2019 HSA Limits Announced by the IRS

This update is hot off the presses! On May 10, the IRS announced that the annual limit on Health Savings Account contributions will increase by $50 for individuals and $100 for families next year.

In 2019, the annual contribution limit for individuals has been set at $3500 for self-only coverage, versus the 2018 rate of $3450. For family coverage, that limit ha gone from $6900 to $7000.

An HSA must be combined with a high deductible health plan. The IRS also announced the 2019 High Deductible Health Plan minimum deductible amounts. The minimum deductible for a qualifying high-deductible health plan has not changed for 2019. For 2019, the minimum annual deductible for a HDHP (individual) is $1350, unchanged from last year. For families, the minimum annual deductible rate remains consistent at $2700.

Under the Affordable Care Act, a group health plan cannot require an individual to spend more than a specified annual maximum amount on covered services. The IRS announced that for 2019, the maximum annual out-of-pocket on individual plans is $6750, an increase of $100 from 2018. For 2019, the maximum annual out-of-pocket amount for family plans is $13,500, an increase of $200 from 2018.

The Boon Blog is your resource for the latest in industry news. Follow the Boon Blog and catch us on Facebook, Twitter, and LinkedIn for all things Boon!

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Fiduciary Responsibility, Your Third-Party Services Provider, and You

Fiduciary responsibility. Liability under ERISA. Compliance.

Seems a little daunting when it’s laid out like that, doesn’t it? As a government contractor it’s important to understand the risks and benefits associated with choosing a third-party provider to administer your benefits plans. Read on to learn more:

Plan fiduciaries are the individuals or entities that manage an employee benefit plan and its assets. Per ERISA, a plan must have at least one fiduciary named in the plan, in writing. Most often, the employer is the Plan Administrator, or named fiduciary. Additionally, Trustees, investment advisers, and other entities or individuals who exercise discretion over plan assets may also be plan fiduciaries; attorneys and accountants that are acting solely within their professional capacity, or others who are providing ministerial services only, are not plan fiduciaries.

It is imperative to understand that even if an employer uses a third-party service provider, that employer, as the Plan Administrator named fiduciary, has fiduciary responsibilities. In fact, the named fiduciary has the most extensive responsibility, which includes all phases of plan management. Failure to properly exercise that fiduciary responsibility can make the employer culpable for any negligence or wrong-doing on the part of the third-party service provider the employer chose to provide the services.

ERISA defines the responsibilities of the plan fiduciary as follows:

  • The Duty of Loyalty: The Duty of Loyalty requires the fiduciary to act solely in the interest of the plan participants.
  • The Duty of Care: This duty requires a fiduciary to act with the care, diligence, and skill under the circumstances that a prudent person, acting in a like capacity and with the same expertise, would use in a similar enterprise.
  • The Duty to Provide Investment Diversification: This duty requires the diversification of plan investments to minimize the risk of large losses unless it is not prudent to do so, under the circumstances.
  • The Duty to Adhere to Plan Documents: This duty requires that the fiduciary must act in accordance with governing plan documents and instruments that are consistent with ERISA.

Fiduciaries can also be held liable for the acts, errors, and omissions of outside entities that provide services to the benefit plan. This can include organizations that service pension and benefit plans, consulting firms, law firms, accounting firms, investment advisers, and trust departments.

When choosing an employee benefits company, you’re choosing more than just an entity to handle your administrative and employee benefit needs. You’re choosing to take part in a working relationship that requires trust. For 35+ years, The Boon Group has succeeded with a model of creating strong relationships and providing meaningful benefits. We believe healthcare should be flexible, affordable, and, most of all, transparent and compliant.

For the latest on industry news, follow the Boon Group Blog.

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SEC Proposes its Own Fiduciary Rule

The DOL’s fiduciary rule has been a point of contention in the industry. Many financial groups claimed that the rule was overly burdensome and there was a fear of the rule driving up the cost of providing financial advice regarding retirement. The 2-1 decision from the U.S. Fifth Circuit Court of Appeals voiding the rule was a big win and it looks like there may be another one on the horizon!

That potential victory comes in the form of a fiduciary rule proposed by the Securities and Exchange Commission (SEC). Issued on Thursday, this rule would not pile on restrictions for brokers and advisors. The rule was approved by the SEC in a 4-1 vote and leans greatly in the favor of the industry, which is what critics of the rule are hanging their hat on.    The SEC proposed rule continues the status quo. Of course, this is a battle won in a long war and we will have to wait and see how the new rule stands up against Congress.

But, for now, let’s talk about what’s in the proposed SEC fiduciary rule and what it could mean for brokers and advisors!

