Connect with us

Retirement Planning

Coronavirus Surprise: IRS Allows Midyear Insurance And FSA Changes

Published

3 years ago

on

The economic upheaval and social disruption caused by the coronavirus pandemic have upended the assumptions many people made last fall about which insurance plan to sign up for, or how much of their pretax wages to sock away in health or dependent care flexible spending accounts.

You may find yourself in a high-priced health plan you can no longer afford because of a temporary pay cut, unable to get the medical care you might have planned and budgeted for, or not sending the kids to day care. Normally you’d be stuck with the choices you made unless you had a major life event such as losing your job, getting married or having a child. But this year, things may be different.

Last month, the Internal Revenue Service announced it would let employees add, drop or alter some of their benefits for the remainder of 2020. But there’s a catch: Your employer has to allow the changes.

The new guidance applies to employers that buy health insurance to cover their workers as well as those that pay claims on their own, called self-insuring. It’s unclear how many employers will take advantage of the new flexibility to offer what amounts to a midyear open enrollment period. If you’re wondering what your company will do, ask.

“If a consumer finds themselves economically strapped and their finances have changed, and they’re in a situation where they really would like to rethink their coverage, they may want to approach their employer and see if they’re planning to adopt any of these changes,” said Jay Savan, a partner at human resources consultant Mercer.

Some health care policy experts are unimpressed with the new coverage options, noting that earlier this spring the Trump administration opted not to create a special enrollment period for uninsured workers to buy subsidized health insurance on the Affordable Care Act’s health insurance marketplaces.

“It’s not likely that many people will take up this new coverage opportunity, and it won’t address the problem of lack of coverage that many people are facing,” said Sabrina Corlette, a research professor at Georgetown University’s Center on Health Insurance Reforms.

Assuming you still have employer-sponsored coverage, here are examples of circumstances workers may face and what the IRS changes could mean for them.

You want to switch to a cheaper plan to put more money into savings during these uncertain times. Can you do that?

If your employer decides to allow it, you can.

One consideration: If you switch plans midyear, you may have to start all over again paying down your deductible and working toward reaching your annual out-of-pocket maximum spending limit for the year, said Katie Amin, a principal at Groom Law Group in Washington, D.C., a firm specializing in health care and benefits.

“Some employer plans would credit you under the new option if you switched plans,” Amin said. “It depends.”

You’ve got a high-deductible plan and are worried about high medical bills if you get COVID-19. Can you switch to a plan with more generous coverage?

The IRS guidance allows it, but your employer probably won’t, say experts. It’s impossible for workers or their bosses to know who will develop COVID-19. But the concern among employers is that people willing to pay more for generous coverage may be sicker and have higher health care costs than other workers, and could therefore cost the plan more, a phenomenon called adverse selection.

In addition to evaluating whether employees could benefit from midyear changes, an employer will weigh financial considerations, said Steven Wojcik, vice president of public policy at the Business Group on Health, which represents large employers.

They’ll ask, “What is the adverse selection risk, and what is going to be the uptake [in coverage] if you open up enrollment?” he said.

Under the new rules, if you haven’t had health insurance on the job before but would like to sign up now, you can do that, too, if the employer decides to permit it.

What if one spouse gets laid off but the other is still employed? Can the couple switch their family coverage to the employed spouse’s plan?

Yes. But this was already allowed before the new IRS guidance came out. Under long-standing rules, if workers’ life circumstances change they’re entitled to change their coverage during the year.

Can you drop your employer coverage altogether?

Yes, if your employer permits it. Normally, once you sign up for health insurance through your employer and agree to have your premiums deducted from your paycheck, you can’t drop coverage during the year unless you experience a qualifying life event. Under the new IRS rules, you can drop your coverage, but only if you replace it with another form of comprehensive coverage such as through a health insurance exchange or Tricare, the military health insurance program.

One thing that won’t qualify as comprehensive coverage: a short-term plan, said Amin. The Trump administration has encouraged the adoption of limited-duration plans with terms that can last for nearly a year. They don’t typically cover preventive care or preexisting conditions, and renewal is not guaranteed.

You’ve put thousands of dollars into a flexible spending account to cover day care expenses this year, but now the kids are home full time. Can you change the amount?

