Defined Contribution Benefits Model — Don’t Forget Advance Care Planning!

by Kevin K. Johnson, Certified Senior Advisor (CSA)®

With the introduction of health insurance exchanges and full implementation of the Affordable Care Act by 2015, ‘change’ is the operative word in employer-provided benefits. Many employers are moving to a tool called a “Defined Contribution (DC) Benefit Plan”. From Wikipedia, a defined contribution benefits plan is a type of retirement plan in which the employer, employee or both make contributions on a regular basis. Individual accounts are set up for participants and benefits are based on the amounts credited to these accounts (through employer contributions and, if applicable, employee contributions) plus any investment earnings on the money in the account. Only employer contributions to the account are guaranteed, not the future benefits. In defined contribution plans, future benefits fluctuate on the basis of investment earnings. The most common type of defined contribution plan is a savings and thrift plan. Under this type of plan, the employee contributes a predetermined portion of his or her earnings (usually pretax) to an individual account, all or part of which is matched by the employer. In the United States, Internal Revenue Code specifies a defined contribution plan as a plan which provides for an individual account for each participant and for benefits based solely on the amount contributed to the participant’s account, and any income, expenses, gains and losses, and any forfeitures of accounts of other participants which may be allocated to such participant’s account.

Employers say the top two reasons for contemplating a switch to DC benefit models are to lower health care costs and to offer their employees more choice in the allocation of tiStock_RetirementPlanning_PMheir benefit dollars (59% and 40%, respectively). Employees report they would allot 75% of their benefit dollars to health, dental, and vision coverage, leaving 25% for other coverage’s such as voluntary life, disability, accident, and critical illness insurance. Even with this allocation by employees, 42% of brokers feel the shift to DC plans will lead to an uptick in sales for voluntary products.

“While employers struggle to fund increasing health care costs and more look to shift to DC plans, employees will realize a higher level of choice when it comes to benefits selection and aligning their benefit dollars with personal priorities,” said Jim Gemus, senior vice president, Products, Prudential Group Insurance. “Carriers and brokers have an opportunity to ramp up employee awareness and educational efforts in order to help ensure employees fully appreciate the value of the voluntary benefits available to them.”

I am an active participant in National Healthcare Decisions Day (NHDD) which takes place April 16th. The goal is to inspire, educate & empower the public and providers about the importance of advance care planning. As employers pivot to DC Benefits model and the like, it is crucial that advance care planning (Advanced Directives) be included as an element of a sound employee benefit plan portfolio.

ADVANCED DIRECTIVES

All adults can benefit from thinking about and planning for what their healthcare choices would be if they are unable to speak for themselves.  These decisions can be written down in an advance directive so that others know what they are.  Advance directives come in two main forms:

  1. A “healthcare power of attorney” (or “proxy” or “agent” or “surrogate”)  documents the person you select to be your voice for your healthcare decisions if you cannot speak for yourself.
  2. A “living will” documents what kinds of medical treatments you would or would not want at the end of life.

iStock_SigningWill_PMOHIO ADVANCE DIRECTIVE
The Ohio Durable Power of Attorney for Health Care lets you name someone, called an agent, to make decisions about your medical care—including decisions about life-sustaining treatment—if you can no longer speak for yourself. The durable power of attorney for health care is especially useful because it appoints someone to speak for you any time you are unable to make your own medical decisions, not only at the end of life.  Your durable power of attorney for health care becomes effective when your doctor determines that you have lost the capacity to make informed health care decisions for yourself.

The Ohio Living Will Declaration is your state’s living will. It lets you state your wishes about health care in the event that you become terminally ill or permanently unconscious and can no longer make your own health care decisions. Your Ohio Declaration becomes effective when your doctor determines that you have lost the capacity to make informed health care decisions for yourself and you are terminally ill or you are permanently unconscious.

The Organ Donation Enrollment Form allows you to register your organ donation choices with the registry, so that your organ donation wishes will be followed, even if your declaration cannot be found.

These forms do not expressly address mental illness. If you would like to make advance care plans regarding mental illness, you should talk to your physician and an attorney about a durable power of attorney tailored to your needs.

There are other advanced planning vehicles including ‘trusts’ that should be considered however, the basic elements of the advanced planning portfolio are what I’ve covered above. This is important and I urge every employer, every employee, in fact, every adult, to proactively address advanced planning today for the sake or yourselves and your families!

 

 Thanks to contributions from Prudential Financial and Employee Benefit News

 

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