Compliance August 25, 2016

IRS Announces 2017 Limits on HSA Contributions

For individuals, the cap is raised by $50 to $3,400.
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The Internal Revenue Service (IRS) has announced the 2017 limits for health savings account (HSA) contributions and the minimum deductible amounts and maximum out-of-pocket expenses for high-deductible health plans (HDHPs). By law, these limits are indexed annually to adjust for inflation.

Individuals will be able to contribute $3,400 to their HSA in 2017, a $50 increase, while families’ contributions will remain the same as in 2016: $6,750.

To qualify as a HDHP in 2017, a plan must have a minimum annual deductible of $1,300 for self-only coverage (the same as for 2016), or $2,600 for family coverage (also the same as for 2016). The maximum out-of-pocket expenses permitted for a HDHP is $6,550 for self-only coverage and $13,100 for family coverage.

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Employers are advised to begin updating payroll and plan administration systems to reflect the 2017 cost-of-living adjustments. In addition, employers should incorporate the 2017 HSA limits into all relevant participant communications, like open enrollment and communication materials, plan documents and summary plan descriptions.

Data & Research August 25, 2016

Study Finds Small Business 401(k) Fees Average 2.22%

By comparison, ICI data shows that plans of all sizes pay an average of 1.29% in fees.
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Employee Fiduciary, LLC studied the fees that 401(k) plans with less than $2 million in assets pay and found that they average 2.22%. The study was based on 121 plans, which had an average of $677,000 of assets.

By comparison, the Investment Company Institute (ICI) reports that plans of all sizes pay an average of 1.29% in fees, and that those fees decline as assets rise. For plans with $1 million to under $10 million in assets, ICI found the fees to be smaller than what Employee Fiduciary found—1.65%. Plans with $10 million to under $100 million in assets pay an average of 1.28% in fees. Plans with $100 million to under $500 million in assets pay an average of 90 basis points (BPS), and plans with $500 million or more in assets pay an average of 67 BPS.

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“Meaningful 401(k) fee data is hard to come by and that’s a big problem for small businesses,” says Employee Fiduciary President and CEO Eric Droblyen. “Sponsors of small business 401(k) plans have a fiduciary responsibility to keep fees reasonable for plan participants. When this responsibility is not met, the consequences for 401(k) fiduciaries can be severe—including personal liability. Required publicly available filings, most notably the Form 5500, provide only snippets of fee data. Even worse, 401(k) fees are often a tangle of direct fees from employees and sponsors and indirect fees that come from certain investment providers. Following the money is a difficult job even for those plan sponsors willing to invest the time and energy to do so.”

Employee Fiduciary found that brand-name insurance and payroll company 401(k) providers are the most expensive, while lesser-known, open architecture providers are the least expensive.

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