Pension Laws Overhauled
Written By: Attorney
Jeffrey A. Marshall
, CELA*
The
federal government has moved to reinforce the shaky foundation of
employer-sponsored pension programs that cover 44 million Americans.
The Pension Protection Act of 2006 was signed into law on
August 17, 2006
. It is generally
acknowledged to be the most extensive revision of the nation's pension
law in decades.
A pension is an arrangement through which an
employer provides income to its employees after their retirement or
disability. Of particular
concern to legislators are so-called “Defined Benefit” pensions
plans. A defined benefit plan promises the employee a specific monthly
benefit (the “defined benefit”) at retirement, often based on a
formula that considers the employee’s length of service and salary.
This is to be distinguished from “Defined Contribution” plans (like
401k plans) where the employee’s benefit at retirement depends upon
investment performance.
Employer sponsored defined benefit plans are
estimated to be under-funded by over $300 billion. Over 700 pension
plans have failed over the past 5 years. The government insurer for
these plans, the Pension Guaranty Corporation, already has a $23 billion
deficit.
The new law is intended to strengthen the pension
system, especially in regard to defined benefit plans. Under the law,
most employers must fully fund defined-benefit pension plans over the
next seven years and freeze benefits if plan assets fall below 80% of
liabilities. More
conservative accounting is required and companies are given incentives
to increase funding of their plans. The Act also increases the premiums
that companies must pay to the Pension Guaranty Corporation.
As a result of these changes, it is likely that many companies will
migrate from traditional employer-funded defined benefit plans to
employee-funded 401k plans. Employers
remaining with traditional defined benefit plans will be more likely to
freeze benefits.
The Act also makes significant changes in the rules governing other
forms of retirement plans:
-To increase participation in 401(k) plans, the new law encourages
companies to automatically enroll workers in their 401(k) plan.
Beginning in 2008, employers will be able to designate 3% of a
worker’s account to be deposited in the company’s 401K.
Eventually, the automatic contribution limit will increase to 6%.
Although employees can choose to opt out, most probably will not.
As a result, it is estimated that this change in the law will increase
401(k) participation from the current 66% of eligible workers to more
than 90%.
-The higher contribution limits for 401k plans and IRAs that were
enacted in 2001 are made permanent.
This means that the maximum contribution limit to an IRA,
currently $4,000, will rise to $5,000 in 2008. Employee contributions to
401(k) plans will remain at $15,000.
Both contribution limits will increase with inflation. Older
workers age 50 and over will continue to be permitted to make extra
contributions.
-Older taxpayers (over age 70 1/2) will be allowed
to make annual tax-free donations up to $100,000 from their IRAs to
charitable causes. However, this is a temporary rule that applies only
during 2006 and 2007.
-The law allows non-spouse beneficiaries to transfer an inherited 401(k)
to an IRA in order to stretch out distributions and tax deferral.
Previously, only the surviving spouse could take advantage of
this stretch opportunity.
-The Roth 401(k) is made permanent.
-Plan providers, such as mutual fund companies,
will be authorized to offer specific, in-person investment advice to
plan participants for a flat fee.
Philosophically, the new Pension Protection Act
continues the ongoing policy of shifting more
responsibility of saving for retirement from employers to
employees. To maximize their financial security, workers and retirees
will need to become more knowledgeable regarding their retirement plan
investments.
Attorney Marshall can be contacted at webmail@paelderlaw.com
or at 1-800-401-4552.
PACE
Plus Medicare Begins
Written
By: Attorney
Jeffrey A. Marshall
, CELA*
On
September 1st,
Pennsylvania
initiated its PACE Plus Medicare program.
The program covers individuals who qualify for prescription drug
coverage under both Medicare and the Pennsylvania PACE/PACENET programs.
Under PACE Plus, the Medicare prescription drug benefit provides primary
coverage and the Pennsylvania PACE and PACENET programs fill any gaps in
coverage for low income program participants.
The new program was initially proposed by Governor
Ed
Rendell in February to fill the "doughnut hole" coverage gap
in the Medicare prescription drug benefit and cover some medications not
covered under Medicare.
A Department of Aging Press Release notes that with
Part D and PACE or PACENET, cardholders will not experience any coverage
gaps because they can use the
Pennsylvania
programs as secondary prescription coverage. This means that PACE and
PACENET will pay for prescription medications not on the Part D plan’s
formulary and prescription medications filled during Part D coverage
gaps, as long as the state programs cover the medication.
PACE beneficiaries will pay a monthly premium to
one of six Medicare prescription drug plans selected by the state.
Some PACE beneficiaries will qualify for “extra help.”
For PACENET cardholders with higher incomes, the prior $40
monthly deductible will decrease to no more than $32.59.
The new program will also benefit the 87,000 PACE
and PACENET beneficiaries enrolled in Medicare Advantage plans, although
the choices are complicated. Cardholders should receive a letter that
discusses their options. Additional information and assistance is
available through the PACE toll free number listed below.
PACE and PACENET beneficiaries who have retirement
plans that provide prescription drug coverage will not enroll in the new
program.
PACE and PACENET cardholders who do not opt out of
the program will receive a prescription card from their Medicare Part D
plan. Cardholders should show the Medicare card along with their
PACE/PACENET card to their pharmacist. The pharmacist will bill
the Part D plan first and the PACE or PACENET program second. Cardholders
do not have to keep track of their prescription expenses.
This means that PACE and PACENET cardholders will
have two prescription cards - one from the state plan and the second
from a Medicare Part D drug plan. On their initial visit to their
pharmacy, cardholders should show both cards to the pharmacist. If
the pharmacist has problems billing the medication, ask that PACE be
immediately contacted by phone, while you wait.
