Resource of the Month: Individual Disability Income Insurance

The one thing that can have a big impact on our future is our health. While most of us may be prepared to take care of our families in the event of our death, many are not prepared for a future if they become injured or unexpectedly disabled. A disability can affect your ability to work, which will then affect your income. What plans do you have in place?

This month, we’re focusing on preparing for the unexpected, and our resource of the month gives a detailed overview of insurance options if you become disabled.

Want help exploring your options? Contact the Robin S. Weingast & Associates team. We’re here to help make sure you’re ready for the unexpected.

Need to Know: Whole Life Insurance

Robin Weingast life insurance benefits planningLife insurance has been around for thousands of years. It is believed that the Romans originated the product to fund burials of military personnel who were members of a burial club.

Over time, the reasons for owning life insurance grew more complex, such as to meet estate planning or business planning needs, in addition to personal protection. Product innovations and designs also occurred to meet varying factors, including economic concerns, investment market cycles, medical advances and increases in longevity.

Throughout that time, one proposition has remained constant: None of us know when we’re going to die. Whole life insurance is uniquely positioned to meet that proposition and, thus, has seen a resurgence in popularity because unlike term insurance, it is a permanent life insurance product. And unlike variations of universal life products, it is not subject to interest rate and market fluctuations provided the required premiums are paid.

Once thought of as an expensive form of death protection, whole life insurance lends itself well to various scenarios. Among them:

Scenario 1: Clients who want a higher return with lower risk.

Given current low interests, which are yielding minuscule returns on bank and fixed income financial products, whole life insurance’s cash value growth is now seen as a higher-yielding financial product with similar risk profiles. Yes, it is still life insurance, but the cash value element is often thought of as a bond or CD alternative.

Insurance carriers guarantee an interest rate in cash values. Mutual companies also often provide an annual dividend which is not guaranteed, (although most has paid a dividend every year). The dividend further increases cash values, all of which grows tax-deferred and can potentially be accessed income tax-free through withdrawals to basis and loans thereafter.

Scenario 2: Clients who want a healthy investment portfolio.

Whole life insurance is a non-correlated asset class in a healthy, diversified investment portfolio. For entrepreneurs and more aggressive investors, whole life insurance serves as a counter-balancing force against concentrated positions and aggressive investments.

Scenario 3: Clients who need permanent protection.

The average mortality rate has increased dramatically in recent times due to advances in medical technology, greater access to healthcare, and greater awareness of wellness. As a result, families often realize that there is no standard or finite period to maintain life insurance, such that when the period is over, the “need” or desire somehow goes away.

Other products and designs may not be able to guarantee death benefit coverage through advanced ages without:

• increasing premiums on existing coverage;

• adding to underwriting to get new coverage; and

• reducing coverage on existing policies to maintain the policy and/or premium.

The above shortcomings have led to a renewed awareness of whole life insurance. By design, the death benefit is guaranteed if the premium is paid, thus ensuring the policy will be there when protection is needed. Premiums have been amortized over the expected life of the product so as not to place sticker shock on those who are no longer actively employed but still want and need coverage.

Scenario 4: Clients who have business planning needs.

In business planning situations, advisors and clients have traditionally turned to term insurance to fund buy-sell agreements. Increasingly, however, business owners have discovered that the likelihood of dying while in the business is remote.

It is more likely that the business owner will become sick, injured or leave the business due to retirement or some other life event. As a result, the cash value buildup in a whole life policy is an attractive vehicle to create a sinking fund that will act as a down payment on an installment sale or to supplement a lifetime buyout, while the death benefit ensures funding in the unlikely event of death.

If death does not occur, then the policy can be re-purposed for personal planning use of the departing owner. A well-drafted business continuation plan can address this situation.

Scenario 5: Clients looking for a favorable cost structure.

Overall, costs of a whole life policy are too often misunderstood. As measured by premium outlay, there is no argument that whole life presents the highest premium. However, over a lifetime, whole life insurance generally provides both the highest IRR of premium to death benefit (measured at life expectancy) and also the best cost structure as measured by net present value of premiums relative to cash values.

Scenario 6: Clients who need a “forced” savings vehicle.

As increases in college tuition continue to outpace inflation, and as more individuals and families are realizing they won’t be saving enough in traditional retirement accounts to meet retirement expenses, whole life insurance and its cash value buildup are excellent supplemental sources to accumulate wealth while also protecting the family. The premium payments are often seen as a “forced” savings vehicle.

Thus, there are many reasons why whole life products have enjoyed a resurgence in popularity. For those advisors who don’t typically work with whole life, perhaps a fresh look is warranted. To take a fresh look, contact the Robin S. Weingast & Associates team today. We’re here to help!

