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William Byrnes (Texas A&M) tax & compliance articles

Archive for the ‘Retirement Planning’ Category

The next hot annuity for clients is ?

Posted by William Byrnes on January 20, 2014


As clients have begun to feel the shifting winds with respect to the general economy, the annuity market is now undergoing its own type of evolution.

While products that tie fluctuations in an annuity’s cash surrender value to prevailing market interest rates may have seemed unacceptably risky to most clients just a few months ago, changes in today’s interest rate environment now have clients flocking to find these features.

Annuities with market value adjustment (MVA) features may be the next hot product for clients looking to beat the return on other conservative investment products, so read the full analysis of this emerging trend by Professor William Byrnes and Robert Bloink at Think Advisor !

ThinkAdvisor.com supports the professional growth and vitality of the Investment Advisory community, from RIAs and wealth managers of all kinds, to independent broker-dealer and wirehouse representatives. We provide unparalleled access to the knowledge, information and critical resources they need to succeed at every stage in their career, including professional development, education and certification, industry news and analysis, reference tools and services, and community networking opportunities.

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Entering the Retirement Income Game? What About Universal Life?

Posted by William Byrnes on January 15, 2014


A new product feature has emerged to help clients looking to supplement retirement income or protect against the risk of outliving their assets, and, in an unusual twist, this feature is not attached to an annuity.  Insurance carriers have thrown universal life insurance policies into the retirement income game by offering accelerated benefit riders that make it easier than ever for clients to access the value of their policies.

For clients looking to secure life insurance protection, longevity insurance, and a steady stream of retirement income, these new guaranteed income withdrawal riders could be the perfect solution!

Read the full analysis of Professor William Byrnes and Robert Bloink at Think Advisor !

Professor William Byrnes is a full time academic providing unbiased, informative critique to his readers.  Subscribers of Tax Facts and of National Underwriters receive weekly strategic industry intelligence such as retirement strategies and client case studies.  ThinkAdvisor.com, an industry news site, supports the professional growth and vitality of the Investment Advisory community, from RIAs and wealth managers of all kinds, to independent broker-dealer and wirehouse representatives. We provide unparalleled access to the knowledge, information and critical resources they need to succeed at every stage in their career, including professional development, education and certification, industry news and analysis, reference tools and services, and community networking opportunities.

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LTC’s Future Lies in New Crop of Hybrid Products

Posted by William Byrnes on December 30, 2013


When it comes to long-term care coverage, advising risk-adverse clients has historically required a balancing act that many traditional long-term care insurance (LTCI) policies simply are not cut out for. In weighing the need for coverage against the risk of a lost investment, clients frequently decide against obtaining coverage.

Fortunately, changes in the long-term care marketplace have recently inspired a new crop of products that can alleviate some concerns of clients who are already feeling the pinch of a persistently low interest rate economy. While longer lifespans and the ever-increasing cost of care have led to dramatically higher LTCI costs, new asset-based products can allow your clients to obtain affordable coverage on an almost risk-free basis, with features and tax-preferences that will likely tip the scales in favor of coverage for even the most cautious of clients.

Read the analysis of Prof. William Byrnes and Robert Bloink at ThinkAdvisor !

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Court Eases Use of Annuities to Avoid Medicaid Spend-Down

Posted by William Byrnes on December 24, 2013


The winds are finally changing for Medicaid recipients, as evidenced by a recent U.S. Court of Appeals ruling that eases state-imposed restrictions on the use of annuities, reducing the need for your clients to spend down assets in order to become eligible for Medicaid assistance. The 6th Circuit ruling shut down the state’s attack on Medicaid-compliant annuities in this case, ruling in favor of clients who rely upon these annuities to provide sufficient income even if one spouse requires Medicaid assistance to pay for long-term care in a nursing home.

Based on this precedent, your clients may begin to experience a much more favorable Medicaid planning environment as they gain greater flexibility in the purchase timing and beneficiary designation requirements for annuity contracts that escape the Medicaid resource calculation formula, without jeopardizing an unhealthy spouse’s Medicaid eligibility.