Yes, but once again this is allowed only if your employer agrees to it. Likewise, if you want to increase your pretax contribution because you need to hire someone to care for your kids at home while you work, you can do that, too. You can also establish a new flexible spending account for dependent care expenses in 2020 if you don’t already have one.

Employees are legally entitled to put up to $5,000 annually into a dependent care FSA to pay for day care, preschool, after-school programs or summer camp.

“Since it’s the employees’ money, my guess is employers will allow them to make changes,” said David Speier, who is in charge of the benefit accounts group at human resources consultant Willis Towers Watson.

You planned to use money left over in last year’s FSA to cover the cost of a medical procedure in early March. But that was postponed because of the coronavirus and you’ve missed the March 15 deadline for using those funds. Do you have any recourse?

Under the new IRS guidance, employers can opt to extend the grace period for using leftover 2019 FSA funds through the end of 2020. Typically, those funds would have disappeared under “use it or lose it” rules if they hadn’t been used by March 15. In 2019, the maximum pretax contribution to a health care FSA was $2,700; this year it’s $2,750.

Similar to the changes now permitted for dependent care FSAs, employers can also decide to permit workers to prospectively decrease or rescind their elected health care FSA amounts altogether.

If you decide to stop contributing to your FSA, you can spend down the money that’s accumulated there on health care expenses, but you can’t cash out the account, said Amin. For example, if you’ve accumulated $500 in your FSA, you can use that money for eyeglasses or other approved expenses through the end of the year. But your employer can’t give you the $500 outright, essentially cashing out the account.

Employers have expressed a lot of interest in implementing the flexible spending account changes, said Mercer’s Savan.

“We expect them to have a lot of traction,” he said.

—————–

By: Michelle Andrews
Title: Coronavirus Surprise: IRS Allows Midyear Insurance And FSA Changes
Sourced From: khn.org/news/coronavirus-surprise-irs-allows-midyear-insurance-and-fsa-changes/
Published Date: Mon, 01 Jun 2020 09:00:00 +0000

Related Topics:
Continue Reading

Retirement Planning

Ends-of-the-World Every Year Since 1970

Published

3 years ago

on

August 14, 2020

By

There always has been and always will be a reason not to invest or not to stay invested. This is all the mainstream media reports to us. Below you will find a list of some of the worst global events each year since 1970. I have some commentary to follow.

1970: War: US troops invade Cambodia.
1971: Civil Unrest: Anti-war militants march on Washington.
1972: Political: Start of Watergate Scandal.
1973: Economic: OPEC raises oil prices in response to US involvement abroad.
1974: Political: Nixon resigns as President of the United States.
1975: Political: Multiple assassination attempts on President Ford.
1976: World: Ebola virus.
1977: Political: Government shutdowns.
1978: Market: U.S. Dollar plunges to record low against many European currencies.
1979: World: Iranian militants seize the U.S. embassy in Teheran and hold hostages.
1980: Economic: Inflation spiked to a high of 14.76%.
1981: Political: President Reagan assassination attempt.
1982: Economic: Recession continues in the U.S. with nationwide unemployment of 10.8%.
1983: Economic: Unemployment in the U.S. reaches 12 million.
1984: Economic: 70 U.S. banks fail during the year.
1985: World: Multiple airplane hijackings around the world.
1986: World: Chernobyl Nuclear Power Station explodes.
1987: Market: DOW drops by 22.6% on October 22.
1988: Environment: Awareness of global warming and the greenhouse effect grows.
1989: Environment: Exxon Valdez dumps 11 million gallons of crude oil into Prince William Sound.
1990: World: Persian Gulf War starts.
1991: World: Mass shooting in Killeen, TX.
1992: Human Rights: Los Angeles riots following the death of Rodney King.
1993: Terrorism: World Trade Center bombing.
1994: World: Mass genocide in Rwanda.
1995: Terrorism: Oklahoma City bombing.
1996: Terrorism: Olympic Park bombing.
1997: World: Bird flu.
1998: World: Multiple U.S. embassy bombings.
1999: World: Columbine shooting.
2000: Economic: Start of the Dotcom Market Crash.
2001: Terrorism: Terrorist Attacks in NYC, DC & PA.
2002: Economic: Nasdaq bottomed after a 76.81% drop.
2003: World: The U.S. invades Iraq.
2004: World: The U.S. launches an attack on Falluja.
2005: World: Hurricane Katrina
2006: World: Bird flu.
2007: Economic: Start of the Great Recession.
2008: Economic: Great Recession continues.
2009: Economic: S&P bottomed after a 56.8% drop.
2010: Market: Flash crash.
2011: Market: Occupy Wall Street and S&P downgrades U.S. Debt.
2012: Political: Fiscal cliff.
2013: Political: Taper tantrum.
2014: World: Ebola virus.
2015: World: Multiple mass shootings.
2016: Political: Divided U.S. Presidential election.
2017: World: North Korea testing nuclear weapons.
2018: Economic: U.S. & China trade war.
2019: Economic: Student loan debt reaches an all-time high of $1.4 trillion.
2020: World: COVID-19.

