Effective January 1, 2020, Congress passed an appropriations bill that included a piece of legislation called the Setting Every Community Up for Retirement Enhancement Act (SECURE Act). In summary, the bill may impact your plan in the following ways:
- Increase Required Minimum Distribution Age (Section 114). The SECURE Act increases the age at which Required Minimum Distributions (RMD) must begin from 70 ½ to 72. Participants reaching the new requisite age will still be able to delay their first RMD until the following year (by April 1), for which they must take their first RMD (the required beginning date). Additionally, a second RMD will still need to be distributed by the end of the same year (the year the individual turns 73). Effective for participants turning 70 ½ after December 31, 2019.
- Child-Birth or Adoption Withdrawals (Section 113). The SECURE Act permits participants to take penalty-free withdrawals of up to $5,000 (per child, per parent) for expenses related to the birth or legal adoption of a child (up to the age of 18) for up to one year following the qualifying event. These distributions may be recontributed back to the plan from which the distribution was made, or to an IRA. This is effective for distributions after December 31, 2019.
- Post-Death Required Minimum Distribution Rules for IRAs and Defined Contribution Plans (Section 401). The SECURE Act changes the post-death Required Minimum Distributions (RMD) rules for inherited retirement plan accounts requiring that all distributions (to a designated beneficiary) be made by the end of the tenth calendar year following the year of the participant’s death or inheritance. This change differs from existing law that allows designated beneficiaries to use their own life expectancy for distributions. The 10-year distribution requirement does not apply if the designated beneficiary, also referred as eligible beneficiary, is a surviving spouse, disabled or chronically ill, not more than 10 years younger than the participant, or a child of the participant who has not reached the age of majority. This is effective for distributions by reason of a participant’s death after December 31, 2019 (December 31, 2021 for governmental plans).
- Reduced Minimum Age for In-Service Distributions (Section 104 of Division M). The SECURE Act reduces the voluntary in-service distribution minimum age under a pension plan or governmental section 457(b) plan to age 59 ½ (rather than age 62 that was permitted for pension plans or age 70 ½ that was permitted for 457(b) plans). This is effective for plan years beginning after December 31, 2019.
We will continue to watch the development of this legislation closely and post any relevant updates or changes.
Since 1995, MidAmerica has developed long-lasting relationships because of our dedication to service and a desire to help the people who make our community a better place. Putting people first has always been at the center of everything we do, and we’re constantly searching for more ways to connect with those we serve. MidAmerica strives to do the right thing for our participants and plan sponsors to create an excellent experience for them. As a result, we’ve maintained a 99% client retention rate for more than 17 years.
For MidAmerica, providing excellent customer service starts with having an excellent internal corporate culture. We sum up our approach by simply putting People First. We know that people who find genuine satisfaction in their jobs will go the extra mile to make a customer happy. It’s important to us that each MidAmerica team member feels valued, which is why we regularly deploy an employee satisfaction survey, have quarterly “town halls” known as Renewals, and meet to ensure voices are being heard and any concerns are brought to the surface. We communicate through our actions by focusing on things like communication, accountability, and empathy to reinforce the importance of our commitment to our most valued asset: our people who take care of our customers. By introducing the People First mindset to our own associates from the time they start their journey with MidAmerica, this attitude extends beyond our offices so we can do what is right for each individual participant, employer, and partner.
We also instill the importance of accountability. We give our employees the tools they need to succeed and empower them to act as they deem necessary. When people feel their leaders listen to and respond to their concerns, and that the entire workforce is a team pulling towards the same goals, they feel happier and more engaged at work. MidAmerica knows that our customers see the benefits of this because of our employees’ dedication to delivering excellent service and their overall attitude.
From the time an associate is onboarded, we make sure that they fully know and understand the “Why” behind MidAmerica. Our mission is to take care of those people who do so much to take care of our communities— like public school employees, law enforcement and firefighters, and municipal employees— by providing best-in-class administration for the benefit plans that allow them to live with security and to retire with peace of mind.