Read the full analysis of Professor William Byrnes and Robert Bloink at Think Advisor !

ThinkAdvisor.com supports the professional growth and vitality of the Investment Advisory community, from RIAs and wealth managers of all kinds, to independent broker-dealer and wirehouse representatives. We provide unparalleled access to the knowledge, information and critical resources they need to succeed at every stage in their career, including professional development, education and certification, industry news and analysis, reference tools and services, and community networking opportunities.

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What Advisors Need to Know About the New Reverse Mortgage Rules

Posted by William Byrnes on November 4, 2013


With the U.S. population aging and more boomers turning to reverse mortgages to fund their retirement, the U.S. Department of Housing and Urban Development has announced major changes to its Home Equity Conversion Mortgage program.

The changes, most of which became effective on Sept. 30, are designed to prevent borrowers from tapping into the entire value locked into their homes.  Specifically, new limits have been placed on the amount that borrowers can take out during the first year.

Read Professor William Byrnes and Robert Bloink’s analysis of this issue by clicking to our Think Advisor’s article > ThinkAdvisor <

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William Byrnes author of 2 tax titles published September 2013

Posted by William Byrnes on October 21, 2013


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Summit Professional Network’s National Underwriter published two books authored by Associate Dean William Byrnes and Robert Bloink: 2014 Tax Facts on Investments and 2014 Tax Facts on Insurance & Employee Benefits

William Byrnes explained National Underwriter Company’s place in the market: “National Underwriter has been the leading publisher for over 110 years to the insurance industry.  Tax Facts was first published over 60 years ago and has become in the words of Michael E. Kitces, Director of Financial Planning of Pinnacle Advisory Group:

“…  THE benchmark standard that all other resources are measured by, for financial planners that might need to look up a question about any kind of tax-related issue involving a client. The Tax Facts series sits on a bookshelf right next to my desk for easy and regular access, and only leaves when I replace it with each year’s update!”  (source: http://pro.nuco.com/Pages/AboutUs.aspx)

William Byrnes added “Tax Facts has built strong a subscriber base of over 20,000 financial planning professionals.  I think financial planning professionals relate to the approach of contextualizing client problems in a Question – Answer format.  Clients don’t come with neatly packaged issues, but instead want to tell their stories and ask questions.  Thus, Tax Facts takes that approach, by example leveraging case studies and typical client questions in the expanding online version.”

William Byrnes continued “Robert Bloink’s experience as a former IRS Counsel and national insurance markets advisor combines well with my big 4 and publication background.”

When asked “What is new about the 2014 edition?” Robert Bloink replied “We have included a new section on cross border employment and estate tax issues, captive insurance and alternative risk transfer, reverse mortgages, DOMA, Affordable Care Act, and REITs as well as expanding coverage of annuities, structured settlements, retirement planning and deferred compensation.”

Alexis Long worked with Thomas Jefferson joint degree juris doctorate and LLM alumnus, Marcus Threats, on the REIT Q&A section which sprung from his senior writing project.  Mr. Threats said that “I obtained a legal education to address challenges that I had experienced in the property investments markets.  While the opportunity for a dual degree at Thomas Jefferson attracted me to the law school, the authorship with a renown professional publisher has really made my Thomas Jefferson education stand out.”

William Byrnes interjected: “This Thursday Adjunct Professor Alexis Long begins the next Publications course via the online LLM and interested students should contact her or myself.  We are already planning the 2014 year and about to complete our JD and LLM publication teams.”

William Byrnes continued: “By the way, in November Robert and I expect to announce the publication of our third Tax Facts title addressing entrepreneur’s income tax and small business tax issues and hope it gains market traction in line with these two titles.”

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The benefits to clients from the deferred income annuity sales boom

Posted by William Byrnes on September 24, 2013


When it comes to lifetime income planning, clients are always looking for the latest and greatest strategy to ensure that their income needs will be met during retirement.

Deferred income annuities are finally experiencing a dramatic growth spurt in the market, which has motivated insurance carriers to design products with features that allow each product to be tailored to meet the individual client’s needs. As the number of carriers offering deferred income annuities expands, a corresponding boost in client demand is expected — especially when clients discover that they can find the income features they have come to expect from an annuity product, but with a level of flexibility in required contributions and income options unique to the deferred income annuity market.

