visit the McGraw Wentworth web site at Employers are continuing to grapple with all the various aspects of health care reform. This Advisor clarifies the issues organizations will need to review for 2012: Health Care Reform Changes Health Plan Changes Tax Changes Employer Administrative Requirements Autism Mandate Impacting Michigan Employers With Insured Plans Health Care Reform Changes Health care reform continues to affect employer group health plans. Employers now need to contend with changes in the tax code and additional administrative requirements. Grandfathered Plans Employers need to review the grandfathered status of any plan option annually. To recap, a plan is considered grandfathered if coverage was in effect on March 23, 2010, and no changes were made that would cause the plan to lose its grandfathered status. Those types of changes are discussed in our Reform Update at mcgrawwentworth.com/ Reform_Update/Reform_Update_ 10.pdf. The only modification to these guidelines is that a change in carrier or vendor will not automatically cause a plan to lose its grandfathered status. Grandfathered plans can delay the effective date for a handful of health care reform requirements until they lose grandfathered status. These requirements include: Health Plans Changes The first wave of health care reform changes applied primarily to health benefits. Employers faced a number of health plan issues in Application of non-discrimination rules to fully insured plans (currently delayed for all insured plans until additional guidance is issued). Expansion of specified preventive care services with no member cost-sharing (this includes the expansion of well-woman services). Continued on Page 2

2 Volume Fifteen, Issue Seven December 2012, Page 2 New claim rules and appeal procedure requirements. Primary care physician designation rules (applies only to plans requiring that a member designate a primary care physician). Emergency room coverage rules that dictate how out-ofnetwork providers should be covered. Quality reporting requirements (guidance has not yet been issued on this). Requirement to cover specific clinical trials (this requirement will not apply to nongrandfathered health plans until the first day of the first plan year occurring on or after January 1, 2014). Increase in the allowed amount under HIPAA nondiscrimination rules for wellness plans that award incentives based on achieving a health goal (this requirement will not apply to nongrandfathered health plans until the first day of the first plan year occurring on or after January 1, 2014). If your organization has a grandfathered plan option, you need to evaluate the changes you make to your health plan each year. You should have documentation showing that your changes did not exceed the allowable margins for grandfathered plans. Expansion of Preventive Care Services (Well-Woman Services) Non-grandfathered plans may need to expand their current preventive care services. As of the first day of the first plan year occurring on or after August 1, 2012, health plans must cover the following services innetwork with no member cost-sharing: Well-woman visits Screening for gestational diabetes Human papillomavirus (HPV) DNA testing women aged 30 and older HIV screening and counseling/ STI counseling FDA-approved contraceptive methods/counseling Breastfeeding support, supplies and counseling Domestic violence screening and counseling Certain frequency limitations are allowed. The expanded coverage for contraceptives has received the most media attention. Some religious-affiliated organizations are upset about this requirement, because their beliefs prohibit contraception. The regulations specifically exclude church plans. The government delayed the effective date for religious-affiliated nonprofits that meet specific requirements. More details on the delayed effective date can be found at / Reform_Update/2012/ Reform_Update_50.pdf. The government will allow medical management protocols that help control costs. For example, let s say a health plan has no copay for generic contraceptives but it does require a copay for brand-name contraceptives. The plan can charge this brand copay only if it agrees to waive the copay in cases where the brand name contraceptive is medically necessary. In addition, because voluntary sterilization is an FDA-approved contraceptive method, health plans must cover it with no member costsharing. However, only voluntary sterilization for women is required to be covered with no employee cost-sharing. Restricted Annual Dollar Limits Health care reform currently allows specific annual dollar limits on essential health benefits. For 2012, the annual dollar limit on essential health benefits must be at least $1,250,000. As of 2014, however, these annual dollar limits for essential health benefits will no longer be allowed. The Department of Health and Human Services (DHHS) does allow plans to apply for a waiver of the restricted annual dollar limits. If your plan has applied for the waiver, remember that you must reapply annually in order to continue receiving it. In addition, until 2014, DHHS has issued a global waiver for employers that have annual limits attached to health reimbursement arrangements. More details can be found at Reform_Update/2011/ Reform_Update_33.pdf. Continued on Page 3