An employee learns what is expected of them beyond their role and how their everyday responsibilities impact the business as a whole. They are challenged and empowered to look beyond the mechanics of their everyday job so that they can make a difference in the business and understand what clients rely on our company to do. If an employee understands how their role impacts our Vision and Mission, we have a greater opportunity to create a culture of performance and success. That is why each employee sets quarterly goals that ultimately align with our organization’s overall mission. The alignment between personal goals makes a measurable difference in harnessing employee engagement to drive growth. When employees can see their role as not only the responsibilities within their job, but their purpose in serving the needs of fellow employees and ultimately customers, our organization becomes extraordinary. This approach drives a greater level of employee engagement which is reflected in our rising employee engagement score. We’ve also started to see the impact on client retention, long-lasting relationships, and MidAmerica ambassadors.
Culture is not something we put in a memo or dictate to the organization. It’s ultimately generated out of the mission and vision of our company and the actions we take that align with them. When we focus our people practices on serving our employees as they serve each other and our customers, our culture thrives.
Do you share our values?
We’re looking for people who are motivated, talented and eager to help us realize our mission. If you are interested in joining our team, visit our Careers page to view current opportunities.
Public sector employers regularly provide valuable work opportunities for part-time, seasonal and temporary employees. Although some of these employees may not participate in their employer’s benefits, part-time, seasonal, and temporary workers have been able to take part in Social Security. However, many public sector employers don’t realize that they have an opportunity for cost savings.
So how can public sector employers reduce their cost while providing a valuable benefit? MidAmerica’s 3121 FICA Alternative Plan is a type of retirement plan for public sector part-time, seasonal and temporary workers that replaces Social Security. Ultimately, it’s a cost saver for employers and a valuable benefit for part-time employees.
By saving money in their own operational budget, employers have the power to reinvest savings back into their organization, ultimately resulting in more satisfied employees, a higher retention rate, and benefits that attract quality talent.
Here’s how it works.
The 3121 FICA Alternative Plan eliminates the 6.2% Social Security contribution by the employee and match by the employer. Instead it routes 7.5% of employees’ before-tax wages into an interest-bearing retirement plan, creating a win-win arrangement for everyone. Due to the pre-tax nature of their contribution, the employee’s paycheck remains virtually unchanged and their eligibility for Medicare is unaffected.
This chart shows the savings realized by an employer whose payroll for part-time, seasonal, and temporary employees totals $250,000:
*It may appear that employees have less take-home pay, but the chart below illustrates why that’s not the case.
Savings for the employer: $15,500
How 7.5% equals 6.2%
Even though employees are replacing their 6.2% Social Security contribution with a 7.5% contribution into their 3121 FICA Alternative Plan, they are actually left with around the same take-home pay. Why? Because FICA Alternative Plan contributions are pre-tax. The chart below illustrates the magic of how 7.5% equals 6.2%.
Who’s qualified for 3121 FICA Alternative Plans?
Eligible employers are either governmental entities that are are closely affiliated with state and local governments (generally by government ownership or control), or a political subdivision, which is a separate legal entity of a state that usually has specific governmental functions. Your state Social Security administrator can advise you on the status of your organization.
At the end of the day, the 3121 FICA Alternative Plan is a cost-effective retirement benefit for part-time, seasonal, and temporary employees. But the employer isn’t the only one reaping the benefits of this plan—employees truly benefit, too. For them, 7.5% of wages are contributed on a pre-tax basis, while their take-home pay remains virtually unchanged. Funds are also invested, adding a potential for earnings on contributions over time. Investments may even be self-directed to meet personal retirement goals.
In a world of reduced budgets despite rising retirement costs, truly impactful retirement benefits make employees feel secure and valued. By implementing a 3121 FICA Alternative Plan, employers can ensure their compensation structure remains attractive to potential and existing talent.
Is a 3121 FICA Alternative Plan right for your organization?
Schedule a free consultation:
It’s that time of year again! Open enrollment is the yearly period when employees can enroll in a health insurance plan and voluntary benefit funding plans like Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA). For employers, it is a time of year that serves as an opportunity to help their employees navigate through decisions that will significantly impact them and their families. It’s important that this period goes smoothly so that employees make the right choices for their unique situation. To that end, here are some tried-and-true tips to make the most of this crucial time.
