Tuesday, November 28, 2017
A few years ago, the IRS released regulations easing the tax burden on after-tax contributions in a retirement account. Many clients don’t understand the rules governing after-tax contributions and may equate this contribution option with the Roth option. The tax rules are quite different and its important advisors be able to explain the differences.
Differentiating the Contribution Options
While almost all clients realize they have the ability to defer up to the traditional annual pre-tax contribution limit to a 401(k) plan ($18,000 in 2017, or $24,000 for clients age 50 and over) and up to the individual limit to IRAs and Roth IRAs ($5,500 or $6,500 with the catch-up), many don’t truly understand how the after-tax contribution comes into play.
read the analysis on ThinkAdvisor
Interested in wealth management? Check it out here
Thursday, October 26, 2017
The Federal Trade Commission, along with 11 states and the District of Columbia, today announced “Operation Game of Loans,” the first coordinated federal-state law enforcement initiative targeting deceptive student loan debt relief scams. This nationwide crackdown encompasses 36 actions by the FTC and state attorneys generalagainst scammers alleged to have used deception and false promises of relief to take more than $95 million in illegal upfront fees from American consumers over a number of years.
Student loan debt affects more than 42 million Americans and, with outstanding balances of more than $1.4 trillion, student loans are the second largest segment of U.S. debt, after mortgages.
Operation Game of Loans includes seven FTC actions: five new cases, one new judgment in favor of the FTC, and a preliminary injunction entered in a case filed earlier this year. The agency alleges that the defendants in these actions charged consumers illegal upfront fees, falsely promised to help reduce or forgive student loan debt burdens, and pretended to be affiliated with the government or loan servicers, in violation of the FTC’s Telemarketing Sales Rule and the FTC Act. Operation Game of Loans also includes law enforcement actions by Colorado(link sends e-mail), Florida(link sends e-mail), Illinois(link sends e-mail), Kansas(link sends e-mail), Maryland(link sends e-mail), North Carolina(link sends e-mail), North Dakota(link sends e-mail), Oregon(link sends e-mail), Pennsylvania(link sends e-mail), Texas(link sends e-mail), Washington(link sends e-mail), and the District of Columbia(link sends e-mail).
“Winter is coming for debt relief scams that prey on hardworking Americans struggling to pay back their student loans,” said Maureen K. Ohlhausen, FTC Acting Chairman. “The FTC is proud to work with state partners to protect consumers from these scams, help them learn how to spot a scam, and let them know where to go for legitimate help.”
In addition to its state partners, the FTC has been working closely with the U.S. Department of Education’s office of Federal Student Aid to raise awareness about student loan debt relief schemes, and ensure that borrowers know to visit StudentAid.gov/repay for information about existing repayment and forgiveness programs available to them at no cost.
(Screenshot of sample deceptive student debt relief ad)
Five New FTC Actions Halt Scams
The FTC recently filed five new cases against 30 defendants as part of Operation Game of Loans. In each action, the FTC obtained temporary restraining orders (TROs) that halted the scams and froze defendants’ assets. The Commission vote authorizing staff to file the complaint in each action was 2-0.
- A1 DocPrep, Inc.: In an action filed in the U.S. District Court for the Central District of California, the FTC charged that Los Angeles-based A1 DocPrep took at least $6 million from consumers through unlawful student loan debt relief and mortgage assistance relief schemes. According to the complaint, the defendants claimed to be from the Department of Education, and promised to reduce borrowers’ monthly payments or forgive their loans. The FTC also alleges the defendants targeted distressed homeowners, making false promises to consumers that they would provide mortgage relief and prevent foreclosure. Rather than helping consumers, A1 DocPrep’s CEO, defendant Homan Ardalan, spent hundreds of thousands of consumers’ dollars on cars, jewelry, nightclubs, and restaurants, according to the FTC. The Court entered a TRO on September 28, 2017. Additional defendants named in the complaint are Stream Lined Marketing, d/b/a Project Uplift Students and Project Uplift America, and Bloom Law Group PC, d/b/a/ Home Shield Network and Keep Your Home USA.
- American Student Loan Consolidators (ASLC): In an action filed in the U.S. District Court for the Southern District of Florida, the FTC charged that ASLC, d/b/a ASLC Processing, and BBND Marketing, LLC, d/b/a United Processing Center, United SL Processing, and United Student Loan Processing, and principals Daniel Upbin and Patrick O’Deady bilked student loan borrowers out of at least $11 million by falsely promising loan forgiveness, lowered monthly payments, and reduced interest rates. The FTC alleges that the Deerfield Beach, Florida operation pretended to be affiliated with the Department of Education and loan servicers. The defendants also tricked consumers into believing that illegal upfront fees, typically up to $799, were being used to pay off student loans. The court entered a TRO on September 26, 2017.