What you Need to Know in 2015

2014 is coming to an end and the Robin S. Weingast & Associates team has been busy preparing for 2015. We value working with our clients and want to give you the most current information on what you have to look forward to in the new year.

As we told you in October, the IRS issued information geared towards helping to increase the use of income annuities in 401(k) plans. Plan sponsors can now voluntarily include deferred income annuities in a target date fund used as a default investment, making it easier for employees to consider using lifetime income. We posted the full announcement and would be happy to speak with you about how to take advantage of these new important guidelines.

Beginning in 2015, the IRS increased retirement fund contribution limits. This change reflects cost-of-living increases and could have major implications for you and your employees. Click to expand this graphic and se what the new limits are.

Robin_Weingast_new_IRS_limits

New York-based businesses should know that on December 31, the statewide hourly minimum wage for non-exempt (i.e., hourly) employees will rise from $8.00 to $8.75 (and then to $9.00 on December 31, 2015). Just as significantly, the minimum weekly salary for certain exempt employees – executives and administrators – will also increase on December 31: from $600.00 to $656.25 (and then to $675.00 on December 31, 2015). The wage increase also affects those in the food service and hospitality industries. You can read more about it here (the post also contains information about minimum wage changes in other states).

There are some small changes to the Affordable Care Act that may impact your business. This site summarizes everything that will change in 2015, and we are happy to talk through what these changes mean for your benefits plans and for your business.

Earlier this year, we let you know that the IRS announced an 2016 deadline for pre-approved document restatements. Here’s a refresher on what that means for you. Remember that our team is here to help you with this process.

We hope you found our Need to Know Blog, monthly resources, and updated newsletters a valuable source of must-have information. If you have any suggestions for topics we should cover, please contact us and we’d be happy to cover them on our website.

The Robin Weingast team is ready to offer guidance and help you develop solutions and innovative approaches to respond to any new regulatory changes. We look forward to making 2015 a happy and successful year for you.

Need to Know: Five Things You May Not Know About Your 401 (k)

Robin Weingast can help with 401 (k) planningAt Robin S. Weingast & Associates, we believe a large part of our work is keeping our clients well informed about the insights and trends that will help them achieve their business goals. We also believe that we have a responsibility to pass along tips and to help shatter myths that may be preventing our clients from succeeding. Our team of experts is constantly reading and staying up-to-date on what’s happening with the IRS, employee benefits, and more.

This month we’re talking 401 (k) plans, which are a well-known – but often not fully understood – retirement plan option that many employers offer. If you need a refresher on exactly what a 401 (k) is, we recommend this basic overview.

Now that you know the basics, here are five things you may not know about your 401 (k):

1) If you leave your job, you can roll your 401 (k) over to an individual plan with no tax penalty.
Many people think that any 401 (k) distribution will incur a penalty, but that simply isn’t the case. If you change employers, any plan will allow you to roll over to an established IRA. If you have multiple plans, it’s best to consolidate them.

2) Your 401 (k) is creditor-protected by law
The great thing about this is that your 401 (k) funds are protected – no matter what. That’s why we advise our clients never to use their 401 (k) funds to pay off a debt or avoid bankruptcy. Your funds will be protected, and you should only use them for retirement.

3) Age 55 is important
Most people assume that age 59 1/2 is the point at which they can begin receiving distributions from their 401 (k) without the standard 10% early withdrawal penalty. However, there are certain instances when you can receive distributions beginning at age 55, particularly if you leave your employer after 55 but before 59 1/2. Make sure you discuss these provisions with your plan provider.

4) Using an automated portfolio is a smart strategy
As much as we might want to pick-and-choose our own investments, most plans offer incredibly valuable automated resources. In some instances you simply select a year that aligns most closely with your anticipated retirement date and your plan will allocate your assets across many platforms and the plan will adapt over time as you near your retirement date. In other cases, you may need to articulate how aggressive or conservative you wish to be with your investments, and the plan will compile an appropriately aligned portfolio of investments. Whatever is available, an automated plan makes sense and makes life much easier.

5) Consider Stable Value Funds
If you are close to your retirement (or even if you’re not), consider allocating some of your 401 (k) assets to a Stable Value Fund, which is a special class of fund that most plans offer. The value won’t vary with the market nor will it be impacted by adjustments to interest rates the way bond funds do. As you get closer to retirement, it may make sense to move a few years’ worth of anticipated funds into a Stable Value Fund, so that you can at least have the peace of mind knowing that your first few years of retirement income will not be impacted by market variables.

Need additional assistance managing your 401 (k)? The Robin Weingast & Associates Team is always available. Contact us today. We’re happy to help and happy to answer any questions!

