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Getting Off On The Right Foot in 2012

February 27th, 2012 | Comments Off on Getting Off On The Right Foot in 2012 | Posted in Financial News

A look at some financial changes & the opportunities they may present.

Every year brings some financial change, so here are some relevant changes relating to investment, tax and estate planning for 2012.

Retirement plans. 401(k), 403(b) and 457 plan annual contribution limits rise slightly to $17,000, and you can contribute an additional $5,500 to these accounts if you are 50 or older this year. IRA contribution levels are unchanged from 2011: the ceiling is $5,000, $6,000 if you will be 50 or older in 2012.1

As you strive to contribute as much as you comfortably can to these accounts this year, you will probably notice some changes with the retirement plan at your workplace. In 2012, retirement plan sponsors (i.e., employers) will have to note all of the fees and expenses linked to the funds in the plan to plan participants. So if you have a 401(k) or 403(b), you may notice some differences in the disclosures on your statements and you will probably notice more information coming your way about fees. There is also a push in Washington, D.C. to have financial companies provide lifetime income illustrations on retirement plan account statements, projections of your expected monthly benefit at retirement age.2

Income taxes. Wealthy Americans are set to face greater income tax burdens in 2013, so 2012 may be the last year to take advantage of certain factors. For example, the top tax bracket in 2013 is slated to be at 39.6% instead of the current 35%. This year, capital gains and dividends will be taxed at 15% or less for everyone, 0% for those in the 10% and 15% tax brackets. In 2013, the qualified capital gains tax rate is scheduled to rise to 20% and qualified dividends will be taxed as ordinary income. So taking a little more income in 2012 could be smart.3

In 2013, the wealthiest Americans are supposed to be hit with new Medicare taxes: a new 3.8% levy on unearned income (such as capital gains, income from real estate, dividends and interest) and a new 0.9% tax or earned income. So next year, the truly wealthy could effectively face in the neighborhood of 45% federal taxes.3

Additionally, the IRS is planning to limit itemized deductions for upper-income taxpayers in 2013. A phase-out will also apply for the personal exemption deduction.3

Estate & gift taxes. At the end of 2012, some very nice estate tax breaks could sunset. Barring action by Congress, 2013 could see a 20% leap in the federal estate tax rate from 35% to 55%. The individual estate tax exclusion (currently $5.12 million) is scheduled to be reduced to $1 million.3

As we have unified gift and estate tax rates, those numbers and percentages also apply to gift taxes. That is, from 2012 to 2013 top federal gift tax rate is set to go from 35% to 55% and the lifetime gift tax exemption amount is scheduled to fall $4,120,000 per individual to $1 million. The annual gift tax exemption is $13,000 per recipient in 2012; there is an exemption limit for qualifying educational and medical payments. If you want to gift relatives or friends, you may want to avoid procrastinating for another very good reason: when you make such a gift early in a year, the recipient will gain both the principal and any appreciation tied to the gifted asset in that year.3,4

Speaking of gifts, we said goodbye to charitable IRA gifts in 2011. The IRA charitable rollover, a boon to non-profits and a handy tax deduction option for taxpayers older than age 70½, was not extended into 2012, not even temporarily as a sweetener to the payroll tax extension bill. There is hope it will be back. Two bills have been introduced in Congress with that goal, one sponsored by Sen. Olympia Snowe (R-ME) and Sen. Charles Schumer (D-NY) and another by Rep. Wally Herger (R-CA) and Rep. Earl Blumenauer (D-OR). The proposed legislation would let IRA owners start making charitable IRA gifts at age 59½ and remove the $100,000 limit on the rollovers.5

The limits on the generation-skipping transfer tax could change, too: assuming the Bush-era tax cuts do sunset, the GSTT rate would jump from 35% this year to 55% in 2013, with the GSTT exemption falling from $5,120,000 per person this year to roughly $1.3 million per person next year.3

So given all these changes, it might be wise to meet with the financial professional you know and trust early in 2012 as you strive to start the year off on the right foot. You have until April 17 to file your federal return, but you can plan now.

