This post is from the IRS quarterly newsletter.
Retirement News for Employers – Spring 2011 – Retirement Plans for Self-Employed People
This post is from the IRS quarterly newsletter.
Retirement News for Employers – Spring 2011 – Retirement Plans for Self-Employed People
It is not unusual for businesses to borrow money from banks and other
financial institutions. Loans and lines of credit can help even out the ups and
downs of cash flow so a business can smoothly meet its payroll and other
financial obligations. Borrowing can also help a company capitalize on unique
growth and profit-making opportunities. While borrowing money to run your business can be beneficial, without a plan, it can also create difficult problems.
Your Personal Guarantee
When a bank lends money to a business, it normally requires the owners to
sign personal guarantees. When you give a bank your personal guarantee,
you have signed the loan documents twice: once as an officer of the business
and a second time as a guarantor. Personal guarantees often permit the bank
to demand repayment from either your personal assets or your business assets
if there is a default. The bank gets to choose.
This potentially presents two problems:
Your personal guarantee may create a serious financial problem for you and your family. That’s because in the event of a default, the guarantee permits the bank to come to you personally for repayment. It doesn’t have to go to the business to be repaid; it can come straight to you. If you were to die unexpectedly, your personal guarantee potentially puts the bank ahead of your spouse and children in the distribution of your assets. After the bank is paid, your family could then seek reimbursement from the business. Unfortunately, this could take months – if the business is able to repay them at all. Until then, your family will have to bear the loss.
There is a different problem if your business has multiple owners. Suppose your bank lends your business
money for capital and expansion and all the owners sign personal guarantees. If one of the other owners dies unexpectedly, the bank may have the right to call the loan and demand the entire repayment from you. The bank may not have to look to the business or to the other owners to get repaid. It may be able to recover the entire debt just from you. Then it will be up to you to get the business or other owners to reimburse you.
The Solution: Key Person Life Insurance
When you personally guarantee the loans of your business, you are personally taking on a new financial risk, a risk you probably don’t want. To transfer some of this risk back to the company, your business can purchase and own a life insurance policy on each owner and key employee. The policy death benefits are payable to the business as the beneficiary and can be used to repay the outstanding loans when the insured dies. These policies protect you if a co-owner dies. They also should protect your family in the event of your death. If the policy is properly managed, the death benefits may be income tax free under IRC Section 101.
The Centers for Medicare and Medicaid Services (CMS) plans to use a 10% cut-off to decide whether to look more closely at individual and small group health insurance rate hikes in states.
The 10% threshold will apply both in states where CMS handles rate reviews and in states that do the reviews themselves, officials say.
CMS, an arm of the U.S. Department of Health and Human Services (HHS), will begin to apply the review program rules Sept. 1.
Starting Sept. 1, 2012, each state will get its own review threshold, officials say.
CMS has described the rate review program regulations in an early version of the 94-page Rate Increase Disclosure and Review final rule.
The final rule, set to appear Monday in the Federal Register, will implement Section 1003 of the Patient Protection and Affordable Care Act of 2010 (PPACA).
PPACA Section 1003 requires HHS and the states to develop a process for conducting annual reviews of “unreasonable increases in premiums for health insurance coverage.”
HHS is encouraging states to conduct their own rate reviews. In states where regulators cannot or will not conduct reviews, an arm of CMS will conduct the reviews.
Originally, the rules were set to take effect July 1; CMS responded to pleas for relief from industry commenters by pushing the effective date back two months.
Many state regulators and insurance industry commenters also had asked CMS to reconsider using a 10% review threshold in every state. They suggested that the 10% threshold would lead to reviewers reviewing virtually all proposed rate increases in many states.
CMS declined to change cut-off.
The 2012 limits for HSAs have been released by the IRS in Revenue Procedure 2011-32.
Minimum Annual Deductibles
There is no change in the minimum annual deductibles required for a plan to be considered a “high deductible health plan”, or “HDHP”. They remain at $1,200 for single coverage and $2,400 for family coverage.
Out of Pocket Maximums
The maximum out of pocket maximums for HDHPs for 2012 will increase to $6,050 for single coverage and $12,100 for family coverage (2011 levels are $5,950 single/ $11,900 family).
