New Update: Healthcare Costs Increasing by Over 60% in Some States. Will you be impacted?

The ABCs of 401(h) Plans For Citigroup Employees

Healthcare Provider Update: Healthcare Provider for Citigroup: Citigroup's primary healthcare provider is UnitedHealthcare, which offers a range of health insurance products for Citigroup employees, including employer-sponsored plans that provide comprehensive coverage. Potential Healthcare Cost Increases in 2026: As we look ahead to 2026, healthcare costs associated with the Affordable Care Act (ACA) are projected to rise dramatically. With insurers requesting average premium increases of 18% and some states seeing hikes surpassing 60%, millions of consumers could face unprecedented out-of-pocket costs. Key factors driving these increases include the potential expiration of enhanced federal premium subsidies, which could lead to a staggering 75% increase in out-of-pocket premiums for approximately 92% of marketplace enrollees. The combination of escalating medical costs and the withdrawal of financial assistance presents a significant financial challenge for many families across the nation. Click here to learn more

'Employees of Citigroup companies who are about to retire should understand the benefits of 401(h) plans as it is a good way to reduce the tax liability and to secure the medical costs for themselves and their families thus ensuring a better approach to the healthcare in retirement.'

It is important for Citigroup retirees to understand the structure of 401(h) plans because the moneys that can be contributed and the time that can be saved on medical expenses will help to decrease the impact of the increasing healthcare costs and will help to establish a solid financial situation for the retirees and their families.'

In this article we will discuss:

1. The effects of the rising medical costs on health insurance premiums in 2023.
2. Basic information about 401(h) eligible retiree medical benefit accounts for Citigroup companies' employees.
3. The pros and cons of using 401(h) plans for healthcare and retirement purposes.

The average increase in premium that health insurance plans have requested for 2023 is 10%; some plans have asked for an increase of between 5 and 14 percent. However, this year, 72 providers submitted their plans, and only four of them show a reduction in the prices. This is because the cost of health care is rising.

In their submissions for 2023, many insurers expect that the cost of health care will rise by 4 – 8 percent. The behavior of the costs reflects the prices that the plans pay for hospitals, doctors, and drug makers because of the inflation and the prices that the plans expect the patients to incur in the following year. The Citigroup company employees who are eligible for 401(k) plans should learn how to optimize it to the maximum extent. Here is a summary of the most important information about these plans:

Summary of Discussion:

Retirees of Citigroup should know that it is a retiree medical benefit account that is established within a defined benefit pension plan to pay benefits for illness, accident, and hospitalization for retired employees, their spouses, and their dependents. It is essential to comprehend that Sections 401(h)(1)-(6) of the Internal Revenue Code must be met in order for payments to be made.

Education

Internal Revenue Code section 213(d) defines medical expense as amounts paid for medical care (1). This includes costs related to:
I. Transportation mainly for and necessary to medical care, qualified long term care services or insurance (including Medicare Part B premiums and qualified long term care insurance premiums).

It is important for retired Citigroup employees to know that the language of the plan document determines the schedule of distributions, the scope of coverage, and who is eligible for the plan. A 401(h) account cannot have discrimination in coverage, contribution, and benefit in favor of officers, shareholders, supervisory employees, or highly compensated employees. A 401(h) contribution is not permitted to exceed the total cost of providing the benefits, which must be amortized over the duration of prospective service.

In compliance with Section 1.401-14(c) of Treasury Regulation 1.401, a qualified 401(h) account must provide:
Pension benefits must take precedence over retiree medical benefits. The 401(h) medical benefits of the retirees must be placed in a separate account in the pension trust.

Except for key personnel, the account for the benefits of the employee, or the employee’s spouse or dependents, must be held in a separate account. Furthermore, this account can only be used to pay for the employee’s medical benefits. The contributions from the employer to the account must be reasonable and quantifiable.