- Alliance Document Preparation: In an action filed in the U.S. District Court for the Central District of California, the FTC charged that Los Angeles-based Alliance Document Preparation, d/b/a EZ Doc Preps, Grads Aid, and First Document Aid, took more than $20 million from consumers by charging illegal upfront fees of up to $1,000. The defendants deceptively marketed their purported services primarily on social media platforms like Facebook. The court entered a TRO on September 28, 2017. Other named defendants include: SBS Capital Group, Inc.; SBB Holdings, LLC; First Student Aid, LLC; United Legal Center, LLC; United Legal Center, Inc.; Elite Consulting Service, LLC; Grads Doc Prep, LLC; Elite Doc Prep, LLC; Benjamin Naderi; Shawn Gabbaie; Avinadav Rubeni; Michael Ratliff; Ramiar Reuveni; and Farzan Azinkhan. Defendants also used the fictitious names Grads United Discharge, Allied Doc Prep, Post Grad Services, Post Grad Aid, Alumni Aid Assistance, United Legal Discharge, First Grad Aid, Academic Aid Center, Academic Protection, Academy Doc Prep, Academic Discharge, and Premier Student Aid.
- Student Debt Doctor (SDD): In an action filed in the U.S. District Court for the Southern District of Florida, the FTC charged that Fort Lauderdale-based SDD and its owner, Gary Brent White, Jr., collected at least $7 million from consumers struggling to pay student loan debt. According to the complaint, the defendants charged illegal upfront fees of $750 or more. Using social media, e-mail, and telemarketing, SDD promoted its services across the United States, in English and Spanish. SDD falsely promised consumers loan forgiveness often in as little as five years or less, and told consumers not to communicate with their loan servicers. The defendants also fabricated income, unemployment status, and family size information on relief applications in order to qualify borrowers for eliminated or reduced monthly payments. The court entered a TRO on October 3, 2017.
- Student Debt Relief Group (SDRG): In an action filed in the U.S. District Court for the Central District of California, the FTC charged that Los Angeles-based M&T Financial Group and American Counseling Center Corp., d/b/a Student Debt Relief Group, SDRG, StuDebt, Student Loan Relief Counselors, SLRC, and Capital Advocates, and principal Salar Tahour bilked at least $7.3 million from consumers struggling to repay their student loans. According to the complaint, the defendants falsely claimed to be affiliated with the Department of Education, deceived consumers into paying up to $1,000 in illegal upfront fees to enter them into free government programs, and charged consumers monthly fees they claimed would be credited toward their student loans. In reality, the FTC alleged, defendants pocketed consumers’ money and responded to mounting consumer complaints by changing their name rather than their business practices. The FTC also asserts that the defendants deceived consumers into providing them with Social Security numbers and Federal Student Aid identification information, allowing the defendants to hijack consumers’ accounts while cutting them off from their loan servicers and the Department of Education. The court entered a TRO on September 19, 2017, and a stipulated preliminary injunction on October 10, 2017.
Two New FTC Law Enforcement Developments
Operation Game of Loans also includes two pending FTC actions against 11 additional student loan debt relief scammers, in which federal courts recently entered significant orders.
- Student Aid Center: On August 31, 2017, the U.S. District Court for the Southern District of Florida granted summary judgment against defendant Ramiro Fernandez-Moris in a joint action filed by the FTC and the State of Florida. The Court found that defendants’ unlawful student loan debt relief enterprise took more than $35 million from student loan borrowers by enticing consumers to sign up for services using misleading and false claims. In particular, Student Aid Center misled consumers to believe that they could receive loan forgiveness or modification if they paid unlawful upfront fees, and tricked consumers into thinking the operation was involved in the approval process. Motions for default judgment against two other defendants are pending before the Court, and the proposed final orders against all three defendants are subject to final Court approval.
- Strategic Student Solutions: On May 26, 2017, the U.S. District Court for the Southern District of Florida entered a stipulated preliminary injunction in the FTC’s case against Strategic Student Solutions, freezing defendants’ assets, halting the organization’s student loan debt relief operation, and appointing a receiver to control the business for the remainder of the litigation. The FTC alleged that the defendants took more than $11 million from consumers by falsely promising to reduce or eliminate their student loan debt and offering them non-existent credit repair services.
How to Avoid Student Loan Debt Relief Scams
To help consumers avoid falling victim to such fraud, the FTC has updated its consumer education related to student loan debt relief scams at ftc.gov/StudentLoans. As a follow-up to the sweep of law enforcement actions, the FTC later this month will be holding a Twitter chat with state attorneys general and a Facebook Live session with staff attorney experts on ways to avoid student loan debt relief scams.