3 Volume Fifteen, Issue Seven December 2012, Page 3 Tax Changes Increase in Medicare Tax on High Earnings The employer portion of FICA Medicare tax will remain unchanged at 1.45%. However, as of January 1,, the employee portion of the Medicare tax will increase to 2.35% for earnings that exceed: $200,000 (individuals) $250,000 (married filing jointly) $125,000 (married filing separately) Employers only need to withhold 2.35% on employee earnings that exceed $200,000. If an employee and spouse exceed $250,000 in income when filing jointly with neither making $200,000 individually, then the IRS will assess an additional 0.9% Medicare tax on those excess earnings at tax time. Similarly, if a married employee filing jointly has earnings of $240,000, the employer must withhold the additional 0.9% on the excess $40,000. However, if the employee s spouse does not work, the joint income is less than $250,000. Thus, the additional Medicare tax does not apply. Employees in this situation will be credited the additional 0.9% withheld on income above $200,000 when they file their tax return. Employers should discuss this issue with their payroll vendors and employees. Your payroll vendor will need to flag earnings that exceed $200,000 and withhold the additional tax in. Your employees will appreciate the information as it may impact taxes in. Loss of Tax-Favored Status of Retiree Drug Subsidy Some employers offer post-65 retiree health care coverage and have applied for the retiree drug subsidy. The government reimburses part of post-65 retiree drug expenses under the following circumstances: 1. The employer s retiree drug coverage is as good as or better than Medicare Part D coverage. AND 2. The employer applies for the drug subsidy and provides any data the government requires. The retiree drug subsidy has always been tax-favored. As of January 1,, however, retiree drug subsidies will be taxable. If your organization is a public employer or does not pay taxes, this change in the tax code will not affect you. If your organization does pay taxes, the value of your retiree drug subsidy payments will decrease. In this situation, you may want to consider alternatives to the retiree drug subsidy. Employer group waiver plans may be a cost-competitive option. Some employers have set up health reimbursement arrangements to provide tax-favored funds that allow employees to purchase individual Part D coverage. IRS Limit on Medical FSAs Historically, employers set the annual maximum contribution to medical FSAs. Now, for the first time the government has set the annual maximum. As of the first day of the first plan year occurring on or after January 1,, the annual maximum contribution to medical FSAs will be $2,500. For calendar-year plans, the limit will apply as of January 1,. If your plan year is, for example, October 1, 2012, through September 30,, then the limit will apply to your plan beginning October 1,. The limit applies to each employee. Therefore, married individuals can each set aside $2,500 in their employers medical flexible spending accounts. Further, the latest guidance confirms that benefits used in a grace period will NOT affect the $2,500 limit in the next plan year. Finally, the government gave employers more time to amend their plan documents to reflect the new statutory limit. Plan sponsors have until December 31, 2014, to amend their plan documents, and the change can be retroactive. Comparative Effectiveness Research (CER) Fees Health care reform introduced CER fees to fund studies comparing the effectiveness of various treatment options for specific health conditions. If CER fees fund a study, the results must be published and accessible to the public. The Patient-Centered Outcomes Research Institute (PCORI) will determine which studies to fund. It will also be responsible for publishing the results. Continued on Page 4