1 –,,id=96461,00.html [10/20/11]
2 – [12/29/11]
3 – [1/3/12]
4 – [1/6/12]
5 – [12/25/11]

Department of Labor Extends Fee Disclosure Deadlines in Final Rule on Service Provider Disclosures

February 27th, 2012 | Comments Off on Department of Labor Extends Fee Disclosure Deadlines in Final Rule on Service Provider Disclosures | Posted in Financial News

The DOL published its long-awaited final rule on service provider fee disclosures on February 3.  The final rule replaces an interim final rule that was published on July 16, 2010.  The rule applies to section 408(b)(2) of ERISA, that provides relief from ERISA prohibited transaction rules for arrangements between a plan fiduciary and a plan service provider if the contract or arrangement is reasonable, the services are necessary for the establishment or operation of the plan, and any fees are reasonable.  Under the rule, certain service providers providing certain services must make specific disclosures in order to meet the reasonable fee requirements of section 408(b)(2).  The disclosures are intended to help the plan fiduciary determine if fees are reasonable.  If the requirements are not met, the plan fiduciary and the service provider have engaged in a prohibited transaction.  Click here for an updated comprehensive summary of the rule.

The final rule contains several changes from the interim final rule.  Here are the highlights:

  • The effective date is July 1, 2012.  Under the interim rule, it was April 1, 2012.  It applies to disclosures regarding contracts or arrangements between covered plans and covered service providers as of the effective date.  Disclosures are required “reasonably in advance” of entering into a contract or arrangement between a covered plan and a covered service provider, and any extension or renewal of such contract or arrangement.  For contracts or arrangements entered into prior to the effective date, the information required to be disclosed must be furnished no later than the effective date.
  • The effective date for participant fee disclosure is 60 days after the effective date of this rule.  For plan years beginning on or after November 1, 2011, the initial disclosure will be required no later than August 30, 2012.  The first quarterly disclosures are required 45 days after the end of the quarter in which the initial disclosure is required to be furnished.  This date is November 14, 2012.
  • Some 403(b) plans are excluded from the rule.  Specifically, 403(b) annuity contracts and custodial accounts issued to a current or former employee before January 1, 2009, for which the employer ceased to have any obligation to make contributions (including employee salary reduction contributions), and, in fact, ceased making contributions to the contract or account for periods before January 1, 2009, and for which all of the rights and benefits under the contract or account are legally enforceable against the insurer or custodian by the individual owner of the contract or account without any involvement by the employer, and for which such individual owner is fully vested in the contract or account, are not covered plans under the rule.
  • The disclosure rule for indirect compensation includes a new requirement to describe the arrangement between the service provider and the payer of the indirect compensation.  This should help plan fiduciaries assess any potential conflicts of interest.
  • The disclosure rules are better aligned with the participant fee disclosure requirements.  The total operating expenses for designated investment alternatives (participant directed investments other than a brokerage window) must be calculated and expressed in accordance with the participant fee disclosure rule.  Additionally, any other information about a designated investment alternative that is required to meet the participant fee disclosure rule must be disclosed if the information is “within the control of, or reasonably available to” the service provider.
  • The “pass through” rules permitting recordkeepers to provide investment-related disclosures by providing materials from the investment issuer are relaxed.
  • Changes in investment disclosures must be disclosed at least annually.  In the interim rule they had to be disclosed in 60 day.  The change is intended to prevent a flood of information about very small changes in investment fees. However, such a delay in material changes might present issues for plan sponsors in meeting their fiduciary duty to monitor plan investments.
  • Requests by a plan fiduciary for additional information needed to satisfy reporting and disclosure requirements must be provided reasonably in advance of the date the information is needed to comply with a specific requirement. Previously, the information had to be provided within 30 days of receipt of the request.
  • Relief was provided to permit a “reasonable and good faith” estimate of compensation as a last resort.
  • An important change was made to the exemption for plan fiduciaries that do not receive the required disclosures.  If a service provider does not respond to a written request for information “promptly after the end of the 90-day period (or earlier if the provider refuses the request), and the information relates to future services, the plan fiduciary shall terminate the contract as soon as possible.
  • Summary disclosures – In the interim final rule, the DOL requested comments on whether or not service providers should be required to offer a “summary road map” of their disclosures.  The final rule reserved judgment on this issue.  Simultaneously, the DOL announced a new separate rulemaking process to address this issue.  Currently, service providers can meet the disclosure requirements by providing documents, from different sources and at different times, that contain required disclosures.  These documents may be voluminous in nature.  The final rule includes a voluntary “sample guide to initial disclosures” in which a provider identifies where specific disclosures can be found in a myriad of documents.  PSCA believes that the final rule should be amended to require the disclosures to be provided in a single document.


The Advantages of HASs

February 27th, 2012 | Comments Off on The Advantages of HASs | Posted in Financial News

Health Savings Accounts offer you tax breaks and more.