While many of these events were undoubtedly terrible (and there are certainly others not named here that were worse), most of these were broadcast as end-of-the-world events for the stock market. Despite that attention, it is worth noting that these were, for the most part, one-time events. In other words, most faded into the newspapers of history. We moved on.

Obviously, some caused monumental shifts in the way the world works. Just think about how much air travel continues to be impacted by the events of 9/11. But, outside of the resulting inconveniences (if we want to call safety protocols inconveniences) associated with air travel, flying is safer than ever before.

Take a look at just about any of the events and you will find there are many that people will hardly remember. My point here isn’t that these events are to be ignored or that they were easy to stomach at the time, but that they have become a distant memory.

I want to also make the point that we should expect these types of negative events. As investors, we know these types of crises, economic catastrophes, and global phenomena are going to happen.

But in almost all cases, here is what we can say in the next breath – this too shall pass.

Will there be legal, humanitarian, economic, or some other aid required as a result of these events? Almost certainly the answer is yes, but that doesn’t mean it they won’t eventually fade into history.

Lastly, what’s worth noting is how the market has performed over these last 50 years despite the continual advertisements of the world crashing down around us. On January 2, 1970, the Dow Jones stood at 809 and the S&P at 90 -> those are not typos. These same indexes have grown (not including dividends) to 26,387 and 3,232 respectively. Amazing, no?

Perhaps what gets overlooked more than anything else is what separates the above one-time negative events from the positive stories that go largely ignored over our lifetimes. And that is a story worth telling. See the companion post below:

Unheralded Positive Events Every Year Since 1970

Stay the Course,
Ashby

Retirement Field Guide Mission:

“To help 10 million people make better retirement decisions.”

If you would like to join us in achieving our mission, I hope you will consider sharing our site if you have found it helpful in your own retirement planning.

This post is not advice. Please see additional disclaimers.

The post Ends-of-the-World Every Year Since 1970 appeared first on Retirement Field Guide.

—————–

By: Ashby Daniels, CFP®
Title: Ends-of-the-World Every Year Since 1970
Sourced From: retirementfieldguide.com/ends-of-the-world-every-year-since-1970/?utm_source=rss&utm_medium=rss&utm_campaign=ends-of-the-world-every-year-since-1970
Published Date: Tue, 04 Aug 2020 13:26:19 +0000

Did you miss our previous article…
https://getinvestmentadvise.com/retirement-planning/wildfire-prone-property-insurance-bill-in-california-due-for-hearing/

Continue Reading

Retirement Planning

Wildfire prone property insurance bill in California due for hearing

Published

3 years ago

on

August 14, 2020

By

The post Wildfire prone property insurance bill in California due for hearing appeared first on Live Insurance News.

The bill is expected to be heard in upcoming weeks as opposing sites prepare for major battle.

A new California bill, the outcomes of which will have a lot to say about coverage for wildfire prone property in the state, will soon be headed for hearing. The hearing is expected to be a heated one as strong opposing opinions have the opportunity to be voiced.

Opponents of this bill are calling it a direct attack on consumer protections in insurance.

That said, proponents of the bill claim it is the best method for making coverage available to wildfire prone property in California. The bill in question is Assembly Bill 2167. It was written by Assemblyperson Tom Daly (D-Anaheim). If it passes,it will create the Insurance Market Action Plan (IMAP) program. The IMAP program is meant to protect residential properties.

