Compliance September 16, 2016

PANC 2016: Presidential Politics

What the outcome of the election could mean for the employee benefits industry.
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Bruce Ashton, partner at Drinker, Biddle and Reath LLP, shared his thoughts at the 2016 PLANADVISER National Conference about what the outcome of the presidential election could mean for the employee benefits industry.

If Clinton Wins 

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Ashton said if Hilary Clinton wins, the Senate may flip to Democratic control, but the House won’t. The fiduciary rule will go into effect; Obamacare stays, but Clinton will try to make tweaks; and there will be ramped up enforcement on service providers. Ashton said it may be difficult for Clinton to make tweaks to Obamacare if legislation is needed; Congress may fight her. He also noted that enforcement on service providers will not start immediately, but will happen over the course of her administration.

Ashton shared what Democrats have promised:

  • Fight against any attempt to roll back the fiduciary regulation;
  • Fight to protect pension benefits in multiemployer plans;
  • Defend the rights of workers to collect their defined benefit (DB) pensions and make sure they get “priority and protection” when plans are in distress; and
  • Fight efforts to weaken Social Security and, in addition, expand it.

As for health care, Democrats have promised to:

  • Crack down on “runaway” prescription drug prices;
  • Fight efforts to roll back women’s health and reproductive rights;
  • Create a “public option;”
  • Permit those older than 55 to opt in to Medicare;
  • Empower states to create waivers under the Affordable Care Act (ACA) to develop locally tailored approaches to health coverage; and
  • Repeal the excise tax on high-cost health insurance.
NEXT: If Trump Wins

According to Ashton, if Donald Trump wins the election, Republicans will probably keep both the Senate and House. Obamacare will be gone. The fiduciary rule will be gone. Ashton questioned whether anything would replace them.

Ashton shared what Republicans have promised:

  • Cut taxes, which may reduce the incentive to save for retirement through workplace plans;
  • Consolidate and reform multiple different retirement savings provisions in the Internal Revenue Code—Ashton said this will likely impact 403(b)s and 457s the most;
  • Explore more general savings vehicles outside the employer based system and possibly in addition or lieu of IRAs.

As for health care, Republicans have promised to:

  • Repeal Obamacare; replace it with an approach “based on genuine competition, patient choice, excellent care, wellness and timely access to treatment;”
  • Return to the states the regulation of local insurance markets, limit federal requirements and promote a “robust consumer market;”
  • Cap non-economic damages in medical malpractice suits to lower health care costs;
  • Reform the FDA – Ashton says the idea is that the Food and Drug Administration is putting lives at risk by delaying the development of certain items.

“These are my thoughts, but anything could happen,” Ashton said, noting that “Whoever wins will have a significant impact on the benefits industry.”

Client Service September 16, 2016

PANC 2016: HSAs and DC Health Care

Advising about saving for retirement health care costs can add to an adviser’s value proposition.
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Christopher Auda, senior director, Marketing and Strategy, at ADP Retirement Services, told attendees at the 2016 PLANADVISER National Conference that the movement of using health savings accounts (HSAs) to save for retirement is a natural convergence.

Chad Metzger, regional vice president, DCIO Mutual Fund Sales, at Nationwide Funds, says HSAs are for advisers because the ‘S’ stands for ‘savings.’ He points out that HSAs have triple tax advantages for employees—savings are put in on a tax-deferred basis, earnings on the accounts are tax-free and distributions from the accounts are tax-free. Metzger added that after retirement age, non-medical-related expenses can be paid from HSAs, but those payments are subject to income tax.

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“Employees are being taught by employers that HSAs are spending plans, but to the extent employees can keep from using the savings for current costs and can invest their HSA assets, there is tremendous opportunity for retirement savings,” he said. Advisers can educate employees about the diversification of retirement savings and the tax benefits of HSAs.

Chad J. Wilson, investment director and co-founder of HighTower Fiduciary Plan Advisors, who moderated the panel discussion, noted that plan sponsors have to have a high-deductible health plan (HDHP) in order to offer HSAs. He added that HSAs are valuable for highly compensated employees who need a way to save more on a tax-deferred basis than statutory limits on retirement plans will allow.

Dan Steele, SVP and head of Retirement Field Distribution at BNY Mellon Retirement, believes the use of HDHPs will grow. “It is similar to the move from defined benefit plans to defined contribution plans,” he said. “Employers want to lower their health care budget, so more will move to HDHPs and HSAs.”

Auda said it is a new idea, but he believes it will take off as more focus is being given to total financial wellness. “Advisers need to get into the market and offer education before competitors do. Get in the game now,” he told attendees.

“You position yourself as a retirement expert, and you agree that health care expenses will be employees’ biggest cost in retirement. Do you have a solution to address this?” Steele queried.

NEXT: Getting into the health care advising game

Auda said advisers can partner with an HSA provider to incorporate HSAs into their practice or just refer clients to an HSA provider. Steele added that if advisers incorporate HSAs into their practice, they need to start with vetting providers. He said Access Point HSA is a good site for vetting providers.

According to Metzger, there are some providers out there that will white label a product for advisers. He added that until the market evolves, fee-based advisers are best to get into the market now. They can provide consultation, advice and employee education.

Steele noted that HSAs are the single-best tax-advantaged solution to saving for retirement health care expense, and they are growing 23%, with zero intermediary distribution. “Advisers are in the best position to market HSAs. It can be an adviser’s ‘hook,’” he said.

Steele added that advisers can incorporate health care advising into their value proposition. It’s as simple as asking a company if they have an HDHP, and if so, telling the company you can help with HSAs, he told attendees.

Auda warned that the new Department of Labor fiduciary rule comes into play if an adviser is advising employees about HSA investments, and if 12b-1 fees are related to the investments. However, advisers do not have to get down to the investment advice level to offer a value-add to clients, he added.

As for pricing, Wilson suggested advisers view HSA consulting as project work and price similarly.

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