Read William Byrnes and Robert Bloink’s full analysis of this boom in the sales of deferred income annuities at LifeHealthPro: http://www.lifehealthpro.com/2013/09/11/the-benefits-to-clients-from-the-deferred-income-a

 

Posted in Pensions, Retirement Planning, Uncategorized, Wealth Management | Tagged: , , , , , , , | Leave a Comment »

DB(k): A 10-Year Retirement Strategy for Business Owners

Posted by William Byrnes on September 19, 2013


Small business clients who have seen their businesses return to profitability following the economic crisis of the past few years may have secured their continued viability, but many have done so at the expense of personal retirement security. As a result, a vast portion of the baby boomer population is now struggling to play catch up. Unfortunately, traditional retirement savings vehicles, with their strict contribution limits, often are not enough to replace years’ worth of lost savings.

For many baby boomer clients who own small businesses, a new strategy that combines a defined benefit plan with elements of a voluntary 401(k) plan can allow the client to save more than 10 times as fast as a traditional plan, with dramatic tax savings that your clients will have to see to believe.

Read William Byrnes’ full analysis at  > Think Advisor <

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Term Life: An better option for clients?

Posted by William Byrnes on September 12, 2013


Advisors who think they know all there is to know about term life insurance might be surprised to learn that these policies are finally being brought up to speed.

Increasing demand for already popular term life policies has insurance companies jumping to differentiate their products in a crowded market. The result is a new generation of term life products that can be customized to meet the needs of an extremely diverse section of the market.

Whether your clients are concerned about covering education costs or providing enhanced benefits in the case of specific accidents, modern term life insurance might be the solution.  … Read this full analysis by William Byrnes at  > LifeHealthPro <

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How to Build Your Own Solution to Long-Term Care Insurance Scarcity

Posted by William Byrnes on September 10, 2013


A basic problem for clients looking for long-term care insurance today is that they simply may not be able to find it. Major carriers have pulled out of the market in the last year, and the policies that remain can be prohibitively expensive and contain strict qualification requirements.

Fortunately, the product market is evolving so that a relatively new method of securing tax-preferred long-term care benefits has emerged. Hybrid annuity products that combine the estate and income planning features of an annuity with the protection of long-term care insurance are becoming increasingly popular among clients looking for replacement insurance.

Read William Byrnes’ analysis of building your own solution to long-term care insurance at > The Law Professor Column of Think Advisor <

 

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Net unrealized appreciation tax break: Still a tax break in 2013?

Posted by William Byrnes on September 4, 2013


The tax break provided for net unrealized appreciation (NUA) on 401(k) account distributions once provided a powerful tax savings strategy for clients with large 401(k) balances — allowing some clients to reduce their taxes on these retirement funds by as much as 20 percent.

Today, as high-net-worth clients are increasingly seeking strategies to help minimize their tax burdens in light of higher 2013 tax rates, the NUA strategy may have become more complicated than ever.   Read the full analysis of William Byrnes & Robert Bloink at > Life Health Pro <

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2 New Tax Facts Books Released

Posted by William Byrnes on August 23, 2013


National Underwriters published 2014 editions of Tax Facts books authored by William Byrnes and Robert Bloink of the graduate tax program.

2014 Tax Facts on Investments

2014 Tax Facts on Insurance & Employee Benefits

“We have included a new section on cross border employment and estate tax issues, captive insurance and alternative risk transfer, reverse mortgages, DOMA, as well as the previously expanding sections on ETFs and on precious metals & collectibles,” William Byrnes said.  “Moreover, we hope to soon announce the newest title of Tax Facts addressing entrepreneurs and their small business tax issues.” 

“Tax Facts Books and the Tax Facts Online portal have built strong following of many thousand of financial planning professionals.  I think financial planning professionals relate to National Underwriter’s approach of contextualizing client problems in a Question – Answer format.”

Both publications are now available as e-books, as an alternative or in combination with print.