The proposed rule puts forth different standards for brokers and advisors, in acknowledgment of the differences between how the two maintain relationships and dispense advice. For brokers, the SEC rule requires the “best interest” standard that we all know well by this point; no broker can put their own interests or the interests of the firm they represent over the interests of their client. The SEC proposal also provides some flexibility in terms of conflicts for brokers. The rule does not prohibit a broker-dealer from having conflicts, so long as the broker-dealer discloses those conflicts when making a recommendation. These disclosures would include those related to compensation and in-house products.

Advisors must abide by a more-stringent fiduciary standard. Critics of the rule claim that the proposal blurs the distinction between standards of care between brokers and investment advisors. The rule also provides no clarification on the difference between a sales and an advisory relationship. This has cast some doubt as to whether the rule will ever be successfully implemented.

Another point that the proposed SEC fiduciary rule addresses is the occasionally muddy waters of titles. Per the SEC rule, brokers and broker-dealer firms cannot call themselves “advisors/advisers.” However, hybrid RIA/brokers are exempt from this and open to some flexibility.

Both advisors and brokers will be required, under the new rule, to provide clients with a relationship-summary disclosure. This would detail the nature of their relationship, the services and costs associated, any existing conflicts of interest, an expected standard of conduct, and any legal or disciplinary events or actions.

It remains to be seen what the future of the SEC proposed fiduciary role will be.  The proposal is currently in a public comment period that will last 90 days from the date the proposal was issued (Apr. 18). Additionally, the AARP has thrown their hat into the ring with an attempt to revive the DOL fiduciary rule. The AARP, backed by attorney generals from various states, have appealed to the Fifth Circuit and are requesting permission for an en banc review of the ruling against the DOL rule.

The Boon Group is dedicated to providing effective investment management services. Asset allocation? You bet. Performance monitoring and portfolio analysis? We got this! At Boon, we are set up to be a Fiduciary and always act in the best interest of our clients; the one constant in these uncertain times. Boon isn’t shaken by these changes and are steady in our commitment to you!

This is a developing issue that we will be watching closely. Follow the Boon Blog for the latest in industry updates and all things Boon! You can also catch us on Facebook, Twitter, and LinkedIn!

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Your Guide to Letters from the IRS

As a government contractor, one of your biggest concerns is compliance. As of now, Affordable Care Act penalties are being assessed by the IRS and the hammer is dropping on many organizations who failed to comply with the employer mandate requirements of the Affordable Care Act. This hammer is arriving in the form of Letter 226J and can have serious implications for you and your organization. But what is it? What are your options, should you receive one of these letters? Read on to learn more:

Letter 226J

This is the first letter that the Internal Revenue Service sends out to Applicable Large Employers (ALEs), with the intent of notifying them that they may be liable for an Employer Shared Responsibility Payment (ESRP). The IRS uses information from 1094-C and 1095-C forms filed by the ALE and the individual income tax returns of employees of that ALE to make a determination on whether an ALE owes an ESRP and, potentially, the amount that is due. The ACA Times reported letters requiring payments ranging from the tens of thousands of dollars to nearly six million! They’re not calling it the “Million Dollar Letter” for nothing!

If you receive Letter 226J, it is important that you review the data that was submitted as part of your ACA filing with the IRS. Hopefully, this will help you identify any errors that there may be in the IRS letter and you will be able to appeal. Next, you must provide the information requested by the IRS by the response date included in the letter, which is typically 30 days from the date the letter was sent. All contact information will be included in the letter. Respond in writing, either with your compliance to the request or with your disagreement and evidence to back up your request for review.

What if you don’t respond? The IRS will issue a Notice and Demand For Payment.

Letter 227

IRS Letter 227 is sent next, after your organization has received a Letter 226J. Letter 227 is actually five different letters and each different version is used to acknowledge your response to Letter 226J and describes further actions that your organization must take. So, what are these different versions and what do they do?  Two of the five letters are reserved for instances of partial agreement or the need of clarification on a response. The other three are as follows:

1) Letter 227K

This is your best case scenario letter! It confirms that your case has been resolved. The purpose of Letter 227K is to acknowledge that the information you enclosed in your response to the Letter 226J was satisfactory and your organization does not owe an ESRP.

2) Letter 227L

Letter 227L is also a positive. While not a total closing of the case, a Letter 227L means that the IRS has heard your case for a reduced ESRP and agrees with you and the information provided in your response to Letter 226J. An ESRP payment must still be paid but for an amount much smaller than the one originally proposed.

3) Letter 227M

Unfortunately, not all news is good news. When you receive a Letter 227M it means that the IRS disagrees with your Letter 226J response and reiterates the original penalty, no dismissal and no reduction of the ESRP. If your organization still disagrees with the IRS you do retain the right to appeal and prepare a protest. It is recommended to request a pre-assessment conference with the IRS Office of Appeals. This should be requested in writing and sent in by the response date indicated in your Letter 227 (this is typically 30 days from the date of the letter).