Why do people open up Health Savings Accounts in tandem with high-deductible insurance plans? Well, here are some of the compelling reasons why younger, healthier employees decide to have HSAs.

#1: Tax-deductible contributions. These accounts are funded with pre-tax income. Your annual contribution limit to an HSA depends on your age and the type of insurance plan you have in conjunction with the account. For 2010, the limit is set at $3,050 (individual plan) and $6,150 (family plan). If you are older than 55, those limits are nudged $1,000 higher.1

#2: Tax-free growth. The money in an HSA grows untaxed – and some HSAs even have investment options, including mutual funds. Some HSA owners choose to invest the assets in money market funds, but they are commonly held as cash.2

#3: Tax-free withdrawals (as long as withdrawals pay for heath care costs). To make withdrawals even easier, many HSAs offer you checkbooks and debit cards to make it easier to pay healthcare expenses and reimburse yourself. There is no need to provide reimbursement claims to the IRS; all you need to do is keep your receipts in case of an audit.1

Add it up: an HSA lets you avoid taxes as you pay for health care. Additionally, these accounts have other merits.

You own your HSA. If you leave the company you work for, your HSA goes with you – your dollars aren’t lost.

No use-it-or-lose-it rule. This is an improvement from a Flexible Spending Account (FSA). If you don’t use the money in an FSA at the end of a year, you lose it. With an HSA, there is no such penalty. For the record, you can’t have both an HSA and an FSA.1

Hidden social advantages? Since HSAs impel people to spend their own dollars on health care, the theory goes that they spur their owners toward staying healthy and getting the best medical care for their money.

How about the downside? Well, HSA funds don’t pay for all forms of health care. For example, you can’t pay for over-the-counter drugs with HSA assets.3 In the worst-case scenario, you get sick while you’re enrolled in a high-deductible health plan and lack enough money to pay medical expenses.

If you use funds from your HSA for non-medical expenses, the federal government will hit you with a withdrawal penalty – 10% in 2010, going north to 20% in 2011. And in case you might be wondering, some HSAs do assess monthly fees and transactional charges to account owners.2,3

Even with those caveats, younger and healthier workers see many tax perks and pluses in the HSA.

Who is eligible to open up an HSA? You are eligible if you enroll in a health plan with a sufficiently high deductible. For 2010, the eligibility limits are a $1,200 annual deductible for an individual or a $2,400 annual deductible for a family. You aren’t eligible if you are enrolled in Medicare or if someone else claims you as a dependent on their federal return.1

You don’t need an employer-sponsored health plan to have an HSA. You can open one with a personal health plan, too. In June 2010, the American Medical Association’s American Medical News reported that HSA enrollment had reached the 10 million mark, growing by 2 million alone during 2009.1,3

As health insurance costs are repeatedly increasing for businesses, and as health plans with higher deductibles generally cost less for a company compared to traditional coverage, you will likely see the population of HSA owners growing in the 2010s.

1 – [6/13/10]
2 – [6/16/10]
3 – [6/7/10]

Quarterly Economic Update

February 27th, 2012 | Comments Off on Quarterly Economic Update | Posted in Monthly Economic Update

It Isn’t at All Taxing to Protect Your Tax Information

February 27th, 2012 | Comments Off on It Isn’t at All Taxing to Protect Your Tax Information | Posted in Financial News

Sniff out—and smack down—tax fraud. Put the kibosh on tax-related identity theft with these quick and easy tips.

1. Keep it safe. Never carry your Social Security card or number in a purse or wallet. Leave it at home in a secure place or in a safe-deposit box.

2. Do not store tax information on your computer. Keep sensitive tax information (worksheets, W-2s, 1099s, 1040s) on a password-protected or encrypted external drive or disk, and store it in a secure location, such as a safe-deposit box or a locked safe. If you must store it on your computer, make sure the drive is encrypted. Never store tax files or any personal information on a cloud or Internet drive.

3. Employ strong usernames and passwords, especially when conducting financial business online. Always include numbers, upper- and lowercase characters, and symbols such as *, ! and &.

4. Be picky about your preparer. Carefully choose a tax preparer. Many fraud rings front as tax preparation companies that may steal personal information, redirect your return or offer to fraudulently review your returns for inaccuracies.

5. Snoop around. Verify the status of your preparer’s license with the Better Business Bureau and IRS Office of Professional Responsibility (OPR). Email the IRS at with the full name of the individual or company and their address to confirm they’re a legitimate operation.