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Reforming Annuities’ Image Problem: New Focus on Risk

Posted by William Byrnes on August 16, 2013


Today’s media coverage of the variable annuity market has focused on company buybacks and modifications to existing clients’ product guarantees—a prospect that has many clients feeling more wary than ever about annuity purchases.

Despite this, insurance companies have used the negative experiences of recent months as motivation to effect positive change in their annuity product offerings by offering clients real flexibility and risk management options.

read William Byrnes and Robert Bloink’s full analysis regarding annuities at > ThinkAdvisor <

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Income-based premiums triple Medicare costs under PPACA

Posted by William Byrnes on July 31, 2013


For your high net worth and upper middle class clients, Medicare planning has become a critical component of a well-executed retirement income plan.

New rules put into effect under the Patient Protection and Affordable Care Act (PPACA) can impact these clients’ retirement income planning in ways they might not yet realize by increasing their Medicare premiums proportionally as income increases.  The new rules will expand the pool of clients to which these monthly increases will apply.

In today’s environment, it is more important than ever to consider Medicare premiums when planning for retirement expenses.

Medicare Income-Based Premiums … read my analysis at LifeHealthPro – http://www.lifehealthpro.com/2013/05/13/income-based-premiums-triple-medicare-costs-under

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In Medicaid Planning, Don’t Surrender Life Insurance—Trade It for LTC Instead

Posted by William Byrnes on July 23, 2013


Your clients who are nearing retirement age might often wonder why they bother maintaining the life insurance policies they have funded for years. With children grown, the need to provide for beneficiaries in the event of an untimely death has already been eliminated. Further, these policies are considered assets that can have a significant impact when determining Medicaid eligibility.

Despite this, recent proposals in several states can give older clients a reason to maintain their policies and provide peace of mind in Medicaid planning. Under these proposals, ownership of a life insurance policy can actually help clients in long-term care planning as more state Medicaid offices embrace the use of life settlements in conjunction with Medicaid coverage.

The Proposals

read the full analysis at ThinkAdvisor – http://www.thinkadvisor.com/2013/06/03/in-medicaid-planning-dont-surrender-life-insurance

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The Fiscal Cliff Conclusion: Compromise Continues Tax Cuts for Many, But Not All

Posted by William Byrnes on January 2, 2013


In the first moments of 2013, Congress eased the fiscal cliff tax increases for taxpayers earning less than $450,000 by enacting the American Taxpayer Relief Act (Act), permanently extending the Bush-era income tax cuts for this group. … While the legislation extends the current income tax rates for taxpayers earning less than $450,000 ($400,000 for single filers) per year, it allowed the Bush-era tax cuts to expire for all higher-income taxpayers.  Similarly, taxes on capital gains, dividends, and estates were increased for the wealthiest taxpayers.

How Were Income Taxes Increased by the Fiscal Cliff Compromise?

How Does the Act Impact the Current System for Tax Deductions and Exemptions?

Were Capital Gains and Dividend Rates Impacted by the Act?

How Are Estate and Gift Tax Rates Affected?

What Other Changes Were Made?

Beyond the Act: What is the “Investment Income Tax”?

Planning Under the Act: How Should Clients Plan for Higher Taxes in 2013?

Read the analysis at National Underwriters’ Advanced Markets – http://nationalunderwriteradvancedmarkets.com/articles/fc010113-a.aspx?action=16

Posted in Estate Tax, Retirement Planning, Tax Policy, Taxation, Wealth Management | Tagged: , , , , , , , , | Leave a Comment »

Fully Funded Retirement in 10 Years: A DB Plan for Now

Posted by William Byrnes on December 17, 2012


Your small business clients are faced with the increasing likelihood of higher taxes in 2013 and beyond; those aiming to reduce the slope of the fiscal cliff next year will want to take a closer look at the benefits of a defined benefit plan. …. read our strategy article at http://www.advisorone.com/2012/12/13/fully-funded-retirement-in-10-years-a-db-plan-for

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The life insurance fiscal cliff: The end of a tax-preferred product class?

