Browse > Home / Archive: June 2012

| Subscribe via RSS

IRA Dates & Milestones to Remember

June 25th, 2012 | No Comments | Posted in Financial News

These are the dates (and deadlines) too often forgotten.

IRAs come with complex rules and regulations. As these rules and regulations are occasionally forgotten or misinterpreted by IRA owners, here is a refresher.

Age 70½: Required Minimum Distributions (RMDs). Once you reach age 70½, you are required to make withdrawals from any traditional (“regular”) IRAs that you have established. (Original owners of Roth IRAs never have to take RMDs.)1

**You must take your initial RMD from a traditional IRA by April 1 of the year following the year during which you turn 70½. You may not want to wait that long, however.

**If you do wait that long and choose to take your first RMD in the year after you turn 70½ rather than the year during which you turn 70½, you have to take two RMDs in that year after you turn 70½ – one by April 1, and another by December 31.

**In all succeeding years, you must take your annual RMD by December 31.1

Age 59½: option to make penalty-free IRA withdrawals. With few exceptions (see below), original owners of Roth and traditional IRAs must wait until age 59½ to take money out of their IRA without a 10% early withdrawal penalty. The IRS defines “age 59½” as the point at which you are midway through your 59th year.2

Age 59½: option to donate IRA funds to charity. While the IRA charitable rollover is no more, IRA owners aged 59½ and older can still distribute IRA assets to a qualified charity. The deadline to do so for a particular tax year is December 31. One problem: your gift to charity will also boost your adjusted gross income (AGI). As with an RMD, this type of IRA distribution qualifies as taxable income. You can claim a charitable deduction as you report the distribution as income to the IRS.3

The timeline for 72(t) payments. These are the special periodic payments by which you can exempt yourself from the 10% early withdrawal penalty normally due on IRA withdrawals prior to age 59½. In the 72(t) option, equal payments (distributions) from your IRA are scheduled for five or more years or until you hit age 59½, whichever time frame is longer. The time frame reaches its limit when a) you are exactly 59 years and six months old or b) exactly five years have passed since the first of the periodic payments.2

The 12-month limit on IRA-to-IRA rollovers. There is no annual deadline for these rollovers, but there is a 12-month time limit affecting how many you can make. You can only make one IRA-to-IRA rollover per IRA account per year, whether the IRA is a traditional IRA or a Roth. So if you have three IRAs, you can make a total of three rollovers (one per IRA) in a 12-month period, be they IRA-to-IRA rollovers or Roth-to-Roth rollovers.4

The 5-year rule on Roth IRA conversions. You may know about the five-year rule here – when you convert a traditional IRA to a Roth IRA, you have to wait until you either a) turn 59 1/2 or b) five years have passed before you can take a penalty-free distribution of a Roth IRA conversion. The asterisk comes in terms of measuring those five years. It isn’t five years from the day you complete the Roth conversion; the five-year measurement actually starts on January 1 of the year in which the funds are first deposited in the Roth IRA.2

The 5-year rule for Roth IRA qualified distributions. Here we have a slightly different circumstance, and a slightly different five-year rule. You may know that once your first Roth IRA is five years old, you can start taking tax-free and penalty-free withdrawals from it under the following circumstances: a) you are age 59½ or older, b) you are disabled, or c) you are a first-time homebuyer using Roth IRA assets for that purpose.2

With regard to qualified distributions, when is your Roth IRA judged to have turned five? It depends on which calendar year you earmarked your first Roth IRA contribution for – for example, you can make a 2012 Roth IRA contribution up until April 15, 2013. The five-year time frame starts on January 1 of the calendar year for which the contribution is designated. An interesting wrinkle: if you open additional Roth IRAs in the future, that initial five-year time frame also applies to them; there is no reset per new Roth IRA.2

