American Academy of Actuaries Releases Issue Brief on Drivers of 2024 Health Insurance Premium Changes

Industry News

Print

American Academy of Actuaries Releases Issue Brief on Drivers of 2024 Health Insurance Premium Changes

On July 19, 2023, the American Academy of Actuaries (AAA) released its issue brief, Drivers of 2024 Health Insurance Premium Changes. The brief examines factors that may affect the composition of health care prices, health care utilization and health insurance risk pools, which may affect health spending projections and premiums for 2024.

The key findings include:

  • Inflation and other factors are projected to increase negotiated provider payment rates and premiums;
  • Changing the payment responsibility for COVID-19 vaccines and tests from the federal government to insurance carriers may increase premiums, which may potentially be offset by reduced carrier coverage of at-home tests; and
  • Premium changes will reflect the dynamics of the local market and will vary by carrier and geographic area. 

In addition, the brief indicated that, “Although Medicaid eligibility redeterminations due to the end of the COVID-19 public health emergency (PHE) will likely result in an increase in individual health insurance market enrollment, the impact on the risk pool and premiums is uncertain.”

The issue brief is available here.

CRR Publishes Brief on Public Pension Funding Levels

Industry News

Print

CRR Publishes Brief on Public Pension Funding Levels

On July 17, 2023, the Center for Retirement Research at Boston College (CRR) released its issue brief, Public Pension Funded Levels Improve Amidst Rising Interest Rates. The brief indicates that the funded status of state and local pension plans has increased about two percentage points since 2023 and five points since 2019.

Despite the volatility of asset values since 2019, strong investment performance for most asset classes (excluding those for fixed-income assets (i.e., bonds)) has helped to improve the funded status of pension plans. The brief notes that the recent rise in interest rates to curb inflation has only marginally impacted the overall finances of public pension plans.

According to the brief, “Since [Fiscal Year] FY 2019, financial markets have been jostled by the onset of COVID; the subsequent COVID stimulus; declining interest rates; rising inflation; and rising interest rates. Despite the volatile path of market asset values over this period, the FY 2023 funded status of state and local pension plans is about 78 percent – higher than in FY 2022 and about 5 percentage points above the FY 2019 level.” It also indicated that “pension funds have been navigating rising interest rates. While this increase has hurt their fixed-income holdings, the overall impact has been offset thus far by the relatively strong performance of other asset classes.”

The brief is available here.

IRS Provides Transition Relief and Guidance Related to Certain Required Minimum Distributions Under SECURE and SECURE 2.0 Acts

Industry News

Print

IRS Provides Transition Relief and Guidance Related to Certain Required Minimum Distributions Under SECURE and SECURE 2.0 Acts

On July 14, 2023, the Internal Revenue Service (IRS) issued Notice 2023-54 which provides transition relief and guidance for certain Required Minimum Distributions (RMDs) under Section 401(a)(9) of the Internal Revenue Code. The additional RMD relief follows certain changes enacted under the Setting Every Community Up for Retirement Act of 2019 (SECURE Act) and SECURE 2.0 Act of 2022 (SECURE 2.0).

The 2023 Notice extends the transitional relief that the IRS previously issued in Notice 2022-53 and provides certain transition relief for participants who were born in 1951 and may have been impacted by recent legislative changes. Under the Notice, the IRS issued limited transition relief for plan administrators, payors, plan participants and beneficiaries to address the changes in requirements for RMDs for qualified plans (including 401(k) plans), IRAs, Roth IRAs, 403(b) plans and 457(d) eligible deferred compensation plans made by the SECURE Act and the SECURE 2.0 Act.

As background, the SECURE Act increased the age for determining an individual’s Required Beginning Date (RBD) to age 72 and added a new 10-year rule for trusts and certain individuals (which include an individual beneficiary who does not qualify as an Eligible Designated Beneficiary). This 10-year rule generally requires trusts and certain beneficiaries to distribute the remainder of their portion of a retirement account within 10 years of the account owner’s death. In February 2022, the IRS also released proposed regulations implementing the RMD changes in the SECURE Act. The IRS indicated that the 10-year rule applied in addition to the “at least as rapidly” rule. Generally, the “at least as rapidly” rule provides that if the participant dies after the RBD for taking RMDs, then the RMDs for years after the participant’s death must be based on the longer of the beneficiary’s or the participant’s life expectancy.