Posted by William Byrnes on December 7, 2012


Clients today assume that the tax-free status of life insurance is a given and may have even engaged in fiscal cliff planning that involves the purchase of life insurance to provide a source of tax-free investment income. Given today’s political climate, it is important for clients to realize that no tax preference is safe and that the tax benefits they have come to expect from life insurance are no exception.

read this article at Life Health Pro e-zine

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the new tax strategies book “2013 Tax Facts on Investments” just released

Posted by William Byrnes on December 5, 2012


2013 Tax Facts on Investments in PRINT and E-Book format 2013_tf_on_investments_cover-m_2provides clear, concise answers to often complex tax questions concerning investments. Pertinent planning points are provided throughout.

Organized in a convenient Q&A format to speed you to the information you need, 2013 Tax Facts on Investments delivers the latest guidance on:

  • Mutual Funds, Unit Trusts, REITs
  • Incentive Stock Options
  • Options & Futures
  • Real Estate
  • Stocks, Bonds
  • Oil & Gas
  • Precious Metals & Collectibles
  • And much more!

Key updates for 2013:

  • New section on captive insurance
  • New section on reverse mortgages
  • Expanded section on ETFs
  • Expanded section on precious metals & collectibles
  • More than 30 new Planning Points, written by practitioners for practitioners, in the following areas:
    • Real Estate
    • Limited Partnerships
    • Stocks
    • Interest and Expenses
    • Options
    • Mutual Funds

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Post-Retirement Health Care: A Quarter-Million-Dollar Dilemma

Posted by William Byrnes on December 3, 2012


After expenses covered by Medicare are taken into account, many of your clients retiring this year are likely to incur about $240,000 per couple in out-of-pocket health care expenses during retirement. …  You may be able to alleviate the retiree health-expense problem by using guaranteed income annuities or life insurance alternative funding solutions.

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Life Settlements — Are They Back?

Posted by William Byrnes on November 28, 2012


One question financial advisors are asking themselves today is whether life settlements have returned to the fold as a viable tool in their clients’ planning strategies.  Read the entire article at http://www.lifehealthpro.com/2012/09/05/life-settlements-are-they-back

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Preparing Clients for the Reality of PPACA’s Investment Income Tax

Posted by William Byrnes on November 26, 2012


… the PPACA provisions proposing an additional 3.8 percent tax on investment income will shortly become effective … and your high-income clients will need advice on how to reposition their investments today to minimize its effect.  Read the full article at http://www.lifehealthpro.com/2012/07/19/preparing-clients-for-the-reality-of-ppacas-invest

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my newest book: 2013 Tax Facts on Insurance & Employee Benefits

Posted by William Byrnes on November 21, 2012


http://www.nationalunderwriter.com/2013-tax-facts-on-insurance-employee-benefits-269.html

Organized in a convenient Q&A format to speed you to the information you need, 2013 Tax Facts on Insurance & Employee Benefits delivers the latest guidance on:

  • Estate & Gift Tax Planning
  • Roth IRAs
  • HSAs
  • Capital Gains, Qualifying Dividends
  • Non-qualified Deferred Compensation Under IRC Section 409A
  • And much more!

Key updates for 2013:

  • Enhanced explanation of the Disclosure Regulations for Retirement Plan Service Providers
  • Expanded section on the taxation of annuities
  • More than 30 new Planning Points, written by practitioners for practitioners, in the following areas:
    • Life Insurance
    • Health Insurance
    • Federal Income Taxation
    • Estate Taxation

Plus, you’re kept up-to-date with online supplements for critical developments.

Posted in Estate Tax, Pensions, Retirement Planning, Taxation, Wealth Management | Tagged: , , , , , , , , | Leave a Comment »

The ticking estate tax time bomb

Posted by William Byrnes on November 21, 2012


For your clients who have been playing the wait-and-see game in estate planning this year, the time for waiting is over.   Absent congressional action, the current $5.12 million exemption will revert to $1 million in less than three months, and the current 35% maximum estate tax rate will jump to 55%.  The entire article is available at http://www.lifehealthpro.com/2012/10/17/the-ticking-estate-tax-time-bomb-less-than-90-days

 

