Wealth & Risk Management Blog

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

Posts Tagged ‘Funds’

Pensions Turn to Death Bonds

Posted by William Byrnes on September 28, 2011


It’s a given that most of us want to extend our lives as long as possible. But our ever-increasing life spans can financially strain pension funds and others that are contingent upon us dying to keep their books balanced.

Pension funds face severe longevity risk. If pensioners live longer than expected, payouts from the funds could eclipse the estimated cost of keeping the funds stable. Worldwide, $17 trillion of pension funds – $23 trillion in assets – is exposed to longevity risk.

But the big banks—including Goldman Sachs, JPMorgan Chase, and Deustsche Bank—are coming to the rescue by packaging that longevity risk and selling it to investors; and they’re counting on investors being interested in gambling on death.

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 life insurance contracts in Advisor’s Journal, see IRS Guidance Provides Safe Harbor for Policies Maturing After Age 100 (CC 10-51).

For in-depth analysis of pension plans and other qualified employee plans, see Advisor’s Main Library: O – ERISA – FAQs.

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Pensions Turn to Death Bonds

Posted by William Byrnes on September 8, 2011


It’s a given that most of us want to continue living as long as possible.  Exercising, eating healthy, and taking every precaution available to extend the gift of life to its limits. Nevertheless, even living a longer life is not exempt from the foreseeable strains it creates financially. Increasing life spans can create problems for pension funds and others that depend on us dying to keep their books balanced.

Pension funds are exposed to severe longevity risk. If pensioners live longer than expected, payouts from the funds could exceed the estimated cost of keeping the funds solvent. Worldwide, $17 trillion of pension funds – $23 trillion in assets – is exposed to longevity risk.

But the big banks—including Goldman Sachs, JPMorgan Chase, and Deustsche Bank—are coming to the rescue by packaging that longevity risk and selling it to investors; and they’re counting on investors being interested in wagering on your death.

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 life insurance contracts in Advisor’s Journal, see IRS Guidance Provides Safe Harbor for Policies Maturing After Age 100 (CC 10-51).

For in-depth analysis of pension plans and other qualified employee plans, see Advisor’s Main Library: O – ERISA – FAQs.

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Are All Target Date Funds Created Equal?

Posted by William Byrnes on May 6, 2011


Not according to a recent U.S. Government Accountability Office (GAO) report which found that annualized returns on a variety of funds with the same target date vary wildly—some with gains as high as 28% and others with losses of up to 31%. Target date funds, which “are designed to provide an age-appropriate asset allocation for plan participants over time,” are essentially an investment advisor substitute. But, unlike a personal financial advisor, target date funds can’t take into consideration the individualized needs of investors and don’t offer investors the level of disclosure that’s mandated of registered investment advisors.  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 target date funds in Advisor’s Journal, see Are Target-Date Funds Failing (CC 09-35)Missing the Target? (CC 07-59), & The Automatic IRA Act of 2010: Boon for Advisors? (CC 10-56).

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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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House Passes Bill Modernizing Mutual Fund Taxation

Posted by William Byrnes on January 25, 2011


Although overshadowed by the fight over the Obama tax agreement, mutual fund legislation passed the House on December 15.  The Registered investment Company Modernization Act of 2010 (RICM Act), H.R. 4337, was originally passed by the House on September 28, but the Senate amended the bill, forcing a second vote in the House.  The President signed it into law December 22 – Public Law 111-325.

Tax Code provisions governing mutual funds have not had a substantial update since 1986, with some components of the Code relating to mutual funds sitting untouched for sixty or more years. The tax and regulatory landscape has changed significantly in the intervening years, which has left the tax rules for mutual funds sorely in need of updating.

The RICM Act brings the Tax Code’s treatment of mutual funds and other registered investment companies (RICs) up to date by introducing the following provisions to the Tax Code, among others: 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 previous coverage of mutual fund investment in Adviso’rs Journal, see Can Term Life Coupled with a Mutual Fund Investment Replace a Variable Universal Life Policy? (CC 10-77).

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