Guidance On HSAs Is Issued By IRS, Treasury

1. Immediate Money Fund. The total cost of possible medical and hospital expenses, outstanding bills, burial costs, and attorney/executor fees. (It may be sufficient to set aside 50% of the higher wage earner's annual income for this purpose.)
   
   
2. Debt Liquidation. Your debt, if any, may be in the form of credit card bills, school and auto loans, unpaid notes, outstanding bills, etc. So that all debts may be cleared, record the total.
   
   
3. Emergency Fund. Unexpected bills not readily payable from current income, such as major home and car repairs, or even medical emergencies. (Again, 50% of the higher wage earner's annual income may be sufficient.)
   
   
4. Mortgage/Rent Payment Fund. How much would you need to pay off your mortgage or provide for at least ten years' apartment rent should one spouse die?
   
   
5. Child/Home Care Fund. Expenses created as a result of the death of a spouse who had been performing child and/or home care duties, but was not receiving any payments for it. (Estimate the cost of hired help needed to substitute your spouse's duties.)
   
   
6. Education Fund. The cost of funding a four-year undergraduate education or comparable vocational training for your children.
   

The total of all of the above costs minus your liquid assets and life insurance would give you your new cash needs. The numbers will be different for you and for your spouse, because assets and existing life insurance, as well as child/home care amounts, are likely to be different.

The steps noted above are a simple way for a family to figure out how much life insurance is really needed. Circumstances vary from person to person and from family to family. Analyzing your financial needs in detail is an important step toward determining the right coverage for you and your family.

States Adopt Contraceptive Equity Laws

A total of 20 states have enacted legislation mandating contraceptive equity in health insurance coverage and that number may increase, according to the National Women's Law Center, a nonprofit organization based in Washington, D.C.

The Center found that existing contraceptive equity laws are uniform in stating that if a health insurance policy provides prescription drug coverage, then the plan must provide coverage for any prescription drug or device that has been approved by the Federal Drug Administration as a contraceptive. In addition, the Center discovered that most existing laws state that any deductible, co-payment, or co-insurance applied to contraceptives may not be greater than those applied to other prescription drugs.

Employers that provide self-funded plans are governed by the Employee Retirement Income Security Act (ERISA) and are not regulated under state law. However, the Center noted that the Equal Employment Opportunity Commission (EEOC) has found that all employer-provided health care plans that fail to provide health insurance coverage for prescription contraceptives violate Title VII of the Civil Rights Act of 1964 because such action discriminates on the basis of gender and pregnancy.

The Center said the 20 states that currently have contraceptive equity laws are: Arizona, California, Connecticut, Delaware, Georgia, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Missouri, Nevada, New Hampshire, New Mexico, New York, North Carolina, Rhode Island, Vermont, and Washington state. Meanwhile, the Center noted, another eight states have mandated that HMOs cover "family planning services." They are: Michigan, Montana, New Jersey, North Dakota, Ohio, Oklahoma, West Virginia, and Wyoming.

Medical 401(k)s Being Studied By Deere, Fidelity

Deere & Company is working with Fidelity Investments to develop a proposal for a retiree medical benefits account (RMBA) that would function like a 401(k) plan for health care.

In advocating the need for RMBAs, Fidelity noted that, if a 65-year-old couple were to retire today without access to an employer-sponsored health care plan, they would need an estimated $175,000 to fund out-of-pocket medical expenses.

Mert Hornbuckle, vice president of human resources at Deere, said his company's aim in supporting the creation of RMBAs is "to help future retirees better understand medical costs and encourage them to plan and save to meet their own needs in retirement, beyond what Medicare and/or employer-sponsored retiree benefits provide."

Disability Income Insurance Requires Thoughtful Planning

Have you ever asked yourself how your employees would manage if they were to suffer a severe accident or illness that left them unable to work? How would they pay their bills and cover their daily expenses? The likelihood of such an event may be greater than you think. According to the Insurance Information Institute (III, 2002), an employee between the ages of 40 and 65 has a greater chance of missing at least three months of work due to an accident or illness than of suffering an untimely death. To compound the problem, the recovery period may run as high as a lengthy two and a half years.

To be prepared for such a situation, it is important for your employees to plan ahead. A smart approach to help protect your employees is for them to purchase an individual disability income insurance policy. However, there are a few considerations your employees should keep in mind when they are choosing this coverage:

• Definition of Disability. Employees should carefully review their policy's definition of disability. Some policies may provide coverage if an employee is unable to work in the occupation in which he or she was employed or for which he or she was trained. In contrast, other policies may offer coverage only if your employee was unable to work in any occupation.
  
  
• Residual Benefits or Partial Disability Coverage. Under certain specified circumstances, if an employee becomes disabled and is only able to earn a portion of his or her previous income, residual benefits or partial disability coverage pays a portion of their benefits.
  
  
• Guaranteed Renewable. With this feature, the insurer cannot refuse to renew an employee's policy or change any terms, except for premium cost, as long as premiums are paid on time.
  
  
• Guaranteed Insurability. This provision allows employees to increase their monthly benefit, even if they experience health changes that would otherwise prevent them from obtaining additional disability coverage.
  
  
• Cost-of-Living Adjustment (COLA). This feature helps protect an employee's benefits against the effects of inflation during a long-term disability.
  

There are alternatives to having a disability income policy, although they have shortcomings. For instance, employees could self-insure. However, one year of disability could easily eliminate many years of savings for the self-insured. Workers compensation may be an option in some cases; however, it only covers injuries suffered on the job. Eligibility and benefits vary by state.

To qualify for Social Security disability benefits, your employees must be severely disabled and, even then, they will have to wait at least six months for payments to begin. Social Security disability was not intended to be an individual's sole source of disability income, thus benefits are often less than what an employee might need to cover regular living expenses.