The Boon Group has the expertise and resources to help clients address a variety of compliance issues. Our Legal and Compliance services have experience in Affordable Care Act compliance, state mandate requirements, tracking federal regulation and ensuring compliance with new regulations, as they arise.

Have questions about your compliance? Visit us at The Boon Group. Want to stay up to date on the latest industry news? Follow the Boon Group Blog and catch up with Boon on our Facebook, Twitter, and LinkedIn!

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Three Potential Compliance Pitfalls for Government Contractors in 2018

Compliance goes with government contracting like peanut butter goes with jelly. It’s just part of the deal. But compliance, in and of itself, is a huge undertaking. Government contractors are navigating rules and regulations, statutes and case law, new legislation and initiatives that ebb and flow with each new administration, and the individual requirements and guidance issued by the contracting agency.

In this ever-changing landscape, there are new pitfalls for government contractors opening up each and every day. At The Boon Group® , our team is here to be your guide! Read on for three potential compliance stumbling blocks that all government contractors should be aware of in 2018.

1) New and Changing Sick Leave Requirements

Sick leave requirements are a part of the vast majority of government contracts. In 2015, President Obama signed an executive order requiring that employees be provided at least seven days of paid sick leave, including paid leave for family care, annually. The Final Rule on Executive Order 13706 was published later, in 2016.

As it stands, under the current administration, President Trump has not moved to rescind this executive order but the future of EO 13706 remains uncertain. This is an area of interest for government contractors that we’re all watching closely, especially given the fact that these requirements must be included in addition to whatever mandates regarding sick leave are established in various locales and states. The issue of these sick leave requirements is gaining a lot of momentum across the country.

As a government contractor, your compliance rests on providing these types of benefits to your employees and being on top of all the latest developments. At Boon, we’re paying attention as well and making it a priority to provide you with the latest updates.

2) Unpredictable Administration, Uncertainty with Federal Budget

You don’t have to be an avid follower of politics to know that things are getting interesting up in Washington, D.C. With the Republicans holding a majority in the United States Legislature, under the Trump administration, one might assume certain changes are a given. Not so! This administration has shown time and time again that it does not neatly check off the expected boxes. Priorities shift and that makes it difficult to anticipate the next big move on Capitol Hill.

Putting policy preferences aside, the unpredictable nature of the current administration and its focus means that contractors are left suspended in the balance. The U.S. already saw a shutdown this year on January 20th, lasting only two days but reminding us that benefits and pay could be affected in the future. Government shutdowns mean the closure of nonessential government offices and show the fickle nature of the federal budget. It also brings government contracting projects to a screeching halt.

A brief but nail-biter of a funding gap occurred on Friday, February 9th 2018. While this technically constituted a shutdown, neither workers nor government services were disrupted as the issue arose and resolved overnight before the following workday.

No government, no billable hours. That’s a stressful game to play when it comes to one’s income. While, historically, federal employees are always paid back for any time that they were shut down during a period of no funding, contractors and their employees do not always enjoy the same safety net, making it especially important for government contractors to stay abreast of the trends in D.C. for the purpose of compliance adherence.

3) SCA Compliance

The Service Contract Act, better known as the SCA, is the “Big One” in the world of government service contractors. The SCA is the final word on standards for wages, hours, and benefits and its impact is huge. The SCA governs contractors and subcontractors performing services on contracts valued in excess of $2500. Compliance with the terms of the SCA is an absolute must for government service contractors and those found in violation may suffer serious repercussions.

Meeting the terms of the SCA is straightforward, but must be managed diligently and thoroughly. Government contractors are responsible for tracking the productive hours of their employees; making proper and timely payments in the form of wages and bona fide fringe benefits, and providing employees with notice of their benefits.

At The Boon Group, our vision is flexible and affordable healthcare in the federal contracting space. This is about providing quality care to our clients but also about being in your corner. Our in-house team of professionals work tirelessly to be experts in our field and to be on guard against compliance pitfalls, so that you don’t have to be. At Boon, our entire team is dedicated to staying ahead of these potential pitfalls and keeping you compliant.

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Obama-era Fiduciary Rule Voided by U.S. Appeals Court

Last week, a federal appeals court voided the DOL’s Obama-era fiduciary rule. The rule was adopted in 2016 in an attempt to curb conflicts of interest among providers working with Americans that were planning for retirement. The Fifth U.S. Circuit Court of Appeals came to a 2-1 decision and represented another big win for financial service groups under the Trump administration. Many such financial groups claimed the rule overly burdensome and feared that it would drive up the cost of providing retirement financial advice.