Posted in Estate Tax, Pensions, Retirement Planning, Taxation, Trusts, Wealth Management | Tagged: , , , | Leave a Comment »

How New Deferred Annuities Provide Income Early in Retirement

Posted by William Byrnes on November 19, 2012


…insurance companies have begun building annuity products in a variety of shapes and sizes, and the latest crop of deferred income annuity products could pave the way for clients seeking to maximize retirement income security in the years leading up to retirement.  Read the full article on AdvisorOne – http://www.advisorone.com/2012/11/08/how-new-deferred-annuities-provide-income-early-in

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Tax-Free Hedge Fund Investment: Private Placement Insurance

Posted by William Byrnes on April 9, 2011


Is hedge fund investment without capital gains or estate taxation possible for your high net worth clients?  Yes, through the medium of private placement life insurance (“PPLI”).   Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of topics relevant to estate planning for high net worth clients in Advisor’s Journal, see High Net Worth Clients: How to Find Them, How to Service Them (CC 10-07).

For in-depth analysis of state tax laws that are favorable for PPLI purposes, see Advisor’s Main Library: Estate Planning and the State Premium Tax.

 

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Target Date Funds on Top of the Defined Contribution World

Posted by William Byrnes on April 8, 2011


Why is this Topic Important to Wealth Managers? This topic discusses a relatively new form of retirement investment offered by companies to their employees. The topic presents information about target date funds, what they are, who may use them and how they work. The defined contribution retirement market is a prime location for wealth managers to earn fees and commissions. Thus, staying informed about new market updates is provided to give managers an edge when exploring retirement benefits.

The Government Accountability Office recently published a report stating that financial security of millions of Americans in their retirement years will substantially depend on their savings in 401(k) and other defined contribution (DC) plans. [1]The GAO notes, to help ensure adequate financial resources for retirement, participants in DC plans should make adequate contributions during their working years and invest contributions in a way that will facilitate adequate investment returns over time.

To that end, the Pension Protection Act of 2006 (PPA) included various provisions designed to encourage greater retirement savings among workers eligible to participate in 401(k) plans, such as provisions that facilitate plan sponsors’ adoption of automatic enrollment policies. [2]

Under such policies, eligible workers are automatically enrolled unless they explicitly decide to opt out of participation. Because an automatic enrollment program must also include a default investment—a vehicle in which contributions will be invested absent a specific choice by the plan participant—the act also directed the Department of Labor to assist employers in selecting default investments that best serve the retirement needs of workers who do not direct their own investments. Since that time, target date funds (TDF)—that is, investment funds that invest in a mix of assets, and shift from higher-risk to lower-risk investments as a participant approaches their “target” retirement date—have emerged as by far the most popular default investment.

TDFs are designed to provide an age appropriate asset allocation for plan participants over time.    However, target date funds vary considerably in asset structures and in other ways, largely as a result of the different objectives and investment philosophies of fund managers. In the years approaching the retirement date, for example, some TDFs have a relatively low equity allocation—35 percent or less—so that plan participants will be insulated from excessive losses near retirement. Other TDFs have an equity allocation of 60 percent or more in the belief that relatively high equity returns will help ensure that retirees do not deplete savings in old age.

TDFs also vary considerably in other respects, such as in the use of alternative assets and complex investment techniques. In addition, allocations are based in part on assumptions about plan participant actions—such as contribution rates and how plan participants will manage 401(k) assets upon retirement—which may differ from the actions of many participants. These investment differences and differences between assumed and actual participant behavior may have significant implications for the retirement security of plan participants invested in TDFs.

Read the analysis at AdvisorFYI

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Tax Court Calculates FMV of Policies Distributed from Terminated 419 Plan

Posted by William Byrnes on March 31, 2011


The Tax Court recently calculated the fair market value (“FMV”) of life insurance policies distributed by a terminated 419 welfare benefit plan. The FMV of the policies—which must be included in the taxpayers’ income—was determined by the court based on: (1) surrender charges, (2) conditions imposed on the taxpayers by the insurance company, and (3) “paid-up insurance coverage remaining on the policies as of the date of distribution.”  Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of policy valuation in Advisor’s Journal, see Tax Courts Holds Employee Taxable for Value of Life Insurance Owned by Welfare-Benefit Plan (CC 11-14).