In addition, the SECURE 2.0 Act increased the RBD from age 72 to age 73 as of January 1, 2023 and age 75 starting on January 1, 2033. Before the change under SECURE 2.0, a participant that attained age 72 (born in 1951) in 2023 would have an RBD of April 1, 2024. However, after the change, the increase to age 73 for those born in 1951 does not have an RMD for 2023, but rather the RBD is April 1, 2025 for 2024 RMD payments. The IRS granted relief related to 2023 distributions that were mischaracterized as RMDs due to the change in the RBD from age 72 to 73.

Specifically, Notice 2023-54: 1) extends the effective date of the final RMD regulations that the U.S. Treasury and IRS intend to issue related to RMDs (for all plan types) for another year to now be effective for calendar years beginning no earlier than the 2024 distribution calendar year; 2) provides rollover relief to plan sponsors and participants/IRA owners that were born in 1951 (as well as their surviving spouses) that received a distribution between January 1, 2023 and July 31, 2023, which includes extending the rollover period through September 30, 2023; and 3) eliminates the need for 2023 RMD payments for beneficiaries under the combination of the 10-year rule and the ‘at least as rapidly’ rule. 

IRS Notice 2023-54 is available here.

MissionSquare Releases State and Local Government Workforce Survey Report for 2023

Industry News

Print

MissionSquare Releases State and Local Government Workforce Survey Report for 2023

Recently, the MissionSquare Research Institute (formerly the Center for State and Local Government Excellence at ICMA-RC or SLGE) published its report, Survey Findings: State and Local Government Workforce 2023. The research found that the public sector faces significant challenges in hiring and retaining employees in various critical areas. However, governments are utilizing strategies which have helped with creative outreach techniques, ongoing employee engagement and professional development to acquire new skills.

The research indicates that the most difficult positions to fill over the past year are in policing (78%), corrections/jails (77%), health care (physicians/nurses) (76%), engineering (73%), mental health professionals (71%), dispatch (71%) and skilled trades (71%).

In addition, the research found that about 35% of respondents indicated that retirement-eligible employees are accelerating their plans for retirement while 22% have postponed their retirement date.

Other key findings include: 

  • 53% of respondents hired more full-time staff in 2022 than in 2021;
  • 62% implemented broad-based pay increases;
  • 61% allowed for flexible schedules;
  • 58% provided for regular hybrid scheduling for eligible positions;
  • 46% hired temporary or contract employees; and
  • Only about 30% believe employees are financially prepared for retirement. 

State and local governments continue to deal with a challenging recruitment environment and are deploying new strategies to attract and retain public service workers. Some are offering hiring bonuses, increasing salaries, amending degree requirements and job descriptions, expanding recruiting methods and implementing non-traditional benefits or other retention programs.

The survey included responses from 249 human resource managers with 80% from local governments and 20% from state governments. 

The report is available here.

CRR Examines Whether Social Security Should Invest in Equities

Industry News

Print

CRR Examines Whether Social Security Should Invest in Equities

On July 5, 2023, the Center for Retirement Research at Boston College (CRR) released its issue brief, Should Social Security Invest in Equities? The brief examined the concept of the U.S. Social Security program investing in equities. According to the brief, investing the program’s trust fund assets in equities would require a large trust fund. Since the program’s trust fund is moving toward zero, rebuilding the fund would require a tax hike to cover the program’s current costs as well as to produce an annual surplus to increase the trust fund reserves.

Other key findings include: 

  • Investing a portion of Social Security’s reserves in equities could potentially earn a higher return which would result in less tax increases or benefit reductions.
  • However, critics caution that equity investment could interfere with private markets or give the impression that trading bonds for stocks would potentially create new money.

The brief concludes, “Social Security no longer has a sizable trust fund to invest. And rebuilding the trust fund through additional taxes or borrowing may not be either wise or feasible. Thus, while the mechanics are totally manageable, the time may have passed for raising taxes enough to accumulate a meaningful Social Security trust fund that would make investing in equities worthwhile.”

The brief is available here.