The deadline(s) for RMDs made by non-spouse beneficiaries. If you are a non-spouse beneficiary of someone else’s IRA, you usually have to start taking RMDs from that IRA by December 31 of the year after the death of that IRA owner. In other words, you have from 12-24 months to take that first RMD. One exception comes if an IRA accountholder dies after age 70½ without taking his or her initial RMD. If that is the case, then the non-spouse beneficiary of the IRA will end up having to take the initial RMD from that IRA by the end of the calendar year in which the deceased IRA owner has passed away.2

Citations.
1 – www.irs.gov/retirement/article/0,,id=96989,00.html#2 [1/5/12]
2 – www.smartmoney.com/retirement/planning/iras-5-timing-rules-you-need-to-understand-1337271033972/ [3/5/12]
3 – counselprotect.com/making-charitable-ira-donations-in-2012/ [4/23/12]
4 – www.theslottreport.com/2012/05/one-ira-rollover-per-year-per-ira.html [5/4/12]

Who’s On The Hook For Decisions Made In Your 401(k)?

June 25th, 2012 | No Comments | Posted in Financial News

Michael Chamberlain, CFP, AIF, Contributor

Wal-Mart recently agreed to pay $3.5 million to settle a lawsuit filed by its employees who claimed it failed to properly supervise the company 401(k). There have been other similar suits out there like this one, and more will come.

Why? Most companies can do a better job in supervising the company 401(k), and the motivation to do so needs to start at the top with the owner of the company or the Board of Directors.

If you are a business owner, on the Board of Directors or serve on the Plan Investment Committee, follow the line of questions from a “hypothetical deposition” directed to you and picture how you would answer the questions.

Attorney: Are you are a fiduciary to your company’s 401(k) plan?

Answer: No. We named our CFO as the “Plan Fiduciary”. Reality: Business owners and the Board Members are automatically deemed fiduciaries by the D0L since they have control in appointing those that have discretion over the plan assets. Hence, they are legally responsible and can be personally liable for plan losses.

Attorney: Could you please tell me the ERISA duties of plan fiduciaries you appointed or asked to serve on the plan committee?

Answer: No

Attorney: When you appointed employees to serve on the Plan Investment Committee, did you determine they were legally qualified?

Answer: There are legal requirements? Well no, I did not. Reality: Yes there are, ERISA Section 411 a and b

Attorney asks a series of question:

1. Did you determine that the persons appointed as a plan fiduciary have the capacity to act under “the prudent expert law?

2. Did you inquire as to their experience acting as a plan fiduciary?

3. Did you or anyone inform them of their fiduciary duties under ERISA?

4. Did you offer to provide fiduciary training?

5. Did you inform them that they could be legally responsible for participants plan losses caused by a plan fiduciary breach?

6. Did you make sure that the plan participants were protected from monetary loss for fiduciary breaches under your corporate E&O policy?

7. Did you offer protection under a “fiduciary” insurance policy?

8. Did the company indemnify them for claims against them for fiduciary breaches?

Answer: No to all questions

Attorney: If your company needed a new “truck driver or equipment operator” what would your company do before hiring a person and after the hire?

Answer: We would check for a driver’s license, check their DMV record, check their criminal record, check their credit report, and verify past employment records. Once they were on the job we provide training, a list of jobs requirements and expectations and cover them under the company insurance.

Attorney: Why do you do all that for that job?

Answer: That’s what is deemed responsible or prudent to protect the company and it’s assets.

Attorney: Would that mean that it would be irresponsible and “not prudent” for you to put a person in a position when you do not know the job duties, whether the people were legally qualified to do the job, whether they had the ability (according to DoL) to do the job, whether they have the experience or specific training for the position, and that you did not provide or even offer training for the job, and you failed to insure your plan participants against loss caused by a fiduciary breach by the people you appointed?

Answer: Well….I thought that people in HR and Finance as well as our financial services provider would take care of things. I did not know that I was responsible.

The Reality

The Board of Directors or the owners of company are busy trying to make their companies successful. Spending time understanding and properly supervising the 401(k) is often way down their list of things to do. This “bottom of the list attitude”, towards the 401(k) is often demonstrated by the staff administrating the plan as well.