Annual Individual Contribution Limit
The maximum permitted contribution to the HSA on behalf of an individual increases to $3,100 for an individual with single coverage and $6,250 for an individual with family coverage (2011 levels are $3,050 single/ $6,150 family).
May 20th, 2011 by email@example.com
It comes as no surprise that we in the U.S. spend substantially more on health care than any other developed nation. Still, the cold, hard numbers — as shown in a recent study put out by the Kaiser Family Foundation — are shocking. The significant spending gap, first measured in 1970, swelled in 2008 to 91 percent more than other developed countries around the world.
A brief history of numbers:
This timeline is complimented by data showing how health care costs have devoured our national GDP: in 1970, the U.S. spent 7 percent of its Gross Domestic Product on health care, 37 percent more than other developed countries. By 2008, this number had risen to 16 percent, 58 percent higher than average.
So, what do we do with these numbers? Study authors suggest: “This growing gap between health spending in the U.S. and that of other developed countries may encourage policymakers to look more closely at what people in the U.S. are getting for their far higher and faster growing spending on health care.”
Judging from ASJ’s recent Health Insurance Market Study, many agents agree that a closer look is needed. When asked whether you supported the new federal health care laws, 51 percent of you said yes — although just 3 percent wanted to keep the laws in their current form.
Looking at the numbers, it’s difficult to deny that reform is needed. Looking at the Affordable Care Act, it’s difficult to deny that there are some substantial holes. How would you fix things? Drop us a line at Editor@SBMedia.com and let us know which direction you think reform should take.
By ALLISON BELL
Published 4/28/2011 Consumers who buy the minimum required level of health coverage in an Affordable Care Act health care environment could be responsible for handling thousands of dollars of medical costs out of pocket. Analysts at the Henry J. Kaiser Family Foundation, Menlo Park, Calif., come to that conclusion in a report prepared using actuarial analyses from Actuarial Research Corp., Columbia, Md.; the Aon Hewitt of Aon Corp., Chicago (NYSE:AON); and Towers Watson & Company, New York (NYSE:TW). The analysts looked at the deductibles and out-of-pocket spending limits consumers might see if they buy individual health coverage through the new health insurance exchanges that are supposed to come online in 2014. Many Republicans and some Democrats are trying to block implementation of part or all of the Affordable Care Act, the legislative package that includes the Patient Protection and Affordable Care Act of 2010 (PPACA). If PPACA takes effect as written and works as supporters have hoped, consumers will be able to use subsidies to buy coverage through the exchanges, which are supposed to help match individual consumers and small employer groups with health insurers. PPACA requires exchanges to offer coverage with 4 levels of actuarial value — bronze, silver, gold, and platinum. The bronze-level plans are supposed to cost the least and cover the smallest share of enrollees’ expenses, and the platinum-level plans are supposed to cost the most and offer the richest level of benefits. When the Congressional Budget Office (CBO) was considering PPACA, it did not provide estimates of exchange plan deductibles or analyses of out-of-pocket cost totals, the Kaiser analysts say. The analysts commissioned the 3 separate deductible and out-of-pocket cost forecasts to deal with variations in estimation techniques and assumptions. The firms found, for example, that an individual who owned a bronze-level plan could end up facing a deductible of anywhere from $2,750 to $6,350 and a coinsurance rate for bills between the deductible amount and the out-of-pocket cost limit ranging from 0% to 30%. The bronze-level plan would cover only 60% of expenses before the out-of-pocket cost limit kicked in. “The variation – which exists in spite of agreement up front among the firms on a common set of major assumptions – is primarily due to differences in the assumed distribution of health expenses across the population, as well as how patients are believed to respond to varying levels of cost-sharing in their use of services,” the Kaiser analysts write. The variation in the estimates suggests that exchange plans could vary widely, despite efforts of the PPACA drafters to promote standardization of coverage terms, the analysts say.