Consumers should remember that only scammers promise fast loan forgiveness, and that scammers often pretend to be affiliated with the government. And consumers should never pay an upfront fee for help, and should not share their FSA ID—a username and password used to log in to U.S. Department of Education websites—with anyone.
Consumers can apply for loan deferments, forbearance, repayment and forgiveness or discharge programs directly through the U.S. Department of Education or their loan servicer at no cost; these programs do not require the assistance of a third-party company or payment of application fees. For federal student loan repayment options, visit StudentAid.gov/repay. For private student loans, contact the loan servicer directly.
The FTC thanks all of those who helped with this operation, including state attorneys general participating in this initiative and the U.S. Department of Education’s office of Federal Student Aid, with particular help on FTC law enforcement actions from the U.S. Postal Inspection Service; the Florida Attorney General; the Georgia Attorney General; the New York Attorney General; the California Department of Justice; the Florida Office of Financial Regulation; the Florida Department of Agriculture & Consumer Services; the Broward County (FL) Sheriff’s Department; the Boca Raton Police Department; the Los Angeles Police Department; and the Better Business Bureaus of Southeast Florida & the Caribbean and Los Angeles & Silicon Valley.
Friday, August 4, 2017
Has The UK Courts Ordering a Review for Amendment of a Consent Agreement Seven Years Later Damaged the Rule of Law?
Birch (Appellant) v Birch (Respondent)  UKSC 53; On appeal from  EWCA Civ 833 (excerpt with footnotes omitted below)
The husband and wife entered into a consent order on 28 July 2010. Part of the order provided that the husband should transfer to the wife his legal and beneficial interest in the matrimonial home subject to the mortgage so that the wife could continue to live there with the two children of the family. In return the wife undertook at para 4.3 of the recitals to discharge all mortgage payments, to indemnify the husband against any liability under it and to use her best endeavours to release him from the covenants under it. Then, crucially, she undertook at para 4.4 of the recitals that, if the husband had not been released from his mortgage covenants by 30 September 2012, she would secure his release by placing the home on the market for sale and proceeding to sell it.
On 18 November 2011 the wife, who had (and still has) duly discharged the mortgage payments, issued an application to “vary” her undertaking at para 4.4. She explained that she had not been able to secure the husband’s release from his mortgage covenants and would not be able to do so by 30 September 2012. The children were in schools in the vicinity of their home and it would be gravely damaging to their interests for them to have to move home while still at school. In such circumstances she sought a “variation” of the undertaking at para 4.4, so as to postpone for seven years her obligation to secure the husband’s release from his covenants under the mortgage by sale of the home until 15 August 2019, being the date of their son’s 18th birthday.
The husband argued that the court had no jurisdiction to hear the wife’s application and requested that the court rule on that preliminary issue. He argued that the wife’s undertaking was equivalent to an order for sale under section 24A of the Matrimonial Causes Act 1973 (“the Act”). And he relied on the Court of Appeal’s decision in Omielan v Omielan  2 FLR 306 that jurisdiction to vary the latter did not exist where it related to the “territory” of the property adjustment order.
When the wife’s appeal from an adverse decision below came before the Court of Appeal it held that its jurisdiction to hear the application was a “formal” jurisdiction which existed only “technically”; that scope for its exercise was “extremely limited indeed”; and that there was no basis for its exercise upon the wife’s application.
JUDGMENT The Supreme Court by a majority of 4 to 1 allows the wife’s appeal and holds that jurisdiction exists to hear the wife’s application. Lord Wilson gives the lead majority judgment, with which Lady Hale, Lord Kerr and Lord Carnwath agree. Lord Hughes gives a dissenting judgment.
REASONS FOR THE JUDGMENT The description of the application as being to “vary” the wife’s undertaking is confused. The court’s power is only to grant or refuse an application for release from the undertaking. Although the court’s exercise of its power may result in something which looks like a variation of an undertaking, if it decides to accept a further undertaking, it is the product of a different process of reasoning .
The courts below wrongly concluded that they did not have jurisdiction to release the wife from her undertaking. They failed to distinguish between the existence of the court’s jurisdiction to release the wife from her undertaking, and the exercise of its jurisdiction . The case law indicates that there is full jurisdiction to hear the wife’s application . Further, in circumstances where the undertaking in para 4.4 could have been framed as an order for sale of the property under section 24A of the Act, variable under section 31(2)(f), it would be illogical for the existence and exercise of jurisdiction to grant release from the undertaking to differ from those in relation to the variation of any such order [17-18]. The equivalence of the wife’s para 4.4 undertaking with a section 24A order for sale seems clearly to confirm the existence of the court’s jurisdiction to hear her application for release from it 
Lord Hughes gives a dissenting judgment, not on the existence of the jurisdiction to vary a section 24A order for sale, or its equivalent achieved via an undertaking, but on the principles for its exercise. It must be kept in mind that the section 24A order is ancillary to a capital order and that final capital orders cannot be varied in their substance (whether or not there is a change of circumstances). Lord Hughes states that the acid test should be whether the application is in substance (impermissibly) to vary or alter the final order or whether it is (permissibly) to support it by working out how it should be carried into effect . The application in the present case is one which attempts to vary, not to carry into effect, the originally agreed and court-endorsed order and therefore the Court of Appeal was right to hold that it was bound to fail . Lord Hughes would dismiss the appeal .