6. Do the math. Your annual Social Security Statement will identify all income from individuals working in the United States under your SSN. Do the numbers look right? This can be a good way to spot otherwise undetected identity theft.

7. Stalk your mail carrier. Monitor your mailbox and stay on the lookout for W-2s, 1099s and other official tax forms. If any are late or appear to have been opened, contact the provider immediately to find out how and when they were mailed.

8. Splurge on the extras. If you file a return by snail mail, make sure to use certified mail from the U.S. Postal Service so you can confirm its arrival.

9. Go electronic. Opt for direct deposit of tax refunds to avoid lost or stolen refund checks

Keeping Your Tax Information Safe Online

1. Got an email from the IRS? It’s probably a fake. The IRS never communicates or requests personal information such as a Social Security number or date of birth via unsolicited email. Do not open or forward emails claiming to be from the IRS—only forward them to

2. Don’t be a follower. Always type in full URLs and never follow links in emails, download attachments or respond to banner ads for tax services from unknown sources or sources you don’t trust—especially those promising a bigger or faster refund (average refund times don’t change: three weeks for e-filed returns and six weeks for mailed copies). These are probably scams.

3. Keep an eye peeled for imposter or “cloned” websites. These usually are typified by grammatical errors, typos and an unprofessional appearance. Watch for odd error messages, unexpected page layouts or other strange site behavior. Visit sites of reputable companies only. Make sure there’s a little yellow padlock to the right of the address bar indicating a secure connection.

4. Read the fine print. When filing taxes online, read the privacy and security policy first, especially if the service is free. Find out when personal identifiable information will be destroyed and whether it can be shared with third parties.

Keeping Your Tax Information Safe At Home

1. Paranoid is the new black. Store sensitive tax information (worksheets, W-2s, 1099s, 1040s) on a password-protected or encrypted external drive or disk and keep it in a secured location, such as a safe-deposit box or safe. If you must store it on your computer, make sure the drive is encrypted. Never store tax files or any personal information on a cloud or Internet drive.

2. Take a sledgehammer to it. Destroy old computers, drives, printers or fax machines containing past tax information, or use a trusted wiping application.

3. Employ strong usernames and passwords, especially when conducting financial business online. Always include numbers, upper- and lowercase characters, and symbols such as *, ! and &.

Keeping Your Tax Information Safe When You Use a Tax Preparer or Accountant

1. Be picky about your preparer. Many fraud rings front as tax-preparation companies and may offer to review returns for inaccuracies, but they can steal your information and redirect your refund.

2. Snoop around. Verify the status of your preparer’s license with the Better Business Bureau and IRS Office of Professional Responsibility (OPR). Email the IRS at with the full name of the individual or company and their address.

3. Be suspicious. Be wary of services claiming to give zero or extraordinarily low tax liability. They often charge exorbitant fees, skim money from returns or divert refunds.

4. Ask lots of questions. Then ask some more. Grill your accountant on how your personal information is stored and his personal privacy policy, including security measures to keep your information safe. This will help you feel more secure—and will alert a less-than-reputable preparer that you’re on the ball.

5. Everyone’s a critic. Scrutinize returns carefully and immediately. Never sign a blank or incomplete return or one the preparer has failed to sign (paid preparers are required to sign your return and complete all preparer sections requesting their ID number).

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The Frequent Flier’s Guide to Staying Fit

February 27th, 2012 | Comments Off on The Frequent Flier’s Guide to Staying Fit | Posted in Lifestyle

How to keep in shape anywhere in the world: the best hotel gyms, airport restaurants, city running routes, on-the-go gear—and the 10-minute hotel-room workout.

The Ultimate Take-It-Anywhere Workout
A 10-minute total-body routine you can do in any hotel room—or boardroom—from The Biggest Loser star Bob Harper.
The Best On-the-Go Exercise Gear
Hit the hotel fitness center in style with these travel-tested road warriors.
Three Ways to Stay Healthy While Traveling
How to avoid sickness and fatigue on your next trip.
Terminal Health: How to Eat Smart at the Airport
A gourmet air-traveler’s hub-by-hub guide to dining.
The World’s Sexiest Hotel Gyms
The 12 places to stay—and stay fit—in style.
What to Choose—and What to Lose—From the Minibar
If you can’t resist the siren call, here’s how to tame those jet-lag-fueled after-hours cravings.
Where to Run When You’re on the Road
Five scenic city routes.

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