The common result is no one is properly supervising the 401(k). The people “up the chain” think that the people “down the chain” are “taking care of it”. The people “down the chain” do not have the training or experience to really “take care of it” and they do not want to disappoint those “up the chain”. They often overly rely on their financial services providers (Merrill Lynch, John Hancock, ING, Fidelity, Wells Fargo etc.) who look at the 401(k) as a “cash cow”. The result is that the plan participants are often harmed.

The mandate for better supervision of 401(k) plans needs to start at the top with the company owner or in the boardroom. The reason is for the betterment of the plan participants and for the company owner or Board of Directors avoid looking foolish in a deposition.

Monthly Economic Update for June

June 25th, 2012 | No Comments | Posted in Monthly Economic Update

Vacation Tips for your Protection

June 25th, 2012 | No Comments | Posted in Lifestyle

As You Head Out for Vacation, Protect Your Home and Your Identity Against Burglars

Burglars who break into your home this summer may be after more than your jewelry and electronic equipment—they may also steal your identity. As you prepare to leave on vacation, it is important to protect yourself against both a physical and a virtual break-in, according to the Insurance Information Institute(I.I.I.).

Most burglaries occur in July and August and homeowners insurance claims due to theft total about $1 billion annually, with the average claim around $2,500.

“Once in your home, a burglar can easily obtain credit card information, social security numbers or other identification information by going over personal documents in a home or stealing the family computer,” said Loretta Worters, vice president for the I.I.I.

Identity theft is one of the fastest growing white collar crimes in the country, according to the Federal Trade Commission, with more than nine million victims annually. The crime takes many forms. Identity thieves may rent an apartment, obtain a credit card, or establish a telephone account in a person’s name. The victims may not find out about the theft until they review their credit report or a credit card statement and notice charges they did not make—or until they are contacted by a debt collector. Losses to credit cards average $7,000, and while victims are generally only liable for the first $50 for each card, they may also end up spending hundreds of dollars and many days repairing damage to their good name and credit record. Some victims may lose out on job opportunities, or be denied loans for education, housing or cars because of negative information on their credit reports. In rare cases, they may even be arrested for crimes they did not commit.

The I.I.I. recommends following these preventive measures to keep your home safe:

  • Keep your home well lit. Mount exterior lights in your yard or on your house so that they are out of reach of would-be burglars. Put indoor lights on a timer.
  • Make it time-consuming to break into your home. Dead-bolt window and door locks can slow a burglar down. You may qualify for a discount of 2 to 5 percent on your insurance policy for installing these devices.
  • Make it noisy to break into your home. Invest in a burglar alarm. The most effective systems ring at an outside service, which alerts the police, fire or other emergency service. A sophisticated alarm system could result in insurance discounts of 15 to 20 percent.
  • Make sure you have strong doors. Outside doors and frames should be made of metal or solid hardwood and be at least 1¾-inches thick and each door must fit its frame securely. Even the best lock will not deter a burglar if it is installed in a weak door. Garage doors also need strong locks. If you have a tool shed, keep it locked since burglars can use the tools to break into your home.
  • Turn off your computer and disconnect it from the Internet. If you save personal information in your computer, make sure it is difficult to access. You do not want a hacker at work while you are on vacation.
  • Keep valuables in a secure location. When possible, do not leave personal documents in your home office or desk—burglars know to look for them there. Keep important documents, expensive jewelry and other items in a safety deposit box in a bank or other secure location.

As you prepare to leave on vacation follow these additional steps:

  • Have mail and packages picked up, forwarded or held by the post office. Also, stop newspaper deliveries and ask a neighbor to pick-up circulars for you.
  • Leave blinds or curtains open in their usual position. This will make it appear that you are at home.
  • Ask a neighbor for help. Ask a neighbor you trust to keep an eye on your home while you are away. Make arrangements for your lawn to be mowed. Only tell people you know and trust that you are going away.