Judgments are public documents and are available at: http://supremecourt.uk/decided-cases/index.html
Wednesday, June 28, 2017
- Despite its relatively small size, the BVI is a real, balanced and sustainable economy.
- The BVI is home to a unique cluster of financial and professional services firms that form an ‘international business and finance centre’.
- The ‘BVI Business Company’ is a widely used and dependable vehicle to facilitate cross-border trade, investment and business.
- The BVI is a sound and reliable centre which has worked harder than many bigger nations to meet international standards, and not some supposed tax haven.
- Through its direct employment, trade and, most importantly, facilitation of cross-border business, the BVI supports jobs, prosperity and government revenues worldwide.
The BVI’s international business and finance centre mediates over US$1.5 trillion of investment globally – UK (US$169bn)
BVI-mediated investment contributes over US$15 billion in tax annually to governments around the world (London) The British Virgin Islands (BVI) enables global investment and trade which supports more than two million jobs worldwide – 150,000 of which are in the UK – according to a detailed report published today.
The report, Creating Value: BVI’s Global Contribution, undertaken by Capital Economics, an independent economics consultancy, analyzed the significant global economic contribution of the BVI. It finds that the BVI mediates over US$1.5trn of cross-border investment flows, the
equivalent to 2% of global GDP.
The report – the first of its kind – also finds that over US$15bn of tax revenues are generated annually for governments around the world, via investment mediated by the BVI and the resulting economic activity. The UK (US$3.9bn), the EU excluding UK (US$4.2bn) and China
and Hong Kong (US$2.1bn) are the largest beneficiaries of this tax generation.
Coupled with the jobs it supports, the tax generation marks the BVI as a substantial net benefit to governments worldwide.
Commenting, Lorna Smith, OBE, Interim Executive Director of BVI Finance said:
“The results of this study clearly demonstrate the significant contribution the BVI makes to the global economy. “Not only does the BVI enable cross-border trade and investment, it both supports millions of jobs globally and generates substantial tax receipts for governments worldwide. This brings
tangible benefits to the lives of employees, voters, families, and businesspeople around the world.
“The report is unequivocal: contrary to some accusations, the BVI is a sound and reliable centre which has worked harder than many bigger nations to meet international standards, and it is not a tax haven. “This independent and authoritative report is equally clear in stating that the BVI is not a centre for corporate profit shifting. This helps clarify once and for all some of the inaccuracies and misunderstanding about what the BVI is and the valuable role it plays in the global economy.”
Commenting, Mark Pragnell, Head of Commissioned Projects at Capital Economics and the report’s author said:
“The BVI provides the legal structures that allow companies, institutions, and individuals to safely and efficiently carry out their business and make investments across international orders. “The ‘BVI Business Company’ is a widely used and dependable vehicle to facilitate cross-border
trade, investment, and business. Over 140 major businesses listed on the London, New York or Hong Kong main stock exchanges use BVI vehicles to support their international investment activities. Similarly, major international development banks, such as the World Bank’s International Finance Corporation, use BVI Business Companies to help fund vital projects.
“Our report shows that the BVI is a global powerhouse for cross-border investment equating to a conservatively estimated $1.5 trillion across its 417,000 active BVI Business Companies.”
Of the 417,000 BVI Business Companies, roughly two-fifths originate from beneficial owners in Asia. Another fifth (18%) have ultimate beneficial owners in Latin America and the Caribbean, while the remainder are primarily in Europe and North America.
A summary of the report’s key findings can be found here
The full report can be downloaded here
The report website can be viewed at www.bviglobalimpact.com
Thursday, January 26, 2017
Capturing Technological Innovation in Legal Services report by Law Society - Will Your Firm Survive?
Unprecedented technological change offers solicitors exciting opportunities to innovate in ways that benefit clients, technological innovators and the legal profession.
Capturing Technological Innovation in Legal Services offers insights from those on the front line of technological change and reveals a legal sector that is increasingly engaging with advanced automation. It also introduces the possibility of combining machine learning and artificial intelligence (AI) with the skills held by the profession to engage with complex legal concepts.
There are obstacles to innovation in the legal sector: while three-quarters of firms surveyed agreed that innovation is critical to exploiting opportunities and standing our from the crowd, more than half said they were likely to wait for others to pioneer new technologies.