The state promises that no PACE or PACENET
beneficiary will pay more under the new program. Savings for
beneficiaries may be significant. And,
by effectively utilizing Medicare dollars, the program should save
Pennsylvania
money which can hopefully be used to expand the state programs.
Pennsylvania
’s PACE Plus Medicare program provides benefits that are unavailable
in most other states. Still, we see many clients who could qualify for
the state prescription programs but are unaware of the benefits.
Qualification is based on income and you must be
age 65 or older. The income
limits for PACE are $14,500 for individuals and $17,700 for married
couples; and for PACENET $23,500 for individuals and $31,500 for married
couples. If you think you
may qualify, contact your local Office of Aging or the PACE program at
the number below.
Funded by the Pennsylvania Lottery, PACE and
PACENET currently provide low-cost prescription assistance to nearly
312,000 Pennsylvanians age 65 and older. PACE now covers over 184,000
older adults and PACENET covers nearly 128,000.
Cardholders with questions about PACE Plus Medicare
should call PACE/PACENET, toll-free, at 1-800-225-7223. They may also
visit the Department of Aging's Web site at http://www.aging.state.pa.us
and click on the blue and gold PACE card or choose the link titled
"PACE Plus Medicare."
Additional articles on PACE, Medicare Part D, and
using your medications wisely are available prior Elder Care Law Alerts
available at http://www.paelderlaw.com/news2006.html.
Attorney Marshall can be contacted
at webmail@paelderlaw.com or
at 1-800-401-4552.
Staff Changes Announced in Our Long Term
Care Services Department
Marshall
, Parker & Associates is pleased to announce Lisa Barner’s
promotion to Manager of the firm’s Long Term Care Services Department.
She will succeed Perry Landon who has held the position for the
last fifteen years.
In her new position, Lisa will be responsible for
working with the firm’s lawyers to supervise and assist long term care
planning department staff in the life care planning process.
She will also be providing ongoing analysis of regulatory and
planning changes. She will
continue to directly assist seniors and their families with long term
care planning issues, including Medicaid eligibility and home care
options. Lisa has been with
Marshall, Parker & Associates for the past 10 years. She previously
served as Assistant Manager of the Department.
Perry has accepted a new position with Albright
Care Services as the Executive Director of the LIFE Program in Lycoming
and Clinton counties. Although our firm is saddened to lose such a valuable, respected and
dedicated colleague, we are also excited about his wonderful new
opportunity to serve the seniors of our region. The LIFE Program is a
more holistic approach to providing coordinated care to older adults
that is new to our area. It
has the potential to enhance the quality of the lives of many area
seniors and we know Perry is the best person to bring it to its full
potential.
If you
have any questions, please feel free to contact Lisa at anytime.
She can be reached at 570-398-7603 or at lbarner@paelderlaw.com.
Marshall, Parker & Associates Opens
New Office in
Lackawanna
County
Last
week Marshall, Parker & Associates officially opened our
Scranton
area office to serve families in
Lackawanna
and surrounding counties. Our
new office is conveniently located at 3 Abington Executive Park in
Clarks Summit. If you would like to schedule an appointment for your
family or your clients, please call the Clarks Summit office at 587-0841
or call us toll-free at 1-800-401-4552.
Attorney Marshall can be contacted
at webmail@paelderlaw.com or
at 1-800-401-4552.
New Series of “Gotta Know” Classes
for Baby Boomers and Their Parents Presented by Marshall, Parker &
Associates
Written By:
Melissa Bottorf, Director of Marketing & Public
Education
Do you worry about whether your aging
parents have their "affairs in order?" You should. After all,
you’re the one who will deal with the complex issues that will arise
if your parents have not planned effectively.
Without
some forethought on their part and your part, you could be facing a lot
of wasted time, money and frustration.
The good news is the waste and frustration can be avoided.
Marshall
, Parker & Associates is presenting a series of classes designed for
what Baby Boomers and their parents “Gotta Know.”
Each class begins at
6:30 PM
and is held at the
Fleming
Parish
Center
at Annunciation Catholic Church,
410 West Walnut Street
in
Williamsport
. This week’s topic will
be “Is
Someone Depending on You? Planning for a Disabled Loved One.”
Baby boomers will not only learn how to plan for
their parents, but for themselves. Find
out how to protect hard-earned money, transfer the maximum amount of
inheritance to family, and ease your family’s legal and emotional
burden.
Participants can attend any or all of the classes.
For more information or to register, please call us at
1-800-401-4552 or visit us online at www.paelderlaw.com/gottaknow.html.
Classes are free and open to
the public.
Thursday,
September 7 at
6:30 PM
Is Someone Depending
on You? Planning for a
Disabled Loved One
Thursday,
September 14 at
6:30 PM
Caring for an Aging
Loved One at Home
Thursday,
September 21 at
6:30 PM
Getting the Care You
Need Without Going Broke
Thursday,
September 28 at
6:30 PM
Protecting Your Nest
Egg: Retirement Accounts
& Investment Planning
More information is available on our website at www.paelderlaw.com/gottaknows.html
Melissa can be contacted at webmail@paelderlaw.com
or at 1-800-401-4552
Back
issues of The Elder
Care Law Alerts are available on our website.
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can even search our site by a
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*Attorneys
Marshall and Parker are certified
as Elder Law Attorneys by the National Elder Law Foundation under
authorization from the Pennsylvania Supreme Court.