Insurance is available for identity theft, providing reimbursement to victims for the cost of restoring their identity and repairing credit reports. Some companies include it as part of their homeowners insurance policy. Others sell it as a stand-alone policy or as an endorsement to a homeowners or renters insurance policy. Typical policies cost between $25 and $65 a year for $25,000 to $30,000 worth of coverage, but vary by company. Identity theft insurance provides reimbursement for expenses such as phone bills, lost wages, notary and certified mailing costs and sometimes attorney fees with the prior consent of the insurer. Some companies offer resolution or restoration services that will guide you in the process of recovering your identity.

Standard homeowners insurance policies provide coverage for theft of personal possessions and damage to the home caused by the break-in. With replacement cost coverage, which is only about 10 percent more than actual cash value coverage, damaged property is replaced without deducting for depreciation.

View Source

Say Good-bye to Unsafe Pet Travel

June 25th, 2012 | No Comments | Posted in Lifestyle

As the temperature starts to rise, the ASPCA® (The American Society for the Prevention of Cruelty to Animals®) reminds pet owners of simple ways to help animals beat the heat and have a happy and healthy summer.

“Most people love to spend the warmer days enjoying the outdoors with friends and family, but it is important to remember that some activities can be dangerous for our pets,” said Dr. Camille DeClementi, senior toxicologist at the ASPCA’s Animal Poison Control Center. “By following a few simple rules, it is easy to keep your pet safe while still having fun in the sun.”

Here are some of the ways animal lovers can ensure their pets have a safe summer:

    • Keep Cool. Dogs and cats can become dehydrated quickly, so give them plenty of water when it is hot outdoors. Also make sure your pet has a shady place to escape the sun if outside, and when the temperature is very high, don’t let your dog linger on hot asphalt. Being so close the ground, your dog’s body can heat up quickly, and sensitive paw pads can burn. “Pet owners should never leave their animals unattended in a parked vehicle,” added Dr. Louise Murray, vice president of the ASPCA’s Bergh Memorial Animal Hospital. “Parked cars, even with windows open, become very hot in a short amount of time, and this can lead to heatstroke or death.”
    • Spot the Symptoms. The symptoms of overheating in pets can include increased heart rate, drooling, excessive panting or difficulty breathing, mild weakness, seizures and an elevated body temperature (over 104 degrees). Elderly, overweight, and pets with heart or lung diseases are more susceptible to heatstroke. Pets with short muzzles like pugs, bulldogs and Persian cats become overheated because they cannot effectively pant. These pets should be kept in air conditioning to stay cool.
    • Visit the Vet. A visit to the veterinarian for a spring or early summer check-up is a must. Make sure your pet is up-to-date on all necessary vaccinations. Pets should also be given a blood test for heartworm disease every year in the early spring. The deadly parasite is transmitted through the bite of an infected mosquito, and it is recommended that dogs and cats be on monthly preventive medication year-round.
    • Pest-Free Pets. Commonly used flea and tick products, rodenticides, insecticides and some lawn products can be harmful to cats and dogs if ingested, so keep them out of reach. “When walking your dog, steer clear of areas you suspect have been sprayed with insecticides or other lawn products,” added Dr. DeClementi. “Citronella candles, oil products and insect coils should also be kept out of pets’ reach.” Some flea products that can be used safely on dogs can be deadly to cats, so be sure to read the directions on all flea and tick products carefully and follow the label instructions exactly.
    • Party Smarts. Summertime can be perfect for backyard barbecues or parties, but remember that the food and drink you serve your guests may be poisonous to pets. Keep alcoholic beverages away from pets, and remember that the snacks you serve your friends should not be treats for your pet. Any change of diet – even for one meal – may give your dog or cat severe digestive ailments. Make sure to avoid raisins, grapes, onions, chocolate and products with the sweetener xylitol, since these are poisonous to pets.
    • Fireworks are not Friendly. Leave pets at home when you head out for fireworks, and don’t ignite fireworks around pets. Aside from sounding scary, exposure to lit fireworks can potentially result in severe burns or trauma to curious pets, and unused fireworks can be hazardous. Many fireworks contain potentially toxic substances such as potassium nitrate, copper, chlorates, arsenic and other heavy metals.
    • Splash Safely. Do not leave dogs unsupervised around a pool, as not all dogs are good swimmers. Introduce your pets to water gradually and make sure they wear a flotation device on board a boat. Rinse your dog after swimming to remove chlorine or salt from fur, and try to keep your dog from drinking pool water, which contains chlorine and other chemicals that could cause stomach upset. Also, make sure that your pet does not have access to the concentrated pool chemicals, as they are highly toxic to animals if ingested.
    • Beware of “High-Rise Syndrome”. During warmer months, many animal hospitals and veterinarians see an increase in injured animals as a result of “High-Rise Syndrome,” which occurs when pets fall out of windows and are seriously or fatally injured. Keep all unscreened windows in your home closed and make sure adjustable screens are tightly secured.
  • Love the Leash. Warm weather can lead to longer walks, and sometimes the summer is the first time pet owners have the opportunity to take their dog outside for extended periods. While this is exciting for both dog and dog owner, it is important that dogs always be kept on leash, with a collar and ID tag to protect them from getting loose and injuring themselves or others.