This follows President Trump’s earlier memorandum, which had delayed implementation of the rule pending further examination of how the rule may affect investors and retirees. The Department of Labor (DOL) Employee Benefits Security Administration (EBSA) subsequently announced in the Federal Register on April 7, 2017 that compliance deadlines for many provisions of the rule had been pushed back to January 1, 2018, to allow more time for DOL’s re-examination of the rule’s impact. Full implementation of the final rule would not be complete until July 1, 2019—much later than the completion deadline of January 1, 2018 provided in the original final rule. This has now been put on complete hold and the issue is predicted to go before the Supreme Court

The fiduciary final rule sought to expand the definition of “investment advice fiduciary” under the Employee Retirement Income Security Act of 1974 (ERISA) to require virtually all individuals who provide retirement plan advice to ensure that advice and recommendations are made in the best interest of the participants. Retirement plan fiduciaries would be required to uphold standards of care and trust to make choices solely for the benefit of plan participants and beneficiaries, as opposed to the previously held standard of “suitability”.

This turn of events, naturally, puts discussions of  fiduciary duty at the forefront in the wake of the final rule announcements and now this overturn by the court of appeals, employers that sponsor a retirement plan may be left wondering whether their current retirement plan providers are considered to be fiduciaries to the plan. While the retirement plan sponsor (usually the employer) is considered a fiduciary to the plan, third-party service providers may or may not be fiduciaries to the plan. Additionally, one aspect of the plan sponsor’s fiduciary duty is the requirement to select a third-party service provider that is skilled, diligent, and, prudent.

This is a developing issue, so be sure to follow our blog for updates.

Boon Investment Group (CRD# 150102) is a Registered Investment Advisor (RIA) and can provide impartial information regarding investment lineup and ongoing due diligence in an investment fiduciary capacity. The ability to provide impartial recommendations and advice sets Boon Investment Group apart from other firms in the employer-sponsored retirement plan space. While other firms can only offer a non-fiduciary retirement plan platform, Boon Investment Group can provide education and advice to employers in the best interest of retirement plan participants.

Boon Investment Group is carefully monitoring news and announcements regarding the fiduciary final rule. Questions about an employer-sponsored retirement plan? Contact The Boon Group for more information about retirement plan services.

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New All Agency Memorandum Establishes Tiered SCA Fringe Rate

Federal contractors already know that the Service Contract Act (SCA) fringe rate is generally updated annually. In 2016, the Department of Labor (DOL) issued All Agency Memorandum 221, which made no change to the the fringe rate of $4.27 per hour established in 2015 by All Agency Memorandum 217.

The fringe rate update for 2017, All Agency Memorandum 225. introduces a new twist to fringe rates: multiple, distinct fringe rate tiers.

The fringe rate tiers are the result of new regulations in the SCA contracting space. In September 2016, the Department of Labor issued regulations implementing Executive Order (EO) 13706. EO 13706 requires many SCA contractors to provide employees with seven days (56 hours) of paid sick leave annually. As with any benefit required by regulation or by law, the paid sick leave required by EO 13706 cannot be funded by fringe dollars and represents an additional cost burden on federal contractors. EO 13706 is applicable to new federal contracts awarded on or after January 1, 2017.

All Agency Memorandum 225, issued July 25, 2017, responds to EO 13706 by splitting the SCA fringe rate into multiple tiers in an attempt to reduce the cost burden on federal contractors. The fringe rate applicable to an SCA employee is determined by whether the employee is entitled to paid sick leave under EO 13706.

For employees entitled to paid sick leave under EO 13706, the fringe rate will decrease from $4.27 to $4.13.

For employees not entitled to sick leave under EO 13706 EO 13706, the fringe rate will increase from $4.27 to $4.41.

Previous fringe rate updates established a separate, lower fringe rate for employees entitled to health care under the Hawaii Prepaid Health Care Act (HPHCA) All Agency Memorandum 225 also considers the intersection of the HPHCA and EO 13706.

Hawaii employees entitled to health care benefits under the HPHCA, but not entitled to sick leave under EO 13706, will receive a fringe rate of $1.91. Employees entitled both to health care benefits under the HPHCA and to sick leave under EO 13706 will receive a fringe rate of $1.63. Hawaii employees not covered by the HPHCA are subject to the same fringe rates as mainland employees: $4.41 if not covered by EO 13706 and $4.13 if covered by EO 13706.

The new fringe rates are effective for government contracts awarded on or after August 1, 2017.

Confused by the new fringe rates or concerned about rising benefit costs? Contact The Boon Group for help with SCA compliance, fringe accounting and more.

For additional information read the Federal Sick Leave Health and Welfare Benefit Changes Bring Enhanced Compliance Challenges for Federal Service Contractors whitepaper provided by Wiley Rein LLP.



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