However, there are still a large number of innovators in the legal sector who are eager to promote a revolution in the way legal services are delivered. The legal sector is brimming with innovators looking for the next opportunity, or going out and creating that next opportunity for themselves.
The report details the products, processes and strategies we use where technology and new ways of thinking and working are making big changes. From Bitcoin, machine learning and 'lawyers on demand', we see solicitors taking advantage of new opportunities to reshape the legal services sector.
Download the report Download Capturing-technological-innovation-report
Tuesday, May 10, 2016
G20 leaders have identified the facilitation of long-term financing from institutional investors as a priority for helping to achieve targets for future growth and employment. A contribution from the the G20/OECD Task Force on Long-term Investment Financing by Institutional Investors, this annual survey is designed to illuminate the role that large institutional investors can play in providing a source of stable long-term capital.
In 2014, retirement systems in the OECD – comprised of pension funds and public pension reserve funds – held USD 30.2 trillion in assets, a number now well above pre-crisis levels. In that same year, the combined GDP of the OECD countries was USD 48.8 trillion. In 2001, OECD retirement system assets represented 51.8% of GDP; this number has since grown to 61.9% of GDP, highlighting the growing role of institutions as financial intermediaries. Put another way, the accumulation of savings in such financial channels has never been larger, which underscores the important role that institutions can play as sources of productive long-term capital.
The total amount of assets under management for the Large Pension Funds (LPFs) for which data was received or obtained was USD 3.7 trillion at the end of 2014. The assets put aside by the largest pension funds for which we received data increased by a robust 11.6% on average between 2013 and 2014 (through asset appreciation and/or fund flows). Trailing five-year real annualised returns were positive for all funds, where history was available.
Sovereign Wealth Funds (SWFs) and Public Pension Reserve Funds (PPRFs) are becoming major players in international financial markets. Total amounts of PPRF assets were equivalent to USD 6.6 trillion by the end of 2014 for the countries in which data was received or obtained. PPRF assets increased 6.2% on average between 2013 and 2014 (due to asset appreciation and/or fund flows). The largest reserve is held by the United States Social Security Trust Fund at USD 2.8 trillion, followed by Japan’s Government Pension Investment Fund at USD 1.1 trillion. Canada, China, and Korea also accumulated large reserves. Of the countries surveyed, twelve had established their PPRFs since 2000. Large reserves are also accumulated in sovereign wealth funds that have a pension focus.
The survey provides a source of information for policy makers and institutional investors alike in order to help advance the policy agenda on long-term financing by institutions. Recent initiatives such as the Juncker Plan in Europe and the Build America Investment Initiative launched by the Obama Administration provide examples of government-led projects to mobilise private capital for long-term financing. In particular, the data on infrastructure investments can help provide context as such initiatives advance from the planning stages to eventual realisation. Download 2015-Large-Pension-Funds-Survey
The survey includes 75 retirement schemes, consisting of a mix of defined benefit and defined contribution pension plans (mainly public sector funds, but also corporate funds) that together total USD 3.9 trillion. Data for 50 schemes were provided by the large pension funds directly. Data for the other 25 came from publicly available sources. This information is presented in combination with the OECD Public Pension Reserve Funds survey. Altogether, data were compiled for 104 institutional investors from 35 countries around the world including some non-OECD countries such as Brazil, India, Indonesia, Nigeria, and South Africa, accounting for over USD 10.4 trillion of assets under management.
The survey monitors and compares the investment behaviour, asset levels, and performances of the largest institutional investors in each region or country covered and analyses in greater depth the general trends observed at a national level. This survey is based on a qualitative and quantitative questionnaire sent directly to Large Pension Funds and Public Pension Reserve Funds. It is part of the OECD Project on Institutional Investors and Long-term Investment. The insights and detailed investment information collected complement the administrative data gathered through the Global Pension Statistics Project.
Thursday, March 17, 2016
I am going to be in Malta for Easter weekend March 24 - 27 for the 35th anniversary of ELSA-ELS International Council meeting. Which got me thinking about Knights of Malta... but then a quick search and I realized why be a Knight when I can be real Maltese....
Last year the Maltese government received 578 applications under the Citizenship by Investment programme, with 147 having been approved already. See Times of Malta story
The Individual Investor Programme is designed to attract to Malta’s shores applicants who can share their talent, expertise and business connections. It is the first citizenship programme in the European Union to be recognized by the European Commission.
