Tag Archives: Jeff Bradley

GASB 74/75: Are you ready?

Bradley_JeffThe train has left the station and is on its way—the Governmental Accounting Standards Board (GASB) will shortly finalize standards 74 and 75, which will require for the first time that the net liability for publicly sponsored retiree healthcare plans (and other postemployment benefits) be stated on balance sheets.

GASB expects that final rules will be issued close to the end of June 2015.

It is expected that the new accounting treatments will mirror those of GASB 67/68, which require public sector plan sponsors, as well of those of cost-sharing employers, to book an accounting expense for sponsoring the plan and to show net pension liabilities on financial balance sheets.

GASB 67/68 also mandated the use of fair market value of assets and a standard actuarial cost method to be used to value net the net pension liability.

GASB 74, which relates to reporting by benefit plans, is expected to be effective for plans for fiscal years ending June 30, 2017, and later. This will replace the old GASB 43 standard.

GASB 75, which relates to reporting by state and local governments, is expected to be effective for fiscal years ending June 30, 2018, and later. This will replace the old GASB 45 standard.

In this regard, plan sponsors, especially those that have cost-sharing arrangements with contributing employers, should be ready to book a liability for fiscal years ending on or after June 30, 2017. In addition, liabilities and accounting expenses for contributing entities will need to be booked for fiscal years ending on or after June 30, 2018.

For unfunded plans, liabilities will be calculated using a discount rate equal to the yield for 20-year, tax-exempt municipal bonds with an average rating of AA or higher. For well-funded plans, an expected rate of return on assets may be used as long as the plan’s funding policy is expected to make or keep the plan fully funded. For plans in between, a blended discount rate will be used.

Many other changes are expected in the new standards. We recommend you contact your Milliman consultant for more details.

This blog was originally published at RetirementTownHall.com.

Top Milliman blog posts in 2014

Milliman consultants had another prolific publishing year in 2014, with blog topics ranging from healthcare reform to HATFA. As 2014 comes to a close, we’ve highlighted Milliman’s top 20 blogs for 2014 based on total page views.

20. Mike Williams and Stephanie Noonan’s blog, “Four things employers should know when evaluating private health exchanges,” can help employers determine whether a PHE makes sense for them.

19. Kevin Skow discusses savings tools that can help employees prepare for retirement in his blog “Retirement readiness: How long will you live in retirement? Want to bet on it?

18. The Benefits Alert entitled “Revised mortality assumptions issued for pension plans,” published by Milliman’s Employee Benefit Research Group, provides pension plan sponsors actuarial perspective on the Society of Actuaries’ revised mortality tables.

17. In her blog, “PBGC variable rate premium: Should plans make the switch?,” Milliman’s Maria Moliterno provides examples of how consultants can estimate variable rate premiums using either the standard premium funding target or the alternative premium funding target for 2014 and 2015 plan years.

16. Milliman’s infographic “The boomerang generation’s retirement planning” features 12 tips Millennials should consider when developing their retirement strategy.

15. “Young uninsureds ask, ‘Do I feel lucky?’” examines the dilemma young consumers face when deciding to purchase insurance on the health exchange or go uninsured.

14. Last year’s #1 blog, “Retiring early under ACA: An unexpected outcome for employers?,” is still going strong. The blog authored by Jeff Bradley discusses the impact that the Patient Protection and Affordable Care Act could have on early retirees.

13. Genny Sedgwick’s “Fee leveling in DC plans: Disclosure is just the beginning” blog also made our list for the second consecutive year. Genny explains how different fee assessment methodologies, when used with a strategy to normalize revenue sharing among participant accounts, can significantly modify the impact of plan fees in participant accounts.

12. Doug Conkel discusses how the Supreme Court’s decision to rule on Tibble vs. Edison may impact defined contribution plans in his blog “Tibble vs. Edison: What will it mean for plan sponsors and fiduciaries?

11. In her blog “Retirement plan leakage and retirement readiness,” Kara Tedesco discusses some problems created by the outflow of retirement savings. She also provides perspective on how employers can help employees keep money in their plans.

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Health and welfare nondiscrimination testing: The calm before the storm

Bradley_JeffAs evidenced by this recent news story, the Obama administration is delaying enforcement of the nondiscrimination provisions of the Patient Protection and Affordable Care Act (ACA), which prohibits employers from providing better health benefits to highly compensated employees than to other employees.

While plan sponsors anxiously await regulations regarding ACA’s nondiscrimination requirements with respect to non-grandfathered, fully insured health plans, they must also be mindful of compliance with regard to existing nondiscrimination rules as they apply to self-insured health plans, cafeteria plans, and flexible health and dependent care reimbursement plans.

Specifically, plan sponsors should have answers to the following questions:

• Do my current self-insured health plans satisfy the nondiscrimination requirements of Section 105(h) of the Internal Revenue Code (IRC)?
• Do my cafeteria arrangements satisfy the nondiscrimination requirements of Section 125 of the IRC?
• Do my healthcare flexible spending arrangements (FSAs) satisfy the nondiscrimination requirements of both Sections 105(h) and Section 125 of the IRC?
• Do my dependent care reimbursement accounts satisfy the nondiscrimination requirements of Section 129 of the IRC?
• Do I have documentation of compliance with the above?

If the answer to any of these questions is “I don’t know” or “I’m not sure,” then now is the perfect time to get your house in order. When there is a failure, the penalties under 105(h), 125, and 129 generally cause amounts that were received tax-free by highly compensated or key employees to become taxable and could result in several years of amended Federal tax returns.

How would my fully insured plans fare under the current 105(h) rules?
While the penalties under 105(h), 125, and 129 are onerous to plan participants, the penalties under ACA are staggering—plan sponsors could face an excise tax of $100 for each day the plan is not in compliance for each non-highly compensated employee who is not eligible for the health plan, up to a maximum penalty of $500,000.

While we are still guessing at what the regulations will hold, we have been told that they will be “similar” to the existing rules under 105(h).

Again, now may be a prudent time to take inventory.