|
Why do so many employees elect to cash-out their 401(k) plan when they change employers? What can employers do to help employees avoid making a big mistake?
According to a 1998 survey of 193,000 defined contribution plan conducted by Hewitt Associates, 57% of 401(k) plan participants chose to take cash payments when changing jobs, instead of rolling over the balance to their new employers plan or an IRA account. Many employees seem to miss the big picture about the value of a 401(k) plan in helping them save for retirement. Many participants view the cash payment as a sudden windfall, and that is a big mistake. It is important to realize that even a small balances in a qualified plan or IRA could grow substantially over time. The analysis points to the need to consider departing, as opposed to retiring, plan participants as a separate audience. Second, financial education needs to be viewed comprehensively, not just at initial enrollment and retirement. Employers need to do a better job of communicating the consequences of lump sum distributions when an employee leaves the company. The percentage of rollovers to a qualified plan is currently about 6%. This low figure is regrettable because it is often the most favorable option available to the plan participant. The circumstances of a participant's leaving may also be a factor in the decision to cash out. Those who have been laid-off, downsized or fired may be worried about staying afloat until they can find another job. They may also have concerns about the future viability of the company. Unfortunately, some employers feel less commitment to departing employees than they do to retirees when it comes to educating participants about their options when leaving the plan. This attitude is short sighted when you consider the good will sound communication can generate and the opportunity for employees to avoid decisions they may later regret.
Return to Top
How popular is the trend in the defined contribution approach to employee benefits?
Given the increased concern over health care costs, many employers are considering the defined contribution benefits approach. Under this type of funding, the employer agrees to a specified dollar amount (per employee or a percentage of payroll), rather than paying for specific benefits. According to a recent survey by Employee Benefit News, only 16% of the 1,000 participants are currently using the defined benefit approach and 47% are neither using nor considering the approach. At this point, the concept has received a lot of attention, but not much reaction among employers who are taking a wait and see attitude to this new concept in cost containment for health care.
Return to Top
What is the statute of limitations for COBRA?
There is no statute of limitations for violations of COBRA regulations. The usual three year limitation on most IRS audits does not apply because there is no filing date to mark the beginning of the period. The only applicable limit is that excise taxes, once imposed, must be collected within ten years. Failure to comply with COBRA regulations years ago can surface at any time, and mistakes made today can emerge years from now. The thing that will likely trigger dormant claims is the discovery of a serious medical condition and the attending expenses. IRS enforcement has increased dramatically. The IRS now conducts routine COBRA audits during routine corporate tax examinations. Audits may also be triggered by individual employee complaint.
Return to Top
What can be excluded as a pre-existing condition under HIPPA?
A preexisting condition exclusion in a health plan limits or denies coverage for a medical condition by virtue of the condition existing prior to the enrollment date for coverage, regardless of whether the individual received or was recommended medical advice, diagnosis, care or treatment. Under HIPPA, allowable application of preexisting conditions exclusions is limited. Employers may impose a preexisting condition exclusion only if the individual actually received or was recommended medical advice, diagnosis, care or treatment within the 6 month period prior to the enrollment date in the plan. This is referred to the 6 month look-back rule.
This definition can trigger questions as to what constitutes medical care. While HIPPA is clear on who must deliver the care or advise, it is not precise as to what it means in practical terms to receive or be recommend treatment. HIPPA regulations specify that medical advice, diagnosis, care or treatment must come from a state licensed individual or person similarly authorized to provide those services under state law. HIPPA regulations also call for the use of medical records, including physicians notes, prescriptions, billing codes and other communications, to determine whether advice or care was given.
HIPPA specifies two important exceptions to medical conditions subject to pre-existing condition exclusions. First, pregnancy is not a preexisting condition. Second, in the absence of a diagnosis within the six-month look-back period, genetic information indicating a predisposition toward an inherited disease is not a pre-existing condition.
Return to Top
What are the basic components of an effective security program?
- Physical protection of industrial sites, offices, high value cargoes and most importantly, employees.
- Close protection of executive and official VIP's
- Protection of proprietary information and company secrets
- Security system design, procurement, installation and management
- Training of all security personnel with qualified training of guards
- Crisis management planning and training
- Background and reference investigations implementation and training
- Threat assessments, risk analysis and physical security audits
- Effective communication with local law enforcement and emergency personnel
Return to Top
What are the steps to becoming a certified Drug-Free Workplace?
- Develop and plan your program carefully by talking to your employees & supervisors about the benefits of a drug-free workplace. Listen to their ideas.
- Consider the resources available to you and be prepared to do the following:
- Provide access to an EAP (employee assistance program)
- Provide extensive training for your supervisors
- Provide education and awareness for your employees
- Set up a drug-testing program
- Write a comprehensive policy and publish it
- Distribute the policy to all employees, giving them notice well in advance of policy implementation
- Educate your employees about the program
- Post notification of your drug-free workplace program
- Maintain certification of your program
Return to Top
|