(i) acquire and hold a residential immovable property in Malta having a minimum value of three hundred and fifty thousand euro (EUR 350,000); or (ii) take on lease a residential immovable property in Malta for a minimum annual rent of sixteen thousand euro (EUR 16,000):
(6) The main applicant shall provide a written undertaking that he will make such other investments in Malta to an amount of one hundred and fifty thousand euro (EUR 150,000), amongst others, in stocks, bonds, debentures, special purpose vehicles or other investment vehicles as may be identified from time to time by Identity Malta by means of a notice in the Gazette and to retain the said investments for a period of not less than five years:
12. The number of successful main applicants, excluding dependants, shall not exceed one thousand and eight hundred for the whole duration of the programme.
The following contributions shall be required as a minimum to qualify for citizenship under the programme:
(a) main applicant: EUR 650,000 (six hundred and fifty thousand euro), of which a non-refundable payment of EUR 10,000 (ten thousand euro) shall be remitted as a non-refundable deposit prior to submission of the application;
(b) spouse: EUR 25,000 (twenty five thousand euro);
(c) for each and every child below 18 years of age: EUR 25,000 (twenty five thousand euro);
(d) for each and every unmarried child between 18 years of age and 26 years of age: EUR 50,000 (fifty thousand euro);
(e) for each and every dependant parent above 55 years of age: EUR 50,000 (fifty thousand euro).
2. Schedule of Fees The following fees shall be payable under each application:
(1) Due diligence fees:
(a) main applicant: EUR 7,500 (seven thousand five hundred euro)
(b) spouse: EUR 5,000 (five thousand euro);(c) for each and every child aged between 13 years of age and 18 years of age: EUR 3,000 (three thousand euro); (d) for each and every
(c) for each and every child aged between 13 years of age and 18 years of age: EUR 3,000 (three thousand euro);(d) for each and every
(d) for each and every dependant unmarried child between 18 years of age and 26 years of age, EUR 5,000 (five thousand euro);
(e) for each and every dependant parent above 55 years of age: EUR 5,000 (five thousand euro).
2) Passport fees and bank charges fees:
(a) Passport: EUR 500 (five hundred euro) per person;
(b) Bank charges: EUR 200 (two hundred euro) per application.
Wednesday, January 20, 2016
Today’s insurance product marketplace is flooded with options, leaving most clients familiar with the overwhelming feeling that they must choose one. Insurance carriers, however, have Having It All? Combining Whole Life With Indexed Universal Lifeanswered this issue with product innovation—and the next product trend may be one that allows clients to combine the guarantees of traditional whole life insurance with the upside participation potential of an indexed universal life insurance (IUL) product.
Understanding the details of these new products can help clients experience the best of both worlds, eliminating the need to choose between valuable features by combining elements of both into a single, optimal value product.
Tuesday, December 1, 2015
This edition of our newsletter Tax Justice Focus, with a special focus on whistleblowers, is available for download here.
William Byrnes was invited by the Tax Justice Network to contribute a feature for its November released Report on Whistleblowing. William Byrnes introduces us to three of the highest profile whistleblowers from the financial sector, and explores the relationship between whistleblowing and tax compliance and highlights the much anticipated legislation of several offshore jurisdictions who are looking to introduce statutory laws to protect whistleblowers who report tax crimes.
Download The Whistleblower Edition here, and feel free to circulate it to colleagues and friends.
Tuesday, November 17, 2015
Few options may seem to exist when determining what to do with the funds a client has accumulated in an employer-sponsored 401(k) upon changing employers — and the most likely course of action is to roll those funds into an IRA. While this strategy may be advisable in some cases, and can certainly serve to consolidate the client’s accounts to simplify management, there are important scenarios in which an IRA rollover is not the best move. In fact, in some instances. rolling 401(k) funds into an IRA can actually present serious tax and non-tax disadvantages.
To make the right decision and maximize the value of the client’s retirement nest egg, it’s necessary to evaluate all pieces of the puzzle before jumping for an IRA rollover.
Read Byrnes & Bloink's analysis The case for skipping the 401(k)-to-IRA rollover
Friday, October 30, 2015
IRS Announces 2016 Pension Plan Limitations; 401(k) Contribution Limit Remains Unchanged at $18,000 for 2016
The Internal Revenue Service today announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2016. In general, the pension plan limitations will not change for 2016 because the increase in the cost-of-living index did not meet the statutory thresholds that trigger their adjustment. However, other limitations will change because the increase in the index did meet the statutory thresholds.
The highlights of limitations that changed from 2015 to 2016 include the following:
- For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $184,000 and $194,000, up from $183,000 and $193,000.
- The AGI phase-out range for taxpayers making contributions to a Roth IRA is $184,000 to $194,000 for married couples filing jointly, up from $183,000 to $193,000. For singles and heads of household, the income phase-out range is $117,000 to $132,000, up from $116,000 to $131,000.
- The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $61,500 for married couples filing jointly, up from $61,000; $46,125 for heads of household, up from $45,750; and $30,750 for married individuals filing separately and for singles, up from $30,500.