4 Volume Fifteen, Issue Seven December 2012, Page 4 The CER fees will apply to group health plans, which is broadly defined. The following, however, are specifically excluded from the fee: Plans considered excepted benefits under HIPAA Expatriate insurance plans Stop loss or indemnity reinsurance policies Any prepaid health coverage limited definition, limited applicability If a plan is fully insured, the insurance carrier pays the fee. If your plan is self-funded, you pay the fee. The fee is effective for plan years ending after September 30, This is somewhat confusing. If you have a calendar-year plan, your plan will end on December 31, Since this is after September 30, the fee will apply to the 2012 plan year. Self-funded employers will use Form 720, the Quarterly Federal Excise Tax Return, to report average covered members and to pay the annual CER fees. The CER fees are due on July 31 of the calendar year following the plan year for which they were assessed. Thus, with a 2012 calendaryear plan, the fees will be due on July 31,. The fees are not substantial; details are as follows: Annual Plan Fee Per Year End Member Before October 1, $1 Between October 1, $2 and October 1, 2014 After October 2, 2014 and $2* before October 1, 2019 *Increased by the projected increase to the per capita amount of the National Health Expenditures. The latest guidance clarified some outstanding questions: Retiree-only plans are not excluded from this fee; retirees need to be included when calculating average covered members. Plans funded by VEBAs are subject to the fee. The VEBA is simply a funding mechanism; the underlying group health plan will be subject to the fee. EAPs, disease management and wellness plans are not subject to the fee if they do not provide significant medical benefits. Most of these plans do not provide benefits that would be considered significant. Plans may choose different methods to calculate average covered members. Although self-funded plans have three different options for calculating average covered members, once they choose an option, they must be consistent in using it. More details on calculating average covered members and other provisions of this fee can be found at com/reform_update/2012/ Reform_Update_44.pdf. Employer Administrative Requirements Summary of Benefits and Coverage (SBC) Health plans must issue a four-page summary of benefits called the Summary of Benefits and Coverage, or SBC. Since all health plans have to issue an SBC, the goal is to make them consistent in look and wording so that people can compare different plans at a glance. The intention is good, but health plan benefits are so complex that implementing this requirement will be a challenge for most employers. The initial effective date for issuing SBCs was delayed. The new effective date depends on the reason for issuing them: For open enrollment The first day of the first open enrollment period on or after September 23, 2012 For newly eligible or special enrollees The first day of the first plan year on or after September 23, 2012 The responsibility for creating SBCs rests on whoever funds the plan. If a plan is fully insured, the insurance carrier creates the SBC. The insurance carrier and employer share responsibility for distributing it to plan members. If the plan is self-funded, the employer must create and issue the SBC. In many cases, third party administrators (TPAs) are offering to create the SBC for employers. Some TPAs are charging an additional fee for this service. Continued on Page 5

5 Volume Fifteen, Issue Seven December 2012, Page 5 It makes sense for employers to distribute the SBC, as they already communicate with employees in most events requiring an SBC. An SBC is necessary in the following situations: When a participant is initially eligible, such as a new hire. Employees must receive SBCs for all benefit options available to them. To special enrollees (that is, anyone granted special enrollment rights under HIPAA) within 90 days of enrollment. These employees must also receive SBCs for all benefit options available to them. At annual enrollment with the annual enrollment information. Employees need an SBC only for the plan option in which they are currently enrolled. Upon request, within seven business days. Plans can deliver SBCs in a number of ways. They can mail them to participants home addresses or they can send them electronically using a number of government-approved electronic delivery methods. Employers should have a formal, written distribution process. More details on the SBC rules and delivery options can be found in the following Reform Updates: Reform_Update/2012/ Reform_Update_39.pdf Reform_Update/2012/ Reform_Update_42.pdf Reform_Update/2012/ Reform_Update_45.pdf Insurance carriers have struggled to create SBCs, while many employers have struggled to distribute them. Because the Department of Labor (DOL) understands the difficulties involved, it will look for good faith compliance efforts in the first year. It will not penalize insurers or plans working in good faith to comply with the SBC rules. W-2 Reporting Requirements Beginning with the 2012 W-2s, issued in January, employers need to include the value of employer-sponsored health