- Start Education Early
The annual benefits-election process should start well before any forms are filled out. The earlier you can get information and materials out to your employees, the better. This allows time for employees to review their options and formulate any questions before enrollment begins. Plan to answer some of the most common open enrollment questions for each program, such as:
- Why do I need this benefit?
- Which features fit my needs?
- What value does the program provide?
- How much is this going to cost me per paycheck?
If you offer an FSA through MidAmerica, we have several open enrollment and benefit education resources you can leverage. Simply reach out to your Account Manager!
- Remember the Basics
Many employees don’t fully understand health insurance or benefit funding plan basics. With health insurance options changing, employees may need education on definitions and examples of co-payments, deductibles, co-insurance, and out-of-pocket maximums. Avoid using confusing jargon in your marketing collateral so that solutions are easy to understand.
- Communicate Your Plan and Level of Coverage
Prepare to share information about your company’s benefits coverage and health benefit funding plans, including the different plans that you offer and their perspective coverage, and any changes you are making or considering. Be sure to clearly communicate cost information so employees understand what they will need to pay and how their benefit is changing. Prepare handouts outlining the major changes to the benefits and hold informational meetings, including new IRS guidelines and plan maximums. Anticipate questions and have FAQs ready for distribution.
- Avoid Information Overload
Some employers make the mistake of handing out pages and pages of text, jamming a year’s worth of communication into a few weeks. Instead, communicate the technical details of your various benefits over time. Don’t assume employees will weed through all your materials to make sense of the benefits offered to them.
- Give Employees a Generous Time Frame
While many people may wait until the last minute to fill out their forms, others consider their options with their family members for weeks. Giving them just a few days will not be enough. Be sure to build in a time frame that gives HR staff and employees the time they need. A recommended time frame is three weeks.
Although open enrollment can seem like a stressful time, it doesn’t have to be that way. By following the tips above, you can ensure that your organization has a successful open enrollment.
If you have any questions regarding your FSA open enrollment, please reach out to accountmanagement@myMidAmerica.com. We offer many tools and resources you can use to help employees better understand their FSA and how to take advantage of it.
Offsetting rising health care costs is a struggle for many employers. A Health Reimbursement Arrangement (HRA) is a cost-effective way for employers to provide great health benefits to employees at a reduced cost. An HRA is an employer-funded health benefit plan that reimburses employees for out-of-pocket medical expenses and health insurance premiums on a tax-free basis.
At MidAmerica, we offer three flexible HRA options, so you can make sure the benefit offered to employees meets the needs and goals of your organization:
A defined contribution HRA (dcHRA) offers a quantifiable retirement benefit that reduces the employer’s OPEB liability while attracting and retaining top talent. It allows employers to deposit a fixed dollar amount into the HRA while the employee is actively working for use upon retirement or separation of service. Funds can be used to reimburse eligible medical expenses for the retiree, their spouse, and eligible dependents on a tax-free basis. Funding the plan during employment allows for managed cash flow and potential asset growth as well.
A retiree HRA (rHRA) helps bridge the gap between retirement and Medicare eligibility for employees. An rHRA accomplishes this by using unique sources of funding like unused sick leave and unused vacation pay, or other incentives into an employee’s account at retirement. Funds can be used upon retirement or separation of service to reimburse eligible medical expenses for the retiree, their spouse, and eligible dependents.
An integrated HRA (iHRA) helps employers offset the cost of group medical coverage for active employees by depositing a fixed amount into the employee’s HRA. Funds can be used to reimburse eligible medical expenses, such as deductibles, and are available immediately upon contribution. This allows the employer to offer lower premium plans with higher deductibles without increasing the cost to the participant. In other words, this solution makes health care plans more affordable for both the employer and employee.
No matter what the health care benefit goal of your client is, it’s likely there is an HRA solution that can help them reach it. With flexible applications that help both the employer and employee, it’s a win-win plan for all.
Not sure which HRA plan is right for your organization?
Schedule a free consultation:
A Special Pay Plan (a type of 403(b) or 401(a) retirement plan) is a simple, cost-effective retirement plan that benefits both the employer and the employee. Designed to handle special forms of compensation like unused sick leave or vacation pay, funds are contributed pre-tax into the participant’s retirement account upon their retirement or separation of service.