The highlights of limitations that remain unchanged from 2015 include the following:
- The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $18,000.
- The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $6,000.
- The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
- The deduction for taxpayers making contributions to a traditional IRA is phased out for those who have modified adjusted gross incomes (AGI) within a certain range. For singles and heads of household who are covered by a workplace retirement plan, the income phase-out range remains unchanged at $61,000 to $71,000. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range remains unchanged at $98,000 to $118,000. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
- The AGI phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
Below are details on both the adjusted and unchanged limitations.
Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans. Section 415(d) requires that the Secretary of the Treasury annually adjust these limits for cost of living increases. Other limitations applicable to deferred compensation plans are also affected by these adjustments under Section 415. Under Section 415(d), the adjustments are to be made pursuant to adjustment procedures which are similar to those used to adjust benefit amounts under Section 215(i)(2)(A) of the Social Security Act.
Effective January 1, 2016, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) remains unchanged at $210,000. For a participant who separated from service before January 1, 2016, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant's compensation limitation, as adjusted through 2015, by 1.0011.
The limitation for defined contribution plans under Section 415(c)(1)(A) remains unchanged in 2016 at $53,000.
The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of Section 415(b)(1)(A). After taking into account the applicable rounding rules, the amounts for 2016 are as follows:
The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) remains unchanged at $18,000.
The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) remains unchanged at $265,000.
The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan remains unchanged at $170,000.
The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5 year distribution period remains unchanged at $1,070,000, while the dollar amount used to determine the lengthening of the 5 year distribution period remains unchanged at $210,000.
The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) remains unchanged at $120,000.
The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $6,000. The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $3,000.
The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost of living adjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, remains unchanged at $395,000.
The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $600.
The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts remains unchanged at $12,500.
The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations remains unchanged at $18,000.
The compensation amount under Section 1.61 21(f)(5)(i) of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation remains unchanged at $105,000. The compensation amount under Section 1.61 21(f)(5)(iii) remains unchanged at $215,000.
The Code provides that the $1,000,000,000 threshold used to determine whether a multiemployer plan is a systematically important plan under section 432(e)(9)(H)(v)(III)(aa) is adjusted using the cost-of-living adjustment provided under Section 432(e)(9)(H)(v)(III)(bb). After taking the applicable rounding rule into account, the threshold used to determine whether a multiemployer plan is a systematically important plan under section 432(e)(9)(H)(v)(III)(aa) is increased in 2016 from $1,000,000,000 to $1,012,000,000.
The Code also provides that several pension-related amounts are to be adjusted using the cost-of-living adjustment under Section 1(f)(3). After taking the applicable rounding rules into account, the amounts for 2016 are as follows:
The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for married taxpayers filing a joint return is increased from $36,500 to $37,000; the limitation under Section 25B(b)(1)(B) is increased from $39,500 to $40,000; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $61,000 to $61,500.
The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for taxpayers filing as head of household is increased from $27,375 to $27,750; the limitation under Section 25B(b)(1)(B) is increased from $29,625 to $30,000; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $45,750 to $46,125.
The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for all other taxpayers is increased from $18,250 to $18,500; the limitation under Section 25B(b)(1)(B) is increased from $19,750 to $20,000; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $30,500 to $30,750.
The deductible amount under Section 219(b)(5)(A) for an individual making qualified retirement contributions remains unchanged at $5,500.
The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) remains unchanged at $98,000. The applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers (other than married taxpayers filing separate returns) remains unchanged at $61,000. The applicable dollar amount under Section 219(g)(3)(B)(iii) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0. The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $183,000 to $184,000.
The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(I) for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is increased from $183,000 to $184,000. The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $116,000 to $117,000. The applicable dollar amount under Section 408A(c)(3)(B)(ii)(III) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.
The dollar amount under Section 430(c)(7)(D)(i)(II) used to determine excess employee compensation with respect to a single-employer defined benefit pension plan for which the special election under Section 430(c)(2)(D) has been made is increased from $1,101,000 to $1,106,000.
Monday, October 26, 2015
Old age and survivors, disabled workers and SSI recipients — will not see a COLA increase in benefits next year for the third time since 2009. But Social Security beneficiaries with higher incomes will see increases in their premiums for Medicare Part B, which pays for physicians’ bills, outpatient care, durable medical devices and other goods and services. James J. Green explains the impact of the Medicare Part B premium cost increases for Seniors on ThinkAdvisor and the lack of increase of social security benefits.