Contributions to 401(h) accounts made during or after the tax year must be used to pay for medical plan benefits. These contributions are non-transferable and cannot be used for any other purpose. Furthermore, the plan must provide that any balance remaining in the 401(h) account must be reversed to the employer at the time of liquidation of the plan’s obligations for the retiree medical benefits.

Citigroup retirees should be aware that the subordination requirement is incomplete until the plan demonstrates that the total contributions for retiree medical benefits do not exceed 25 percent of total contributions. The 25% includes the actual contribution to the life insurance part of the plan (but excludes the contribution to fund past service credits).

This restriction is meant to ensure that medical contributions are subordinate to pension contributions. It is also important for Citigroup retirees to know that plan sponsors with overfunded, terminating defined benefit plans are allowed to make tax-free contributions (known as) to the related 401(h) accounts. Furthermore, there are restrictions that need to be taken into account, namely the amount transferred is not considered as a taxable reversion. The provision expires on December 31, 2025, or the asset transfer occasioned by December 31, 2025.

The Positives of 401(h) Plans

Deductible:

Employers can claim deduction on their tax returns up to a certain limit. There is no provision for the arrangement to be made for contributions that are beyond the total benefits cost.
Benefit is tax-free for retirees.

The funds are taxed on the way out, and the distributions are tax-free if they are made for the purposes of medical expenses.
The amount that can be contributed annually to the plan by employers is not restricted and can be anything from zero to 25%. They are not required to contribute, but they have the option to do so.

Citigroup employees who are interested in the possibility of maximizing their retirement benefits may be interested in knowing that contributions made to 401(h) accounts can be used to pay for qualified medical expenses that include spouses and children, and dependents. This enables retirees to go beyond the healthcare needs of the 401(h) plan and use the funds to support the medical costs of their relatives and friends. As we explained above, 401(h) plans are tax-compliant and flexible, and when used correctly, they can help retirees design a sound healthcare strategy that includes their families.

The Drawbacks to 401(h) Accounts

The plan itself is complicated and comes with expensive setup and management fees. Because it is not an IRS-approved plan, it operates with more time, administration, and supervision needed.
Employers have to keep the account open until all the retirees have used up their medical account benefits.
Actuaries are often needed to manage and supervise the account, but they can be hard to find.

The conclusion of the Pharmaceutical and Biotechnology Association (BPIA) indicated that its members raised the prices of arthritis and cancer medicines and other prescriptions by 5.6% at the beginning of this year. This means that a Citigroup retiree with a 401(k) may be in a better position (h). Furthermore, a large number of pension plan sponsors may be inclined to fund retiree medical costs through 401(h) accounts. Citigroup employees who are considering this plan are entitled to employer and/or employee contributions, as well as transfers of excess pension benefits, if permitted by the plan terms.

The contributions are deductible, the earnings are taxed on the accrual basis, and the withdrawals are tax-free for 401(h) accounts. Those Citigroup retirees who are not very sure how their 401(h) works may benefit from seeking professional financial advice. We at The Retirement Group will help you get a free cash flow analysis and talk to a consultant who will help you identify which decision is most appropriate for you.

Anybody, whether male or female, can be compared to a chef in the kitchen. The chef has the responsibility of preparing meals for his guests and therefore has to make sure that everyone gets the food that they want. The chef also knows that the enjoyment of the meal is not only limited to the consumer’s plate but also the company’s plate as well. In this analogy, the chef represents the Citigroup employees who are about to retire while the meal represents their retirement benefits. Just as the chef takes into account the diverse tastes and preferences of the guests, Citigroup employees must consider the overall needs of their retirement.

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Like a buffet, the 401(h) plan is a menu of choices that can help the financial health of the employee and his or her dependents. With each course as a different aspect of their retirement plan, from pension benefits to medical expenses, the chef prepares the meal to ensure everyone gets something out of it. In the same manner, Citigroup employees can choose the various components of the 401(h) plan to develop a full retirement plan that will benefit not only their financial situation but also that of their families. In the same manner that the chef’s attention to detail will improve the overall experience of the meal, the proper application of a 401(h) plan can positively affect the career of a Citigroup employee and his or her family

Sources:

1. Health Affairs. 'Health Insurance Premiums: Average Family Premium Hits $23,968 in 2023.' Health Affairs , 2023, healthaffairs.org/doi/10.1377/hlthaff.2023.00996 .