coverage in Box 12. This reporting requirement affects almost all employers with the following exceptions: Federal Indian tribes and tribally-chartered corporations (wholly owned by the Indian tribe). Small employers, issuing fewer than 250 W-2s in the preceding year. It appears that employers are determined by their Employer Identification Number (EIN) and not the IRS controlled group rules. Self-funded plans not subject to any continuation requirements (very limited, such as church plans). Government plans for military members. Employers participating in Multiple Employer Welfare Arrangements (MEWAs). Employers must determine cost in good faith compliance with the CO- BRA rules. For example, if your plan is fully insured, your organization would use insurance premiums less the 2% COBRA administrative fee. For self-funded plans, your organization should use the projected cost or illustrative rate less the 2% CO- BRA administrative fee. The reportable cost is the total cost, and should include employee and employer contributions. It should reflect: Medical and prescription drug coverage. Dental and vision coverage only if they are not excepted under HIPAA (they are excepted benefits if they are provided under separate contracts or are a separate election with separate contributions). Medical FSA only when the FSA annual election exceeds the employee s total salary reduction. EAPs and wellness plans only if they are subject to COBRA, and the employer charges for COBRA continuation. If you offer employees a consumerdriven health plan, contributions to a health saving account (HSA) are not included. However, if your consumer-driven health plan has a health reimbursement arrangement (HRA), reporting on those funds is considered optional. Employers can choose to include or exclude them, but must be consistent. Continued on Page 6

6 Volume Fifteen, Issue Seven December 2012, Page 6 The reported value must also reflect mid-year changes. The mid-year change might be due to a change in coverage, or the result of a mid-year renewal. Employers can calculate reportable cost with the information they have as of December 31. A change in January that affects the previous year s reportable cost does not need to be reflected. New Michigan State Law Mandates Specific Autism Benefits A Michigan law passed this year mandates coverage for specific autism benefits. The law applies to fully insured group and individual health plans, and affects plans issued, amended or renewed in the state beginning 180 days after the effective date of April 19, More details on this state mandate can be found at com/ Special_Alert/2012/ Special_Alert_Issue_2.pdf. The state law requires fully insured plans to cover services for autism spectrum disorder, but they can impose dollar limits depending on the child s age. Organizations should ask their carriers how they will provide this state-mandated coverage. The state mandate established the Autism Coverage Incentive Program to make this coverage cost-neutral. It reimburses insurance carriers for claims expenses incurred when they comply with the mandate. The law Medicare Part A Deductible (per benefit period) $1, Hospital P er Day Copay (per benefit period) 60 to 90 day stays 90+ day stays Skilled Nursing Facility (after 20 days) Per Day does not require self-funded plans to cover autism, but if they do, the program will reimburse some of the cost as well. Employers need to be aware of an unintended consequence of this state mandate. Autism is considered a mental health diagnosis. Although the state mandate includes annual dollar benefit maximums based on the child s age, mental health parity requires more extensive coverage, and does not allow plans to apply dollar maximums. The Autism Coverage Incentive Program will reimburse plans for state mandated benefits. There may be a rating impact if the benefits paid exceed what the state reimburses. Self-funded plans should consider the potential impact of offering autism benefits and the impact of complying with mental health parity. If they add autism coverage, services should covered in a manner similar to medical/surgical services. The Autism Coverage Incentive Program may Medicare Information Copay $ $ $ Medicare Part B Monthly Premiums $ Medicare Part B Annual Deductible $ reimburse some of the claim expenses. However, the program will not reimburse plans for benefits paid outside the state-mandated requirements. Fully insured plans should ask their health plan vendors for the details of this new coverage. Self-funded plans should carefully consider the financial impact if they intend to cover specific autism services. Annual Reminders and Updates Medicare Information The Department of Health and Human Services released the Medicare information for (see table at the top of page 6). Part B premiums are higher for Medicare beneficiaries in a higher income range. The income range and premiums are both adjusted annually. For, the income-adjusted premiums are shown in the table at the bottom of page 6. Individual Return Joint Return Part B Monthly Premium $ 85,001-$107,000 $ 170,001-$214,000 $ $ 107,001-$160,000 $ 214,001-$320,000 $ $ 160,001-$214,000 $ 320,001-$428,000 $ > $214,000 > $428,000 $ The indexed parameters for Medicare Part D for are shown in the table at the bottom of page 7. Health care reform made substantial changes to the Medicare Part D coverage gap. While the standard Part Continued on Page 7

