Tag Archives: 2019

2019 ObamaCare Rate requests surfacing

Fox News in an article (click here) is reporting as follows:

Maryland insurers Carefirst, Kaiser, Blue Cross and Blue Shield are requesting an average 30 percent increase.  Some of the richer PPO plans have a 91% rate increase request.    Virginia is following suits with increases of up to 64%, although Anthem Healthkeepers is only requesting 6%.

 

These are the first two states to release information on pending increases;  all increases have to be approved by the State Insurance Departments.

Changes in your 401k plan in 2019- Hardship Rules

A number of 401k plan changes were included in the Bipartisan Budget Act, specifically around Hardship with drawals and repaying plan loans:

 

Hardship Withdrawals:  Currenlty, employees seeking to take money out of their 401(k) accounts are limited to the funds they contributed themselves.  They must first take a loan from the same account, which has to be repaid.

Due to the Bipartisan Budget Act, the rules will change in 2019. Employees’ withdrawal limit will include not just amounts they have contributed, but also employer matching contributions plus earnings on contributions. If someone has been participating in the 401(k) for several years, this could add substantially to the amount of funds available in the event of a legitimate hardship.

Employees will be able to stay in the plan and continue to contribute starting in 2019, currently they are banned for 6 months after the Hardship Withdrawal.  Plan sponsors won’t be required to unenroll and then re-enroll employees after that six-month hiatus.

One thing that hasn’t changed: Hardship withdrawals are subject to income tax, plus a 10 percent tax penalty. That could take a substantial bite out of the amount withdrawn, effectively forcing account holders to take out more dollars than they otherwise would have.

Hardship criteria

There has been no change to the criteria for a hardship withdrawal:

Such a withdrawal “must be made because of an immediate and heavy financial need of the employee and the amount must be necessary to satisfy the financial need.” That can include the need of an employee’s spouse or dependent, as well as that of a nonspouse, nondependent beneficiary.

The IRS goes on to say that the meaning of “immediate and heavy” depends on the situation. It also assumes the employee doesn’t have any other way to meet the needs. The following are examples offered by the IRS:

• Qualified medical expenses (which presumably don’t include cosmetic surgery)

• Costs relating to the purchase of a principal residence

• Tuition and related educational expenses

• Payments necessary to prevent eviction from, or foreclosure on, a principal residence

• Burial or funeral expenses

• Certain expenses for the repair of damage to a principal residence

Repaying Plan Loans as an ex-employee

Prior to 2018, if an employee with an outstanding plan loan left their employer, he or she would have to repay the loan within 60 days to avoid having it deemed as a taxable distribution (and subject to a 10 percent premature distribution penalty for employees under age 59-1/2).

The TCJA changed that deadline to the latest date the former employee can file his or her tax return for the tax year in which the loan amount would otherwise be treated as a plan distribution. So, for example, if someone with an outstanding loan of $5,000 changed jobs on Dec. 31, 2017, he or she would have until April 15 (or, with a six-month filing extension, Oct. 15), 2018, to repay the loan.

Alternatively, he or she could make a contribution of the same amount owed ($5,000, in this example) to an IRA or their new employer’s plan, assuming the new plan permitted it. That $5,000 contribution would be treated the same as a rollover from the old plan.

As always, please consult your tax adviser should you have any questions.

September 2018
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Reeve Conover is a Registered Representative. Securities offered through Cambridge Investment Research, Inc., a Broker/dealer member FINRA/SPIC. Cambridge and Conover Consulting are not affiliated. Licensed in SC, NC, NY, CT, NJ, and CA.
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