In This Issue
Spike in Heatlh Benefits Costs
Safe Harbor Contributions
PBGC Premium Hike
Health Benefits Costs Could Spike in 2014 Due to Healthcare Reform
Employers expect their healthcare coverage cost per employee to increase in 2014 by an average of 8 percent if they make no changes to their current plans. The small group market could see an even larger cost escalation. The growth in cost slowed in 2013 as employers took action in anticipation of new cost pressures that will arise in the coming years as a result of healthcare reform. According to the National Survey of Employer Sponsored Health Plans conducted annually by Mercer, growth in the average total health benefit cost per employee slowed from 4.1 percent in 2012 to just 2.1 percent in 2013. Costs averaged $10,779 per employee in 2013 including employer and employee contributions for medical, dental and other health coverage. But employers expect that the growth rate in per employee cost of coverage will jump to 5.2 percent in 2014, which reflects changes they will make to reduce costs. If no changes are made to current plans, employers estimate that costs would rise by an average of 8 percent. The survey included public and private organizations with 10 or more employees. A total of 2,842 organizations responded to the survey, conducted in late summer of 2013.
IRS Issues Final Rules on Suspending Safe Harbor Contributions to 401(k) Plans
In November, the Internal Revenue Service issued final regulations governing mid-year reductions or suspensions of "safe harbor" contributions made to 401(k) plans under Internal Revenue Code Section 401(m)(13). Proposed regulations were issued in May 2009. Under the final rules, effective November 15, 2013, non-elective employer contributions may be reduced or suspended mid-year, provided that either (1) the plan sponsor shows that it is operating at an economic loss, or (2) the plan's safe-harbor notice for the year in which the reduction or suspension occurs states:
- The plan may be amended mid-year to reduce or suspend the safe-harbor contribution,
- A supplemental notice will be provided if a reduction or suspension occurs, and
- No reduction or suspension will take effect until at least 30 days after the supplemental notice is provided.
Effective for plan years commencing on or after January 1, 2015, the same standard will apply to mid-year reductions or suspensions of safe harbor matching contributions. The later effective date takes into account the new standard now applicable for safe-harbor matching contributions.
Budget Deal Hikes PBGC Premium
The two year federal budget agreement passed in early December by Congress, and signed into law by President Obama, calls for $8 billion in premium increases for the Pension Benefit Guaranty Corporation (PBGC) to be paid by employers that sponsor defined benefit pension plans. That follows last year's $9 billion increase in premiums according to an analysis by the Tax Policy Center. The basic PBGC premium was already scheduled to increase from $42 per participating worker to $49 in 2014 and to grow with inflation after that. The budget plan takes the premium to $57 in 2015 and $64 in 2016. Additional premiums for underfunded plans and for discontinued plans would also increase.
Hospital Council of Western Pennsylvania is a strategic partner with health care providers and affiliated organizations, enabling them to realize their mission while maintaining their status as economically viable entities.
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