Source: http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2014/05/19/7-things-i-wish-people-knew-about-401k-plans

Resource of the Month: Traditional Defined Benefit Plans

Robin Weingast Defined Benefit PlanDid you know that with a Traditional Defined Benefits Plan (DBP) you can accrue substantial benefits, even within a short period of time or if you retire early, and that your benefits are not dependent upon asset returns?

These are just a few of the many positive features of a DBP. Before you decide if a plan is right for you, your company, your employees, and your long-term business goals, we think it’s important that you have all the facts. That’s why our July Resource of the Month will give you a comprehensive overview of traditional Defined Benefit Plans, how they work, and their advantages.

As our Resource explains, the most basic explanation of a Defined Benefit Plan is that an “employer contributes an actuarially determined amount sufficient to pay each participant a fixed or defined benefit at his or her retirement.”

In truth, there’s much more to Defined Benefit Plans. Our July Resource of the Month will walk you through how they work, how benefits are defined, additional considerations, maximum benefits, and the advantages of DBP for both you and your employees.

Download the full guide today.

A Defined Benefit Plan may be a great fit for your business and may also help you meet your financial goals. Download our resource today and when you’re ready to talk more about a plan that’s right for you, contact the Robin S. Weingast & Associates, Inc. team. We’re happy to put our combined experience and expertise to work….for you.

Need to Know: A Change to the Affordable Care Act Can Mean Big Things for Your Small Business

Robin Weingast on how changes to the Affordable Care Act impact your small business.In early June, President Obama signed into law the “Protecting Access to Medicare Act.” A portion of this new law essentially repeals a provision of the Affordable Care Act that was particularly burdensome for small businesses (those with less than 50 employees). This provision held that small groups were prohibited from offering health plans with deductibles higher than $2,000 for single coverage and $4,000 for family coverage.

This comes as very welcome news to small businesses, which often need the most flexibility and options in order to offer employees health insurance that is both comprehensive and affordable. Small companies will typically use higher deductibles and other cost-sharing strategies.

It’s also a positive change for any employers who want to offer their insurance plans in conjunction with health reimbursement arrangements (HRAs). Previously, federal agencies rejected HRAs as an allowable way to ease the $2,000/$4,000 provision.

The new law was effective immediately upon being signed and is just one example of the many ever-changing rules and regulations that impact your employee benefit plan.

Why not leave the planning to the capable Robin S. Weingast & Associates team, who stay on top of what these legislative changes mean for your business? Contact us today and we can discuss a custom, comprehensive plan that leverages these new small business allowances, incorporates HRAs, keeps your employees satisfied, and makes sense for your bottom line. We’ll even conduct a free evaluation of your current plan to ensure that your benefits are working for you. Reach out today.

Need to Know: Startup Companies and Benefits

Weingast_startupEmployees of startup companies probably consider themselves pretty lucky. According to an article in Forbes startup employees benefit from the “startup culture,” which breeds collaboration as well as from a sense of ownership and visibility that comes from being with a company since its inception. For many startup employees, these factors alone are enough to keep them engaged and on board with the company for years to come.

But if you are at the head of a startup company, you may want to consider the impact of offering a formal benefits program to your employees.  A recent article in Entrepreneur reports that  “MetLife’s annual study of employee benefits trends found that benefits can be even more important than advancement opportunities and company culture in fostering employee loyalty.” This is a key factor to keep in mind, particularly when considering the time, money, and energy it takes to recruit and retain talented staff. In addition to keeping your staff happy, offering formal benefits may also be a way to distinguish you from competitors when you’re recruiting new staff, since “only 28 percent of businesses with fewer than 10 employees offer health insurance.”

Here are some important tips to keep in mind if you are thinking of establishing a formal benefits program for your startup company:

1)    Start with the basics, such as health insurance and disability insurance. Save the fancier perks for later, when you have established your company on solid financial ground.

2)    Manage expectations, for yourself and for your team. Offering any kind of formal benefits at all puts you in a better position than most small companies; asking for employee contributions is not only reasonable but will likely be necessary. And, avoid cutting back benefits at all costs.

3)    Take advantage of health-insurance subsidies, which are now available under the Affordable Care Act.

4)    Get a broker. You’re busy trying to make your business a success. Once you know the basics of what benefits you want to offer your employees, leave the details and logistics to a broker who knows the in’s and out’s of benefits planning. The best part? There’s no extra charge for using a broker.

Read the full article here.

Whether you’re an entrepreneur who wants to attract and retain the best staff as you build and grow a successful business or a leader at an established company that wants to gain a recruiting edge, the Robin Weingast team can help you establish and analyze your employee benefits. Contact us today for a free consultation or a free analysis of your current plan. Our business is to make sure your benefits are working….for you.

Robin Weingast featured in the March 2014 Suffolk Lawyer

Robin Weingast featured in March 2014 Suffolk Lawyer sharing her benefit planning expertise.Employee benefit expert Robin Weingast recently shared her 30+ years of knowledge with the Suffolk Lawyer, the official publication of the Suffolk County Bar Association. In “Cash Balance Defined Benefit Retirement Plans—How to Increase Your Tax Deductible Plan Contributions,” Weingast explores if adding a Cash Balance Defined Benefit Plan is a good fit for your company.

As you know, we are currently exploring Cash Balance Plans in our special series (catch up on part 1 and part 2), and in her article for the Suffolk Lawyer, Robin goes into detail on the many advantages of a Cash Balance Defined Benefit Plan, including:

1) The potential for larger tax deductible contributions than permitted under Defined Contribution (401(k) Profit Sharing Plans) for owners and key employees—which shelters your business profits from taxes

2) Tiered benefit levels, allowing partners and employees to have different levels of contributions

3) A greater appreciation of the plan and its benefits by your employees

4) Less volatility and cost

5) Greater funding flexibility

 

The article also explores if a Cash Balance Defined Benefit Plan is a good fit for your company, and breaks down the many factors to consider, including company demographics (including the age of your staff and your age relative to them), taxes, and if your company has the resources to offer this type of plan.

These are just a few of the many insights offered in the piece. You can download the full article here..

Above all, any benefit plan needs to be thoughtfully constructed and carefully managed by a qualified team of experts. As always, Robin Weingast and her firm of enrolled actuaries, certified pension and employee benefit consultants, and financial and insurance advisors are available to discuss your options for a customized, tax-favorable, and innovative retirement program that is current with ever-changing tax laws. Contact the Robin Weingast team today for more information.

Robin Weingast & Associates Cash Balance Series: Putting Cash Balance Plans in Context

Robin Weingast Putting Cash Balance Plans in ContextDefined Contribution Plans

Before we can really discuss what a Cash Balance Plan is, it’s important to have some general background information to put the discussion in context. A defined contribution (DC) plan, such as a 401(k) profit sharing plan, dictates the contributions that go into the plan each year. Contributions, which are usually discretionary, include employee salary deferrals, employer matching contributions and employer profit sharing contributions. The maximum amount a participant can receive in a DC plan each year is $49,000 for those under age 50 and $54,500 for those age 50 or older. These contributions and the investment returns they generate determine a participant’s ultimate retirement benefit.

A defined benefit (DB) plan promises a benefit using a formula that is usually based on compensation and years of service. For example, a DB plan might provide an annual benefit equal to 1% of average compensation for each year of service. If a participant has average compensation of $65,000 over 10 years with the company, the annual benefit is equal to $6,500 ($65,000 x 1% x 10 years of service) for the rest of the participant’s life.

Rather than limiting contributions, the IRS limits the maximum annual benefit a DB plan can provide to a participant to $195,000 per year. The contribution is a function of how much is needed to fund the promised benefits. While there are a number of variables, the following table summarizes the tax-deductible contributions to fund maximum benefits for DB participants of different ages:

Robin Weingast and her team can provide you with all the information you need about Cash Balance Plans

The employer is said to bear the investment risk because the higher the return on investment, the lower the portion of the funding that must come from the company and vice versa. To the extent a DB plan is not fully funded, contributions are generally required each year.

The next part of our series will focus on clarifying what a Cash Balance Plan is, and explaining various important elements. If you missed Part 1 of our series, you can catch up here.

If you have questions about Cash Balance Plans and if they are right for your business, the Robin Weingast Team is here to help. Please contact us and we would be happy to answer all of your questions.

A Special Series from Robin Weingast & Associates, TPA: Cash Balance Plans

Robin Weingast has all the information you need about Cash Balance PlansCash balance plans have enjoyed a recent resurgence in popularity. However, these plans, which can provide tax-deductible benefits as much as five times greater than 401(k) profit sharing plans, have actually existed for more than 30 years. When the Pension Protection Act of 2006 (PPA) resolved much of the legal uncertainty of these plans, small and large companies alike showed a renewed interest. According to a recent research report, the number of cash balance plans increased by more than 23% from 2006 to 2007 and more than 75% of existing cash balance plans are sponsored by companies with fewer than 50 employees.

In our special “Need to Know” Series on Cash Balance Plans, the Robin Weingast & Associates team will walk you through everything you need to know about these popular plans.

As always, the Robin Weingast & Associates team is here to help. If you have any questions about cash balance plans, please contact us and we’ll be happy to help.