For tax year 2016, the Internal Revenue Service today announced annual inflation adjustments for more than 50 tax provisions, including the tax rate schedules, and other tax changes. Revenue Procedure 2015-53 provides details about these annual adjustments. The tax items for tax year 2016 of greatest interest to most taxpayers include the following dollar amounts:
- For tax year 2016, the 39.6 percent tax rate affects single taxpayers whose income exceeds $415,050 ($466,950 for married taxpayers filing jointly), up from $413,200 and $464,850, respectively. The other marginal rates – 10, 15, 25, 28, 33 and 35 percent – and the related income tax thresholds for tax year 2016 are described in the revenue procedure.
- The standard deduction for heads of household rises to $9,300 for tax year 2016, up from $9,250, for tax year 2015.The other standard deduction amounts for 2016 remain as they were for 2015: $6,300 for singles and married persons filing separate returns and $12,600 for married couples filing jointly
- The limitation for itemized deductions to be claimed on tax year 2016 returns of individuals begins with incomes of $259,400 or more ($311,300 for married couples filing jointly).
- The personal exemption for tax year 2016 rises $50 to $4,050, up from the 2015 exemption of $4,000. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $259,400 ($311,300 for married couples filing jointly). It phases out completely at $381,900 ($433,800 for married couples filing jointly.)
- The Alternative Minimum Tax exemption amount for tax year 2016 is $53,900 and begins to phase out at $119,700 ($83,800, for married couples filing jointly for whom the exemption begins to phase out at $159,700). The 2015 exemption amount was $53,600 ($83,400 for married couples filing jointly). For tax year 2016, the 28 percent tax rate applies to taxpayers with taxable incomes above $186,300 ($93,150 for married individuals filing separately).
- The tax year 2016 maximum Earned Income Credit amount is $6,269 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,242 for tax year 2015. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phase-outs.
- For tax year 2016, the monthly limitation for the qualified transportation fringe benefit remains at $130 for transportation, but rises to $255 for qualified parking, up from $250 for tax year 2015.
- For tax year 2016 participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,250, up from $2,200 for tax year 2015; but not more than $3,350, up from $3,300 for tax year 2015. For self-only coverage the maximum out of pocket expense amount remains at $4,450. For tax year 2016 participants with family coverage, the floor for the annual deductible remains as it was in 2015 -- $4,450, however the deductible cannot be more than $6,700, up $50 from the limit for tax year 2015. For family coverage, the out of pocket expense limit remains at $8,150 for tax year 2016 as it was for tax year 2015.
- For tax year 2016, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $111,000, up from $110,000 for tax year 2015.
- For tax year 2016, the foreign earned income exclusion is $101,300, up from $100,800 for tax year 2015.
- Estates of decedents who die during 2016 have a basic exclusion amount of $5,450,000, up from a total of $5,430,000 for estates of decedents who died in 2015.
Friday, October 16, 2015
No Social Security Cost of Living Adjustment, 3rd Time Since 2009, But Medicare Premiums Surging for Some
James Green, Group Editorial Director, Investment Advisor Group analyzes the 2016 coming tragedy for a large segment of retirees - Medicare premiums will surge but the Social Security payment to pay it will not increase one cent. Read his analysis on ThinkAdvisor.
William Byrnes, associate dean for special projects at the Texas A&M University School of Law, characterizes the lack of a COLA and the increase in Part B premiums more bluntly. “It’s the Federal government’s way of mitigating expenditures on the backs of seniors” who have contributed to the Social Security system for decades.
Byrnes, who with colleague Robert Bloink writes the weekly Law Professor blog, which often focuses on retirement income planning, for ThinkAdvisor, argues that any inflation measure should be regionally based. “The orange still costs a buck,” and despite no inflation as measured by CPI-W, “the taxi costs $4.50.” While “in some town in America” inflation might be down, the CPI-W data “doesn’t work across our country.”
Monday, October 12, 2015
Stand-alone health reimbursement arrangements (HRAs) have, in most cases, been a casualty of the Patient Protection and Affordable Care Act (PPACA)— because they generally set limits on the maximum employer contribution, they typically can be found to violate the ACA’s ban on annual and lifetime coverage limits. The potential penalties are steep, and the rules for offering a compliant HRA are complex enough to dissuade many employers from making the effort.
However, for some small business clients, this popular method for reimbursing employer healthcare expenses may be making a comeback — recent legislation has been introduced that could allow certain small business clients to continue using the stand-alone HRA, thus reviving a popular and tax-preferred method for offering health coverage to employees.
read Byrnes and Bloink's analysis Is the stand-alone HRA making a comeback?
Monday, August 17, 2015
“Fixed index annuities are the current flavor and will remain so while consumers perceive the market indexes potentially rising,” says William Byrnes, an associate dean at Texas A&M University School of Law in Fort Worth.
Sales of FIAs rose 14% to $38.7 billion in 2013 and another 24% to $48 billion in 2014, or about 21% of all annuity sales .... read about the upsides, the downsides, and the costs at USA Today