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Journal of Financial Service Professionals - Current Issue

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Vol. 74, No. 4, July 2020

FOCUS ON Tax & Financial Planning

Life and Financial Planning in the Time of COVID-19
Marc R. Belletsky, JD, CLU, ChFC, RICP
Christina Anstett, JD
Mark A. Teitelbaum, JD, LLM, CLU, ChFC
With passage of the Coronavirus Aid, Relief, and Economic Security Act of 2020 (CARES Act), and the subsequent Paycheck Protection Program and Health Care Enhancement Act, the U.S. government has committed to transferring nearly $2.7 trillion dollars to individuals and businesses to weather COVID-19-related issues. Proper advice and guidance during these turbulent times can assist clients with their overall financial plans. This article will offer an overview of the CARES Act provisions, first covering the individual provisions and followed by a review of business provisions. It will then offer planning advice that might be appropriate for clients, again first from a personal planning perspective and followed by an assessment from a business owner’s perspective.

Required Minimum Distribution Rules after the SECURE Act
Suzanne M. Gradisher, JD, MTax, MBA, CPA (inactive)
Terri Tassell-Getman, JD, CLU, ChFC, RICP, AEP (Distinguished)
On January 1, 2020, the Setting Every Community Up for Retirement Enhancement (SECURE) Act took effect. This act included provisions affecting required minimum distributions (RMD) for individual account plans, such as IRAs and 401(k) plans. In addition, the recently enacted Coronavirus Aid, Relief, and Economic Security (CARES) Act included provisions affecting RMD rules for 2020 that provide retirees some specific financial opportunities. This article provides an overview of the RMD rules as modified by the SECURE and CARES Acts.

Final Regulations Could Expand the Use of Health Reimbursement Arrangements
Paul J. Schneider, JD, LLM
Effective January 1, 2020, under final regulations issued by three government departments, employers can offer two new forms of health reimbursement arrangements (HRAs) to employees. As long as certain requirements are satisfied, the final regulations allow employers to offer an individual coverage HRA which allows HRAs to pay premiums for individual medical insurance coverage purchased by the employee on a tax-advantaged basis. This also shifts the risk of premium increases to the employee. In addition, employers can offer another form of HRA that is allowed to purchase excepted benefits. This could be a significant development for small- and mid-sized employers regardless of whether they presently offer medical care insurance coverage.

Publicly Available Retirement Software: Is It Effective and What Elements Are Needed?
Rachel (Qianwen) Bi, PhD, MBA
Lukas R. Dean, PhD, CRC, RFC
Jingpeng Tang, PhD
Hyrum L. Smith, PhD, CFP, CPA
This article examines the complexity of issues U.S. consumers face attempting to project appropriate savings amounts when using available online retirement planning software. Understanding, interpreting, and analyzing complexities like volatile stock-market returns, inflation, interest-rate fluctuations, longevity risk, sequence of returns, uncertain health care costs, taxes, and other factors make retirement planning significantly more complicated than most consumers and most retirement planning calculators can control for. This paper discusses essential elements that should be considered with retirement planning software and the value that financial planners provide in the planning process.


Editor’s View
Twenty-Five Examples Illustrating How 529 Plans Can Benefit Clients
Kenn Beam Tacchino, JD, LLM
A basic discussion of 529 plans might seem unwarranted since qualified tuition programs have been around since 1996 and many financial service professionals already help clients establish these plans. However, law changes have been made in two successive years so a refresher may be useful. In addition, planners new to the profession or expanding their practice to include education planning might benefit from a review of the current state of the 529 plan strategy. To this end, we will look at the tax benefits provided under the plan, a variety of new and old alternative uses for funds accrued in the plan, the two fundamental types of 529 plans, plan investment options and related considerations, the rules for changing beneficiaries in order to avoid unwanted tax consequences, and some potential drawbacks to implementing this popular education planning strategy.

Accounting & Taxation
SECURE Act Enhances Small Employer 401(k) Plans
Thomas F. Commito, JD, LLM, CLU, ChFC, AEP
According to the Pension Rights Center only 54 percent of all civilian workers participated in a workplace retirement plan. Further, the median account balance for all workers was only $15,000. Congress, cognizant of the need to increase participation in workplace plans, eased the rules for multiple-employer plans, enhanced plan safe harbor opportunities, and made other improvements.

Estate Planning
Opportunistic Estate Planning Lemonade Amid Market Volatility
Mark R. Parthemer, Esq., AEP
We look at six techniques that could be applicable in a volatile market. These include grantor-retained annuity trusts, low-interest loans, annual exclusion gifts, the full use of gift and generation-skipping tax exemptions, converting traditional IRAs to Roth IRAs, and tax-free substitution of growth assets into grantor trusts.

Financial Gerontology
Getting beyond the Financial Markets to Personal Meaning
John N. Migliaccio, PhD, RFG, FGSA, MEd
Large-scale negative circumstances affecting financial markets like the historic drop in 2020 after long-term robust gains are often unexpected. The resulting stress on both advisors and clients is not. However, experience with similar circumstances and prior responses can be a useful and positive countermeasure to the typical emotional turmoil that accompanies the loss of certainty, security, and confidence such a financial upheaval engenders. A look back at the last economic downturn of similar magnitude provides some insight into the mindset and focus that clients of all ages experience, and some successful responses that advisors can provide to assist themselves and clients in maintaining a positive and productive perspective on their lives.

In the Client’s Best Interest
Life Insurance Suitability
Richard Weber, MBA, CLU, AEP (Distinguished)
Both a yearning for “thrival”—and a focus on survival—are on everyone’s mind in this era of COVID-19 virus. We hope you are safe and continuing to shelter in place or are just emerging from isolation as mid-year circumstances allow. On a bleaker note, as of the first week of June 2020, more than 100,000 have already died in the United States, with estimates as high as 240,000 possible U.S. deaths before this is over. We’re told there’s a sudden renewal of interest in estate planning, but what does that mean to a client’s concerns about leaving her family financially secure? Issues of life expectancy and life insurance policy sustainability are addressed in this column.

Insurance & Risk Management
Recognizing Cash Value Life Insurance as an Investment
Steve Parrish, JD, RICP, ChFC, CLU, RHU, AEP
In some circumstances, individuals and businesses purchase cash value life insurance specifically as an investment. The challenge to this use of the product is that it is legally impermissible for life insurance to be advertised to consumers as an “investment” or “savings” plan. This represents a troubling situation where regulation and usage are at odds. The conditions are ripe for this discrepancy to be addressed.

Social Security Planning
Claiming Social Security Retired-Worker Benefits
Bruce D. Schobel, FSA, MAAA, CLU, CEBS
By exercising reasonable care—including getting good advice from a professional—many people can increase the value of their lifetime Social Security benefits by tens or even hundreds of thousands of dollars. We first examine worker behavior and review Social Security’s rules. After that, we explore how those rules can be utilized to maximize the expected value of future benefits.

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