2. MissionSquare Retirement. '401(h) Retiree Health Account.' MissionSquare Retirement , missionsq.org/products-and-services/401%28h%29-retiree-health-accounts.html .

3. Groom Law Group. 'IRS Rules that Payment of 401(h) Account Benefits to Pension-Eligible Active Participants Won't Jeopardize Plan Qualification.' Groom Law Group , 2023, groom.com/resources/irs-rules-that-payment-of-401h-account-benefits-to-pension-eligible-active-participants-wont-jeopardize-plan-qualification .

4. American Society of Pension Professionals & Actuaries. 'Retiree Health Accounts Under Section 401(h).' ASPPA , 2019, asppa-net.org/news/2019/4/retiree-health-accounts-under-section-401h .

5. Emparion. 'Pros and Cons of 401(h) Accounts Plans.' Emparion , 2023, emparion.com/pros-and-cons-of-401h-accounts-plans .

What are the main eligibility criteria for participating in the Citigroup Pension Plan, and how can Citigroup employees ensure they meet these requirements throughout their employment? Furthermore, what implications does the merger of prior pension plans into the Citigroup Pension Plan have on the benefits for employees from acquired companies, and what steps should they take to understand how their previous service is credited under Citigroup?

Eligibility Criteria for Citigroup Pension Plan Participation: Employees hired before January 1, 2007, are eligible to participate in the Citigroup Pension Plan if they were employees of a Participating Employer. Employees hired after that date are generally not eligible to participate. Additionally, employees from acquired companies may have their prior service credited under Citigroup. It's important for these employees to review the plan's specific provisions or contact the Citi Pension Center to ensure accurate service credit(Citigroup_Pension_Plan_…).

How does the Citigroup Pension Plan address survivor benefits for employees who pass away before their pension benefits commence, and what steps must their beneficiaries take to claim these benefits? Additionally, how can employees ensure that their loved ones are adequately informed about the options available should they face this unfortunate event?

Survivor Benefits for Pre-Retirement Death: If an employee passes away before benefits commence, the surviving spouse may receive a lifetime annuity based on the account balance or opt for a lump sum. Employees should ensure that their beneficiaries are aware of these options and the process to claim benefits(Citigroup_Pension_Plan_…).

For Citigroup employees wanting to learn more about the pension plan's benefits and options available to them, what contact methods should they use? How does Citigroup facilitate communication regarding the pension plan, and what are the most efficient ways for employees to get their questions answered?

Contacting Citigroup for Pension Plan Inquiries: Employees can contact the Citi Pension Center by phone at 1-800-881-3938 for U.S. inquiries or use the online portal to access their pension details. These methods provide the most efficient way to get answers to any pension-related questions(Citigroup_Pension_Plan_…).

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.

Citigroup offers both a traditional defined benefit pension plan and a defined contribution 401(k) plan. The defined benefit plan provides retirement income based on years of service and final average pay. The 401(k) plan includes company matching contributions and various investment options such as target-date funds and mutual funds. Citigroup also provides financial planning resources and tools to help employees manage their retirement savings.

Citigroup is planning to cut 20,000 jobs as part of a major restructuring effort to streamline operations and save $2.5 billion. The bank is also focusing on international growth and simplifying its management structure from 13 layers to eight. Despite the layoffs, Citigroup continues to offer comprehensive retirement benefits, including 401(k) plans and health benefits. Understanding these benefits is important in today's political environment.

Citigroup grants RSUs that vest over several years, giving employees shares upon vesting. They also provide stock options, allowing employees to purchase shares at a set price.