So far, AB 2167 has progressed quickly, when taking into consideration that a chunk of the legislature has been considerably restricted by pandemic crisis precautions. It was first presented in early June and backers have been saying that it was brought forward in good timing and that it has all the momentum it needs to be passed.

That said, AB 2167 has not been without opposition. In fact, it has faced considerable opposition, having been called an attack on Proposition 103, insurance consumer protection law. California Insurance Commissioner Ricardo Lara lobbed that argument at it, calling it an “insurance industry wish list, with nothing to help consumers,” and Consumer Watchdog, whose founder, Harvey Rosenfeld, was the original author of Proposition 103.

The insurance industry strongly supports the bill, saying it will help wildfire prone property coverage.

Insurance organizations such as the American Property Casualty Insurance Association and the Personal Insurance Federation both support AB 2167. The bill also has the support of the California Association of Counties (CSAC), as well as Fire Safe Councils of California, and the CalFIRE union.

The Consumer Federation of America, another watchdog organization, has predicted that if AB 2167 passes, it will cause 40 percent increases in insurance rates. On the other hand, insurance groups claim that the bill offers owners of wildfire prone property a greater opportunity for choice and competition among insurance companies based on coverage and premiums while avoiding the limitations and high costs associated with FAIR Plan coverage.

The post Wildfire prone property insurance bill in California due for hearing appeared first on Live Insurance News.

—————–

By: Marc
Title: Wildfire prone property insurance bill in California due for hearing
Sourced From: www.liveinsurancenews.com/wildfire-prone-property-insurance-bill-in-california-due-for-hearing/8549884/
Published Date: Fri, 14 Aug 2020 09:00:14 +0000

Did you miss our previous article…
https://getinvestmentadvise.com/retirement-planning/is-this-the-last-hurrah-for-bonds/

Continue Reading

Retirement Planning

Is this the last hurrah for bonds?

Published

3 years ago

on

August 13, 2020

By

Recently, I have written quite a bit about the long-term return expectations for investing in bonds. See here, here, here and here.

Spoiler alert: I don’t think it’s good.

But long-term bonds this year have been quite an amazing story as the COVID pandemic has caused the Fed to take historically monumental actions. As a result, we’ve watched long-term Treasuries tear the roof off the market. For instance, a 20+ Year Treasury Bond ETF (name withheld for compliance purposes) is up more than 31% YTD as of July 31st.

That is insane!

But there is a good reason for this increase shown below.

The red circle shows a decrease in the 30-year Treasury rate of almost 40% over a span of six months. That’s practically unprecedented with only two periods (2008 and 1981-1982) having similar declines over such short periods.

But this begs the question: Is this the last hurrah for bonds as a driver of any meaningful return? Below is the 30-Year Treasury rate over the last 40+ years.

For what it’s worth, people have been forecasting the end of the bond bull market since 2012 (maybe even earlier) and yet it has continued despite those predictions. But at some point, the bond party will come to an end.

The Fed has been clear that they are going to keep rates stable until at least 2022 which means this may not change for a little while longer. Or in the near term, I could even see the high returns continuing if we experience pandemic economic shutdown round two.

But, I can’t see a world where this is the case for much longer than that – most importantly over the span of a 30-year retirement.

The official end of the bond bull market depends on a recovery from the pandemic economy as well as a few other factors causing rates to rise. But when they do, it seems likely to me that this may be the last great hurrah for bonds for quite some time.

The question is when to get off that train and that undoubtedly requires a personal answer.

Stay the Course,
Ashby

Retirement Field Guide Mission:

“To help 10 million people make better retirement decisions.”

If you would like to join us in achieving our mission, I hope you will consider sharing our site if you have found it helpful in your own retirement planning.

This post is not advice. Please see additional disclaimers.

The post Is this the last hurrah for bonds? appeared first on Retirement Field Guide.

—————–

By: Ashby Daniels, CFP®
Title: Is this the last hurrah for bonds?
Sourced From: retirementfieldguide.com/is-this-the-last-hurrah-for-bonds/?utm_source=rss&utm_medium=rss&utm_campaign=is-this-the-last-hurrah-for-bonds
Published Date: Wed, 12 Aug 2020 13:47:16 +0000

Continue Reading

Trending