If your dog or cat accidentally ingests a potentially toxic substance, please contact your local veterinarian or the ASPCA’s Animal Poison Control Center at (888) 426-4435 for immediate assistance. For more information on having a fun, safe summer with your pet, please visit www.aspca.org.

View Source

Fireworks and Summer Fire Safety

June 25th, 2012 | No Comments | Posted in Lifestyle

Every year Americans look forward to summer vacations, camping, family reunions, picnics, and the Fourth of July. Summertime, however, also brings fires and injuries due to fireworks and outdoor grills. Annually just under 10,000 Americans are injured by fireworks and almost 5,000 are injured by charcoal/wood-burning and propane grill fires. In 2007, 64 percent of fireworks injuries occurred between June 22 and July 22.

Families also enjoy camping in the summer. It is important to follow the park’s rules for the use and extinguishing of campfires.

Summertime should be a time for fun and making happy memories. Knowing a few fire safety tips and following instructions will help everyone have a safe summer.

Fireworks Safety

  • The best way to enjoy fireworks is to visit public fireworks displays put on by professionals who know how to safely handle fireworks.
  • If you plan to use fireworks, make sure they are legal in your area.
  • Never light fireworks indoors or near dry grass.
  • Always have a bucket of water and/or a fire extinguisher nearby. Know how to operate the fire extinguisher properly.
  • Do not wear loose clothing while using fireworks.
  • Stand several feet away from lit fireworks. If a device does not go off, do not stand over it to investigate it. Put it out with water and dispose of it.
  • Always read the directions and warning labels on fireworks. If a device is not marked with the contents, direction, and a warning label, do not light it.
  • Supervise children around fireworks at all times.

Barbecue Safety

  • Before using a grill, check the connection between the propane tank and the fuel line. Make sure the venturi tubes – where the air and gas mix – are not blocked.
  • Do not overfill the propane tank.
  • Do not wear loose clothing while cooking at a barbecue.
  • Be careful when using lighter fluid. Do not add fluid to an already lit fire because the flame can flashback up into the container and explode.
  • Keep all matches and lighters away from children. Teach your children to report any loose matches or lighters to an adult immediately. Supervise children around outdoor grills.
  • Dispose of hot coals properly – douse them with plenty of water, and stir them to ensure that the fire is out. Never place them in plastic, paper or wooden containers.
  • Never grill/barbecue in enclosed areas – carbon monoxide could be produced.
  • Make sure everyone knows to Stop, Drop and Roll in case a piece of clothing does catch fire. Call 911 or your local emergency number if a burn warrants serious medical attention.

Campfire Safety

  • Build campfires where they will not spread, away from dry grass and leaves.
  • Keep campfires small, and don’t let them get out of hand.
  • Keep plenty of water and a shovel around to douse the fire when you’re done. Stir it and douse it again with water.
  • Never leave campfires unattended.

View Source

© Prime Solutions Advisors, LLC. All Rights Reserved. Visit our website at www.primesolutionsadvisors.com | Powered by OnLetterhead Digital Marketing Solutions.