Marcia L. Bowers, Group Sales Director phone: 216.694.4339 or 800.423.0300 NEW YORK, March 22, 2011 – Ordinary personal legal matters – such as will preparation, traffic tickets, real estate matters, debt problems or family situations like adoption and divorce – may be common occurrences, but can take a toll on workplace productivity. A new study, “The Impact of Legal Matters on Today’s Workforce” released today from Hyatt Legal Plans, a MetLife company, found that people with these types of legal issues are spending, on average, close to three hours a week at work dealing with their situation for an average duration of five to six weeks. Furthermore, 37% of men and 47% of women said dealing with their issue negatively impacted their physical or emotional health. The survey was conducted online by Harris Interactive on behalf of Hyatt Legal Plans. Easier with an Attorney The study found that while some people choose to handle a legal issue on their own, either because they feel confident in their ability or because the cost of an attorney is a concern, having legal advice may positively influence someone’s experience. For example, seven in ten individuals surveyed who engaged an attorney said that having legal counsel made them feel more confident and that the issue was easier to resolve. About two-thirds of individuals using a lawyer said that having an attorney gave them peace of mind. Enrollment in a group legal plan through an employee benefits program may positively influence someone’s experience further; those who were enrolled in a group plan and used a network attorney felt more positively about their overall experience than those hiring an independent attorney or those going it alone. “While some people feel confident serving as their own attorney, others do it simply because they are afraid of potential costs. However, there is also an emotional cost of going it alone. Access to a group legal plan through the workplace as a voluntary benefit is an affordable solution for employees. Often for less than $20 a month, group legal plans provide unlimited consultation with an attorney on employees’ most frequent personal legal issues,” said Bill Brooks, CEO, Hyatt Legal Plans. Saving Vacation Days The convenience of having group legal plans as a workplace benefit can not only save money but also time. The Hyatt Legal Plans study found that only 30% of employees accessing their attorney through a group legal plan used vacation or other paid time off addressing their situation, compared with nearly 50% of employees hiring an attorney on their own. Nine out of ten people who used a group legal plan said they would use it again in the future. Interestingly, even 42% of people who were satisfied serving as their own attorney said they would be interested in enrolling in a group legal plan if given the option. “Developing a professional rapport with an attorney is just as important as building a relationship with a family doctor or dentist. Having unlimited, nationwide access to attorneys, along with representation for many key issues, is really appealing to employees. Having a plan available through work helps employees save time and money, while providing peace of mind in knowing that pre-qualified attorneys will take care of them,” added Brooks. Methodology This survey was conducted online within the United States by Harris Interactive on behalf of Hyatt Legal Plans from January 6 to February 7, 2011 among 846 employed U.S. residents ages 18 and older who have had at least one targeted legal issue in the past five years (e.g.foreclosure, adoption, bankruptcy, divorce). This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. About Hyatt Legal Plans Hyatt Legal Plans, a MetLife subsidiary, is the largest provider of group legal plans in the country, serving more than two million group legal plan members and dependents through a nationwide network of 5,300 law firms. For more information on Hyatt Legal Plans, please visit www.legalplans.com. Group legal plans provided by Hyatt Legal Plans, Inc., Cleveland, OH. In certain states, plans are provided through insurance coverage underwritten by Metropolitan Property and Casualty Insurance Company and Affiliates, Warwick, RI. About MetLife MetLife is a subsidiary of MetLife, Inc. (NYSE: MET), a leading global provider of insurance,annuities and employee benefit programs, serving 90 million customers in over 60 countries. Through its subsidiaries and affiliates, MetLife holds leading market positions in the United States, Japan, Latin America, Asia Pacific, Europe and the Middle East. For more information, visit www.metlife.com. About Harris Interactive Harris Interactive is one of the world’s leading custom market research firms, leveraging research, technology, and business acumen to transform relevant insight into actionable foresight. Known widely for the Harris Poll and for pioneering innovative research methodologies, Harris offers expertise in a wide range of industries including healthcare, technology, public affairs, energy, telecommunications, financial services, insurance, media,retail, restaurant, and consumer package goods. Serving clients in over 215 countries and territories through its North American, European, and Asian offices and a network of independent market research firms, Harris specializes in delivering research solutions that help them – and their clients – stay ahead of what’s next.
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