7 Volume Fifteen, Issue Seven December 2012, Page 7 D benefit plan design remains the same, the Medicare beneficiary s cost for drugs in the coverage gap will change. The coverage gap occurs after beneficiaries reach the initial coverage limit. At that point, they must pay the full cost of medication until they reach the true out-of-pocket maximum. Health care reform aims to reduce the financial strain this coverage gap causes. In, the federal government and brand-name drug manufacturers will subsidize part of the drug cost during the coverage gap. The government will subsidize 21% of the cost of generic drugs. Thus the Medicare beneficiary will pay only 79% of the cost for generic drugs in the coverage gap. Drug manufacturers will charge Medicare beneficiaries 50% of the negotiated rate for brandname drugs. In addition, this is the first year the government will subsidize part of the cost for brand-name drugs during the coverage gap. The government subsidy in is 2.5%, which means Medicare beneficiaries will have to pay only 47.5% of the negotiated cost for brand-name medications during the coverage gap. The full negotiated cost of the brand name drug applies to the True Outof-Pocket Maximum. Health care reform also implemented income-based premiums for Medicare Part D coverage. Medicare Part D operates differently from Medicare Part B. The government sets the standard plan design and insurance carriers cover different drugs with different cost-sharing requirements. The carriers set the premiums. Since premiums differ based on the insurance carrier providing the coverage, income-based premiums are presented as an increase to the Part D premiums. The adjustment amounts are shown in the table at the top of page 7. Individual Return Medicare Part D may also affect employers sponsoring retiree drug plans. If their drug benefits are as good as or better than the Medicare benefits, employers can apply for a governmentpaid subsidy based on a percentage of claims paid. The subsidy equals roughly 28% of prescription claims for covered medications that fall between the cost threshold and the cost limit. The cost threshold and cost limit are also indexed, and the 2012 amounts are as follows: Cost Threshold $325 Cost Limit $6,600 Joint Return As of January 1,, retiree drug subsidies will be taxable. This change will not affect organizations not nor- Annual Deductible (amount the Medicare beneficiary pays before benefits are payable) Initial Coverage Limit (once the beneficiary meets the deductible, the plan pays 75% and the beneficiary pays 25% until the total prescription expense - paid by plan and beneficiary - reaches the initial coverage limit) True Out-of-Pocket Maximum (once the beneficiary has paid the true out-of-pocket cost, Medicare catastrophic coverage will pay most of the prescription drug cost. The standard plan pays no part of expenses after the initial coverage limit until the true out-of-pocket maximum is reached.) Total Covered Part D Expenses before Catastropic Coverage (if the beneficiary has no coverage other than the Medicare Part D plan) Part D Monthly Premium Adjustment $ 85,000 or less $ 170,000 or less No Adjustment $ 85,001-$107,000 $ 170,001-$214,000 $11.60 $ 107,001-$160,000 $ 214,001-$320,000 $29.90 $ 160,001-$214,000 $ 320,001-$428,000 $48.10 > $214,000 > $428,000 $66.40 mally required to pay federal taxes. However, organizations that pay federal taxes may want to consider alternatives to the retiree drug subsidy for post-65 retiree drug coverage. Medicare Part D Notice Requirements Employers need to issue two Medicare Part D notices annually. The first notice concerns the creditable coverage status of prescription benefits and must be sent to Medicare-eligible plan participants. As a rule, Medicare beneficiaries must enroll in a Medicare Part D plan when they first become eligible, or face a penalty in the future for late enrollment. Continued on Page 8 $325 $2,970 $4,750 $6, Catastrophic Coverage (Medicare pays most of the prescription drug expense once the catastropic coverage level is reached. The Medicare beneficiary pays the greater of 5% of the drug's cost or a $2.65 generic or $6.60 brand name copay.)