For in-depth analysis of welfare benefits plans, see Advisor’s Main Library: B—Welfare Benefit Funds.

 

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Deductibility of Welfare Benefit Plan Contributions (Section 419)

Posted by William Byrnes on March 18, 2011


Company is an accrual basis fiscal year taxpayer.  Company pays severance benefits in its discretion on an ad hoc basis, and vacation benefits pursuant to its established policy.

Historically, Company has paid both severance and vacation pay from its general assets.  Due to a decline in the Market over the past few years, Company has paid significant severance and expects to continue to pay additional severance over the next few years.  Effective Jan 1, 2009 Company established Trust to pay this anticipated severance and vacation pay.  Trust intends to submit an application for recognition of exempt status in 2010.  On 1/1/2009 Company contributed over $1,000,000 to the Trust and deducted that amount on its tax return for 2009.  Company indicates that beginning in 2010, Company will make payments for vacation and severance and will seek reimbursement from the Trust.

Company computed the amount deducted based on the limitation set forth in the Code.

Company has not provided any information documenting any severance claims incurred in 2009 that it expects to pay in 2010.  Company indicates that because the Trust was established “to pay severance that they anticipate they will have to pay over the next few years …”, and because the amount deducted is within the limit set forth in the Code that the deduction is proper.  Read the analysis at AdvisorFYI

 

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Tax Courts Holds Employee Taxable for Value of Life Insurance Owned by Welfare-Benefit Plan

Posted by William Byrnes on February 18, 2011


A recent Tax Court case demonstrates the severe tax consequences for an employee when a welfare-benefit plan ceases to qualify under section 419A of the Tax Code.  Section 419A governs “qualified asset accounts,” which are employer provided welfare-benefits plans that set aside funds for (1) disability benefits, (2) medical benefits, (3) severance benefits, or (4) life insurance benefits. In general, contributions by an employer to a welfare-benefit plan are tax deductible by the employer if they are ordinary and necessary business expenses. In the case, part of the funds contributed to the plan were used to buy life insurance coverage for the principal and other employees, with the rest of the funds constituting excess contributions. 

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

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Retirement Plan Approved and Prohibited Investments

Posted by William Byrnes on February 15, 2011


Why is this Topic Important to Wealth Managers? Discusses retirement plan investments with regards to client retirement planning.  Provides types of investments retirement plans can and cannot make.

What types of investments can a retirement plan make?

Although there is no list of approved investments for retirement plans, there are special rules contained in the Employee Retirement Income Security Act of 1974 (ERISA) that apply to retirement plan investments.

In general, a plan sponsor or plan administrator of a qualified plan who acts in a fiduciary capacity is required, in investing plan assets, to exercise the judgment that a prudent investor would use in investing for his or her own retirement.

In addition, certain rules apply to specific plan types.  For example, there are different limits on the amount of employer stock and employer real property that a qualified plan can hold, depending on whether the plan is a defined benefit plan, a 401(k) plan, or another kind of qualified plan.

Read the entire analysis at AdvisorFYI.

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Enhancing Executive Compensation: 162 Bonus Plans

Posted by William Byrnes on December 31, 2010


An employer who does not want to, or cannot, institute a qualified pension or profit-sharing plan, or who does not want to extend benefits to all of its full-time employees, can use a “Section 162 plan” to meet its executive compensation needs.   A Section 162 plan leverages life insurance to provide supplemental compensation to select employees while also allowing the employer to take an income tax deduction for the premium payments.

In a Section 162 plan, an employer applies for, and pays premiums on, a life insurance policy on its employee’s life. The employee, however, owns the policy and has the right to appoint beneficiaries; the employer does not take an interest in the policy’s death benefit.

As an example of Section 162 plan and its tax advantages, … read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For in-depth analysis of Section 162 plans, see Advisor’s Main Library: Section 15 C—Executive Bonus – I.R.C. �162 Plan

We invite your questions and comments by posting them below or by calling the Panel of Experts.

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