The following benefits of a Special Pay Plan illustrate how employers could enhance their current benefits package while saving them money:
How an Employer Benefits from a Special Pay Plan
- Tax Savings
Employers avoid 7.65% in FICA taxes that they would have otherwise paid if they did not place the funds in a Special Pay Plan.
- Unique Funding
Special Pay Plans are funded using unique forms of compensation like unused sick and vacation leave. Payments may also be based on years of service and severance.
- Recruitment & Retention Tool
Contributions into the retiree’s plan are made pre-tax, providing the full, untaxed value of the unused compensation. Funds are invested to grow as well, which means increased account value over time. This creates an impactful retirement benefit that can help employers attract and retain talent.
How a Special Pay Plan Can Supplement a Health Reimbursement Arrangement (HRA)
Employers who currently offer an HRA to their retirees can provide an added benefit to their retirement package by implementing a Special Pay Plan. HRA funds must be used to pay for eligible medical expenses. A Special Pay Plan can supplement that post-retirement income by providing access to money that can be used for any purpose once the retiree has reached the distribution eligibility age*. This means an employer could potentially place unused sick leave into an HRA and the unused vacation pay into a Special Pay Plan, creating two buckets of post-retirement funds for the retiree. Both plans utilize an investment vehicle that allows the funds to accrue interest tax-free.
Special Pay Plan/HRA Comparison Chart
Want more information on our Special Pay Plan solution?
Download our Special Pay Plan brochure!
Are you an Alliance Partner with MidAmerica?
Log into the Alliance Partner Portal to access Special Pay Plan resources and presentations.
* Special Pay funds are eligible for distribution once the participant has reached age 55 and separated from service.
Most of us look forward to the day we can retire from our jobs—maybe kick back, relax and take it easy for a change. Or, for those who can’t sit still, maybe this is a time to check off bucket list items.
No matter how you plan on spending your golden years, you’ll need to save plenty of money for when it’s time to cash in. With some careful planning, you can find ways to enjoy this time—without the constant worry of finances.
5 Money-Saving Tips for the Dream-Chasing Retiree
Don’t be afraid to ask for the senior discount!
It only costs $16 a year to be a member of AARP or American Seniors Association, which will grant you access to a world of discounts. Apps like Senior Discounts or Flipp can help you easily discover savings at your favorite restaurants, travel, and stores like Target, Walgreens, and Walmart.
Declutter or downsize your home!
Retirement is the perfect time to take on new projects. Get rid of unwanted items in your garage or storage unit, then have a yard sale or donate it to a family in need. If your kids have moved out, look at the empty-nest phase as an opportunity to start fresh with a smaller home. Consider the savings you could generate—lower property taxes, utility bills, maintenance costs and homeowner’s insurance premiums— just to name a few!
Consider donating or selling an extra vehicle.
Now that you’re no longer commuting to work, perhaps you can get by with just one car instead of two. Sell the car for extra cash or donate the vehicle to a charity and gain a sizable tax deduction. Plus, it will save you on car insurance bills, maintenance and gasoline expenses.
Keep doing what you enjoy, but less frequently.
If you’re in the habit of eating out five times a week, try cutting back to three. It’s not a dramatic change, but you will notice the savings to your wallet. Think of the other ways you could cut back. How about golfing two days a week instead of four?
Treat your Special Pay Plan or Health Reimbursement Arrangement as a rainy-day fund.
If you currently have retirement benefits through MidAmerica, it makes sense to hold off on distribution or reimbursement requests until necessary. Why? Because your benefit funds are invested for tax-free or tax-deferred growth. This means the longer your funds stay in your account, the more money you could potentially end up with down the road. Your 403(b)/401(a) Special Pay Plan and Health Reimbursement Arrangement is there when you need it, but it keeps growing when you don’t. To learn more about your specific MidAmerica benefit, log into your account at myMidAmerica.com.
These are just a few simple ways to save money as a retiree, which we hope makes you realize that saving money doesn’t need to be difficult. Living the happy retirement you deserve can be as simple as sticking to your budget, keeping track of what you spend, and appraising your spending for any savings opportunities.