8 Volume Fifteen, Issue Seven December 2012, Page 8 However, if your health care plan is creditable and the Medicare beneficiary maintains creditable coverage, then the late enrollment penalty will not apply. More details on the wording of the latest model notice can be found at Coverage/Model%20Notice%20 Letters.asp#TopOfPage. More details on the delivery requirements for the Medicare notices can be found at Special_Alert/2007/ Special_Alert_Issue_4.pdf. The second notice, stating your plan s creditable coverage status, must be filed electronically with CMS within 60 days of the beginning of the plan year. Completing the online notice does not take much time; the toughest part is remembering to do it. You can file the notice online at v/ CreditableCoverage/ 45_CCDisclosureForm.asp. State of Michigan Updates Hard Cap Limits for Public Employers Public Act 152 caps the amount public employers may contribute to employee health benefits. The act allows two possible funding approaches, a hard dollar cap or an 80/20 contribution split. The hard dollar caps are indexed annually for medical inflation. For 2012 and, the limits are shown in the table at the top of page 8. The limits continue to be based on an aggregated average as opposed to the actual paid amounts for each coverage level. Hard Cap Limits 2012 Employee only coverage $ 5,500 $5, Employee and spouse coverage $ 11,000 $11,385 Family coverage $ 15,000 $15,525 If a public sector entity chooses to opt out of these limits, it must follow a specific process. The law does not apply to state civil service employees or to public universities. Group Term Life Insurance: Section 79 Employers should annually review the group term life coverage they offer to determine whether employees need to pay taxes on it. In the following cases, income will have to be imputed for the value of the life insurance plan: If the employerpaid life insurance exceeds $50,000. If the life plan favors key employees (only key employees will have to pay taxes). If the employee-paid optional life plan rate table straddles Table I rates (employees whose rates are below the Table I rates may have to pay taxes). If the employer allows voluntary term life coverage to be paid with pre-tax dollars. The most recent Benefit Advisor, available on our website, explains when and how to calculate imputed income. W-2 Should Include Short Term Disability Benefits At the end of the year, organizations need to report disability benefits or earnings paid to disabled employees during the year. Although disability carriers will pay the benefits in many cases, employers need to make sure those benefits are reflected on the employee s W-2. The income from these benefits is generally reported in one of two ways: Disability carriers or administrators may issue W-2s directly to participants who received benefits during the year. Carriers or administrators may send the employer a quarterly or annual report with the information that the employer should include on each disabled employee s W-2. Let your employees know if your disability vendor is issuing them a separate W-2. Typically, disability vendors will inform employers of the amount paid in disability benefits, and then employers will add the benefit income to the employee s W-2. Continued on Page 9

9 Volume Fifteen, Issue Seven December 2012, Page 9 If your organization self-funds short term disability benefits, you will need to include those benefits in the employee s 2012 W-2. If you use a payroll service to issue W-2s, your payroll vendor must include the additional compensation on the employee s W-2. Form 8928 Health Saving Account Limits HDHP Minimum Deductible Self Only Coverage Family Coverage HDHP Maximum Out-of-Pocket Self Only Coverage Family Coverage HSA Statutory Contribution Maximum Self Only Coverage Family Coverage The IRS requires employers to selfreport excise taxes in the case of certain compliance failures. Employers should review their records annually to determine whether they have had any compliance failures that require self-reporting. If so, they need to complete Form Self-reporting has been required since January 1, The details of how to submit Form 8928 and the specific compliance failures employers need to report can be found in our Benefit Advisor at / Benefit_Advisor/2010/ BA_Issue_9.pdf. The IRS does make exceptions for specific compliance failures. For example, no tax penalty is due if the failure was reasonable and not deliberate. To show that a failure was reasonable, employers must: Establish that no one liable for the penalty knew or if he/she $1,200 $2,400 $5,950 $11,900 $3,050 $6,150 $1,200 $2,400 $6,050 $12,100 $3,100 $6,250 had exercised reasonable diligence would have known that the compliance failure had occurred. Correct the failure within 30 days of discovering the problem. It appears that employers with no reportable failures within the year do not need to file Form If an employer does need to file Form 8928, it should be done before the due date for filing the corporate tax return. Employers can request an extension to file Form 8928 by completing Form The 2012 version of Form 7004 has not been released yet. Employers can view a copy of the draft of 2012 s Form 7004 at dft.pdf. HIPAA Breach Reporting $1,250 $2,500 $6,250 $12,500 $3,250 $6,450 Catch-Up Contribution (age 55 and older) $ 1,000 $ 1,000 $1,000 The Health Information Technology for Economic and Clinical Health Act (HITECH) was part of the American Recovery and Reinvestment Act of 2009 (ARRA). HITECH made a significant financial investment to encourage health care providers to move to electronic health records. HITECH changed the HIPAA Privacy and Security Rules to ensure greater protection for health information and more accountability from entities that handle and use protected health information. HITECH added reporting requirements for breaches of unsecured, protected health information. Covered entities must take very specific action if and when a breach occurs. The details of the breach reporting requirements can be found in our Benefit Advisor at /BA_Issue_10.pdf. One of the HITECH requirements is that covered entities must report breaches to the Department of Health and Human Services. If the breach affects 500 or more individuals, it must be reported to the DHHS promptly. If the breach affects fewer than 500 individuals, the breach needs to be reported annually within the first 60 days of the calendar year. Employers can file breach reports electronically at brinstruction.html. If there is no breach during the calendar year, then no report needs to be filed. Indexed HSA Limits The IRS annually releases indexed limits for health savings accounts (HSAs) and high deductible health plans (HDHPs). The limits for the most recent threes can be found in the table at the top of page 9. Continued on Page 10

10 Volume Fifteen, Issue Seven December 2012, Page 10 Indexed Plan Limits The table to the right summarizes the 2012 and indexed plan limits. Conclusion Health care reform has overcome many challenges to its existance in 2012, and it seems to be here to stay. In, much of your time will be devoted to understanding and meeting the new requirements. Because the process of managing benefit plans seems to become more complex each year, a year-end action plan will help ensure your organization is complying with the new health care regulations. Good luck in your efforts to handle the year-end compliance issues facing your organization s benefit plans. The McGraw Wentworth team wishes you and your family a happy and healthy! MW Indexed Plan Limits Plan Limits 2012 Section 401(k) or SAR-SEP $ 17,000 $17,500 Section 402(g) maximum pre-tax contribution by employees for elective deferrals $ 17,000 $17,500 Age 50+ Catch-Up Deferral Limit $ 5,500 $5,500 Section 403(b) Plan $ 17,000 $17,500 Section 408(p)(2)(A) Contributions SIMPLE Plan $ 11,500 $12,000 Section 457(b)(2) Limit $ 17,000 $17,500 Key Employee Determination - Officers' Earnings Threshold Section 415 Limit for: Defined Contribution Plans (calendar year) Defined Benefit Plans $ 165,000 $165,000 $50,000 $200,000 $51,000 $205,000 Highly Compensated Employees Section 414(q) $ 115,000 $115,000 Includible Compensation - Section 401(a)(17) $ 250,000 $255,000 F ICA Taxable Wage Base: Social Security (Tax Rates 6.2%) Medicare (Tax Rate 1.45%) $110,000 No limit $113,700 No limit Copyright McGraw Wentworth, Inc. Our publications are written and produced by McGraw Wentworth staff and are intended to inform our clients and friends on general information relating to employee benefit plans and related topics. They are based on general information at the time they are prepared. They should not be relied upon to provide either legal or tax advice. Before making a decision on whether or not to implement or participate in implementing any welfare, pension benefit, or other program, employers and others must consult with their benefits, tax and/or legal advisor for advice that is appropriate to their specific circumstances. This information cannot be used by any taxpayer to avoid tax penalties West Big Beaver Road, Suite 200 Troy, MI Telephone: Fax: McGraw Wentworth, Inc. 250 Monroe Ave. NW, Suite 400 Grand Rapids, MI Telephone: Fax: