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Alberty Financial Planning Services is a full service boutique style firm dedicated to providing customized, comprehensive and convenient financial planning services for our clients. In an effort to simplify the process, our financial planners come to a location of your choice including your home, place of business or any of the nationwide locations provided by our implementation resource members.

My plan was to start my business and apply for life insurance before I turned 40 in 2010 to avoid the age related premium hike. I knew I was in trouble when I was diagnosed with NH-Lymphoma at age 36 and that obtaining life insurance coverage was unlikely for me for some time. Still, as the eternal optimist, I thought I would at least apply to see if I could pay a crazy premium and still be insured. But to the benefit of all Northwestern policy holders, they did not take on my risky status.

I opened my mail today to find a notice that I am uninsurable for life insurance. I wish I could say I was surprised, but in fact I was not. I knew that even if the insurance company would allow me to pay obscene premiums for a policy based on my battle with NH-Lymphoma that they surely would deny me once they learned the recent news of my mother’s late stage lung cancer diagnosis due to family history. The silver lining is that their letter encouraged me to reapply in four years. There is still hope.

My family has had three strikes of cancer in recent years. It began in 2007 with my diagnosis of NH Lymphoma, earlier this year my aunt (my mother’s sister) was diagnosed with CLL and my mother was diagnosed this Mother’s Day with lung cancer (to be confirmed by biopsy later this month). Unfortunately this makes us pros at going through the process of diagnosing and treating cancer.

Instead of sharing stories of vacations and happy memories, our recent conversations are about scans, lab results and doctor’s bedside manners or lack thereof. We also discuss the mounting costs of these tests and the gratitude to have adequate insurance to mitigate personal financial loss.

I was fortunate to have wonderful health insurance coverage through my husband’s employer benefits, my aunt has coverage through her employee benefits offered by the state of Alabama and my mother has federal employee health benefits since she is currently still working. It has been very educational to see the stark difference between three different policies and the protocol for such similar situations.

Before the recent health care reform financial ruin was still looming overhead as lifetime maximums were easily reached. Fortunately, the health care reform has removed lifetime limits. Other positive changes for cancer patients in the form of the requirement to insure despite pre-existing conditions and the elimination of the fear of being dropped with the onset of a serious illness have also been brought about by health care reform. Even Medicare D will start closing the “donut hole” for prescription coverage.

There are many other benefits brought about by the health care reform for cancer patients and others with chronic health care concerns. Although these changes come at a cost, as a cancer survivor and now a caregiver, I am grateful for the benefits of the current health care reform.

Mike Gautreaux of AI Insurance Group informed me of a little known fact about car insurance. If the title of the car doesn’t match the name on your insurance policy the owner of the car is not insured. If you have titled a car in your child’s name or if you own a car and the child has become insured on their own, be sure to confirm with your agent that the names match up.

If you are a high net worth individual, then it may be unlikely that you will need to spend your IRA funds. In this particular situation, you may find that it is useful not to be subject to the required minimum distribution (RMD) rule. The RMD rule applies to tax payers who are age 70 ½ and who have an IRA account. The RMD rule uses a formula based on life expectancy to determine how much annual distribution tax payers must take. When the funds are distributed they become income taxable since these funds were initially contributed pre tax.

It is common practice for high net worth individuals to defer distributions from IRAs in an effort to continue tax deferred growth as long as possible. This strategy is an attempt to avoid taking distributions and therefore further delaying income tax obligations. To avoid losing tax dollars the RMD rule was created forcing distributions to be made and therefore income taxes to be paid.

Individuals with a Roth IRA are not subject to the RMD rule because the taxes were paid on the contributions up front. For the same high net worth individual who doesn’t need to take distributions, a Roth IRA could be passed to the next generation with income tax free growth. Not only are income taxes not due on the distribution, but the lack of required distributions allows for significant growth opportunity.

It is a common misconception that life insurance is not taxable. In actuality life insurance is not income taxable but is subject to estate taxes. In 2010, we do have a temporary break from federal estate taxes. But in 2011, thanks to the sunset provision, the exemption will return to $1 million.

There are many tax payers that may be unpleasantly surprised by their exposure to the estate tax. For example a family that owns a $250k home, a 401k with a $150k balance and a term life insurance policy for $1 million has an estate tax problem in 2011.

Can you imagine paying the premiums for a $1 million life insurance policy that your heirs receive only $650k and the IRS receives the remaining $350k? This can be avoided simply by having an Irrevocable Life Insurance Trust (ILIT) own your policy. Ideally, the ILIT should be drafted and set up as owner of the policy from the start.

Existing policies may also be gifted to an ILIT, but you are subject to a three year look-back. The 3 year look-back means that you must live at least 3 years beyond gifting the policy to the trust. If you don’t survive the 3 years the policy will still be includable in your estate.

You will need to hire an estate attorney to draft your trust document, and it is important to follow their direction for implementing this strategy. The going rate in Georgia for an ILIT is around $2k. This is a small price to pay to save up to $500k for every million dollars of coverage.

The 2010 Roth IRA conversion option that has now been opened up to high income taxpayers but the decision to convert is not necessarily straightforward. Below are the top 5 considerations for converting an IRA to a Roth IRA:

1. The rules of eligibility for contributing to a Roth IRA are different than converting an existing IRA to a Roth IRA.

2. Converting non deductible IRA funds to a Roth IRA. A non deductible IRA is simply an IRA that is funded with after tax money. High income tax payers use this type of account to take advantage of tax deferred growth. These accounts can be converted to Roth IRAs to provide tax free growth. Since the taxes were already paid on the contribution, there will be no taxes due on the conversion UNLESS you have other IRAs (such as a rollover IRA or one that was funded with pre tax dollars). If this is the case, the total amount of IRA assets is included in the calculation of the taxes due EVEN if the only account you convert is the non deductible IRA. An important consideration since it can create an unexpected tax bill.

3. If you convert to a Roth IRA, you will have the option to either pay the entire balance of taxes due in 2010 or spread the tax obligation out over 2011 and 2012. Although it seems an obvious benefit to spread the taxes out over the two years, it is not necessarily the case if in fact the income tax rates are raised (as anticipated) next year.

4. Partial conversions make sense if you have limited resources to pay the tax obligation.

5. If your Roth will have time to grow and you have the funds to pay the taxes from outside of the IRA, and there is not a specific event elevating your tax rate in 2010 it is very likely that converting your IRA to a Roth IRA makes sense.

As I mentioned above, converting to a Roth IRA is not straightforward. It is advisable to seek help from your financial planner or tax advisor to assist you in this decision.

Recently, I had the opportunity to spend some time with a very talented employee benefits provider at the A. I. Group. He showed me their intricate system of identifying unusual costs and excessive expenses that may be reduced with health education.

It was very interesting to see the trends in health problems such as obesity, heart disease, asthma and cancer. We see this in our community and we hear about it in the news, but to see actual numbers was sobering. The good news is that there are cost reductions in each of these areas when patients are provided with some targeted educational pieces.

In the past, I wrote an article about the savings on a prescription for chemo induced nausea that was incredibly expensive when filled in small quantities, but was available at a fraction of the cost through the mail. My family saved hundreds of dollars a month by making this simple change. And, it was much more convenient to receive these drugs through the mail.

I personally learned this lesson the hard way by paying for the drug at full price. I decided to make some calls as it was prohibitively expensive and soon discovered the benefits of mail order. If I had received information from the administrator about the mail order savings, we (the employer, insurer and my family) would have saved a great deal of money.

My prescription example is from a few years ago and I am happy to report that I now receive regular mailings from our administrator about how to use our benefits more efficiently without sacrificing the high quality health care that we desire.

PRESIDENT SIGNS FINAL HEALTH REFORM LEGISLATION

March 30, 2010

By Jay Turner
Birmingham Office

A little more than a week after the House of Representatives passed the Patient Protection and Affordable Care Act (the “PPACA”), President Barack Obama has now signed the Health Care and Education Reconciliation Act of 2010, containing the changes to the Senate’s health care reform bill requested by the House. This final piece of the health reform legislation is now in place, and employers can better determine how the health reform legislation will affect them in the years to come.

Below are some of the significant changes brought to the PPACA by the Reconciliation Act:

• Employer Mandate – “Play or Pay” – The Reconciliation Act increased the penalties to be paid by employers if they fail to offer qualifying health coverage. Employers with more than 50 employees that do not offer group health coverage and have at least one full-time employee who receives a premium tax credit will be assessed a penalty of $2,000 per full-time employee if the employers fail to offer qualifying health coverage. Employers with more than 50 employees that offer group health coverage but have at least one full-time employee receiving a premium tax credit will pay the lesser of $3,000 for each employee receiving a premium credit or $2,000 for each full-time employee. A penalty will not be imposed for the first 30 full-time employees when calculating the penalty. These provisions are effective beginning in 2014.

• Waiting Period Restriction – Employers are prohibited from imposing a waiting period of more than 90 days. This provision is effective beginning in 2014.

• Individual Mandate – The PPACA requires individuals to purchase qualifying health coverage. The Reconciliation Act increased the penalties to be paid by individuals not purchasing coverage. Those without coverage would be required to pay a penalty tax of the greater of $695 per year up to a maximum of three times that amount ($2,085) per family or 2.5% of household income. These penalties are phased in beginning in 2014.

• Changes to Health Care Spending Accounts – The PPACA contains a change in the definition of “qualified medical expense” that affects reimbursements and withdrawals under all types of health care accounts, such as flexible spending accounts, health reimbursement arrangements, health savings accounts, and Archer medical savings accounts. Over-the-counter medications will no longer be a “qualified medical expense” beginning in 2011. Additionally, the amount employees may contribute to health care flexible spending accounts will be capped at $2,500 in 2013. The Reconciliation Act also increases the penalty on withdrawals from health savings accounts from 10% to 20% for reasons other than the reimbursement of qualified medical expenses.

• Elimination of Lifetime Caps – The PPACA eliminates lifetime caps on essential benefits provided under group health plans. This prohibition on lifetime caps is effective six months after enactment of the bill (September 23, 2010). Additionally, the PPACA places restrictions on annual limits that may be imposed upon plan participants.

• Preexisting condition exclusions – Effective 2014, group health plans may not impose preexisting condition exclusions. Group health plans may not impose preexisting condition exclusions for children under the age of 19 for plan years beginning on or after September 23, 2010. These requirements will make substantial changes to the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) portability requirements affecting group health plans.

• Dependent Coverage – The Reconciliation Act makes substantial changes to dependent coverage under group health plans. Beginning September 23, 2010, group health plans must offer coverage to adult children up to age 26 regardless of whether they qualify as the employee’s tax dependent. The child must not be eligible for coverage under another employer’s health plan until 2014, when that restriction will expire.

• Subsidies for Small Employers – The PPACA provides gives small employers (fewer than 25 employees) tax credits for purchasing group health insurance for their employees. The subsidies shrink as an employer’s size and average pay increase. The subsidy is phased in beginning this year.

• Automatic Enrollment – Employers with more than 200 employees will be required to automatically enroll their employees in their group health plans. Employees will then have the option of opting out of their employers’ plans.

• W-2 Reporting – Beginning in 2011, employers will be required to report the value of health coverage received by each employee on the employee’s W-2.

• “Cadillac-plan Tax” – Beginning in 2018, the legislation will impose a 40% tax on the value of overly generous group health plans. Plans with individual premiums over $10,200 and family premiums over $27,500 will be subject to the tax.

For a more detailed review of the changes health care reform legislation will bring for employers, please join Dana Thrasher, David Pearson and Mike Malfitano for a two-hour, comprehensive webinar at 2 p.m. EDT Wednesday, April 7, entitled “Key Provisions of the Health Care Reform Act: What the Patient Protection and Affordable Care Act Means for your Business.”

If you would like to discuss the impact of this important legislation on your benefit plans, please contact any member of Constangy’s Employee Benefits practice group, or the Constangy attorney of your choice.

Constangy, Brooks & Smith, LLP has counseled employers on labor and employment law matters, exclusively, since 1946. A “Go To” Law Firm in Corporate Counsel and Fortune Magazine, it represents Fortune 500 corporations and small companies across the country. Its attorneys are consistently rated as top lawyers in their practice areas by sources such as Chambers USA, Martindale-Hubbell, Super Lawyers, and Top One Hundred Labor Attorneys in the United States. More than 120 lawyers partner with clients to provide cost-effective legal services and sound preventive advice to enhance the employer-employee relationship. Offices are located in Georgia, Florida, South Carolina, North Carolina, Tennessee, Alabama, Virginia, Missouri, Illinois, Wisconsin, Texas, California, Massachusetts and New Jersey. For more information, visit www.constangy.com.

2010 is a very exciting new year for Alberty Financial Planning Services, Inc. We are providing the same objective fee-only, advice-only services with quite a few new faces and expertise.

We are thrilled to introduce and welcome our new members of the Alberty Financial Planning Services Team.

First, I would like to welcome Leanne Morse to the team as the Vice President of Operations. Leanne brings a strong accounting background, an MBA and a great deal of experience from Chrysler and UGA. Leanne’s positive attitude and work ethic is a tremendous asset to AFPS and we are delighted to welcome her to the team.

I would also like to introduce and welcome our new Professional Implementation Resource team members:

Investment Team:

 Matt McKiney, a financial advisor with Edward Jones in Watkinsville, Georgia.
 Matthew J. Riedemann managing director and real estate portfolio manager for Ashford Capital Partners, Inc in Atlanta, Georgia.

Estate Attorney:

 Jim Spratt owner of The Bowden Spratt Law Firm, P.C. in Atlanta, Georgia.

CPAs:

 Jim Polk managing member of The James Polk Company in Atlanta, Georgia.
 Alesia Burch, managing partner of Burch, Crooms and Company LLP in Hartwell, Georgia.
 Karen Crooms, partner of Burch, Crooms and Company LLP in Hartwell, Georgia.

Insurance

 Denise Willoughby account executive with Rutherfoord in Atlanta, Georgia.
 David L Romero, GBA with Rutherfoord-Benefits in Charlotte, NC.

We are honored to have the opportunity to work with the professionals on our implementation resource team. Our IR team members are professionals who have proven to be at the top of their field. Please visit http://www.albertyfinancial.com/about-us/implementation-resources/ to view our entire Implementation Resource Team and their contact information.

Last but not least, I would like to welcome our interns to the team for the Spring 2010 semester. Jeff Rosengarten and Kelley Mundrick are both very talented students from the University of Georgia. You will hear from them often on our twitter page and our blog posts.

We are looking forward to a prosperous New Year in 2010 as we continue to provide our clients with top notch, comprehensive, and objective financial planning advice.