Do I Still Need Life Insurance Once I Retire? Your Questions Answered
Do you still need life insurance after you retire? Going into retirement doesn't necessarily mean that you are financially sound. Read this blog post for more answers to your questions regarding life insurance after retirement.
Do I need life insurance once I retire? Just because you’re retired doesn’t necessarily mean you’re financially sound.
Think of all the different scenarios that may still be applicable: You may have been required to retire early; you may have had investments that have gone sour and haven’t had time to rebuild your nest egg. Additionally, there may be a need to cover final expenses, you may have children still at home who depend on you, or you may have a family member like an aging parent or special-needs sibling that you provide financial support for.
The bottom line is this: If you owe someone, love someone, or someone depends on you financially, you need life insurance. And just because you’re retired or old doesn’t mean those three things go away.
Do I need the same amount of life insurance coverage as I did before? If you bought the life insurance to replace income and have built up your investments, maybe not.
Then again, if you have built up your investments over the years, there may be some state or federal inheritance tax that will have to be paid upon your death. And even if there is no federal tax, there may still be significant state inheritance tax. There are also things like probate costs, administration costs; there might be final debt or a mortgage on house, too. So as long as there is some type of financial exposure, you need life insurance to match up with that.
If I don’t have one, is it still possible to buy a policy in retirement? Absolutely. Just because you’re old or older doesn’t mean you’re uninsurable.
I just got a call from someone doing planning for the family patriarch who’s 85 years old. They realized that right now, the estate is worth more than the combined amount of federal exemption and that there will be tax to pay. That’s where life insurance comes in, at less than a dollar for each dollar of tax.
Another reason to have the coverage is if someone has taken 100% pay-out on their pension, with no survivorship provision. If that person dies, no money gets paid out to the surviving spouse. This is more common than you think. Nor is it unusual to hear that someone remarries and forgets to change the pension beneficiary. Life insurance can ensure that the spouse is taken care of.
What else should I know about having life insurance in retirement? People don’t often talk about the living benefits of life insurance.
Let’s say you no longer need the death benefit, but are living with a lingering, terminal illness and may not have sufficient cash to pay medical expenses. The accelerated death benefit provision means you can go to the insurance company and pull down money from the policy to absorb the costs of that illness and avoid bankruptcy.
A permanent life insurance policy is also a place to put money aside that gives you a better rate of return than a low pay-out CD or putting money in a safety deposit box. It’s a way to have some safe money invested at no risk—it’s just there for when you need it.
SOURCE: Feldman, M. (9 January 2019) "Do I Still Need Life Insurance Once I Retire? Your Questions Answered" (Web Blog Post). Retrieved from https://lifehappens.org/blog/do-i-still-need-life-insurance-once-i-retire-your-questions-answered/
Wealthy vs Financial Fit. Here’s the Difference and Why It Matters
What is the difference between being wealthy and financially fit? Someone could be wealthy without being "financially fit". Read this blog post from Life Happens to learn more about the difference.
People can be wealthy without being financially fit, meaning they can have a lot of assets or money tied up in assets, but those assets aren’t “liquid.” Let me explain. Say you have a house that has escalated in value in the real estate market. You may have this large asset, but that doesn’t necessarily mean you’re financially comfortable from an income standpoint. You aren’t able to tap into that “wealth” to pay for your day-to-day expenses.
Considering Risk
The overall goal when I sit down with someone, or perhaps a couple, is to determine their wants and needs, and then give them a plan that helps them grow their assets, while achieving their income goals.
But one thing many people fail to look at is the risk during this growth period. Let’s say you’re married, and again your major asset is your home, perhaps even with a large mortgage. What if something were to happen to either one of you? Would you still be able to pay the mortgage and retain the house? Or would you need to sell your largest asset just to pay day-to-day living expenses?
That’s where life insurance comes in as a foundational piece to financial fitness. It addresses the issue of someone dying too soon—that’s a risk factor you don’t want to leave chance. And the truth is, it’s an affordable solution for almost everyone. A healthy 30-year-old can get a 20-year $250,000 level term life insurance policy for about $13 a month. Most of us can afford to find that kind of money in our budget.
What Do Romantic Partners Want?
Life Happens did the survey, “What Do Romantic Partners Want?” and we discovered some great news for most of us—people prefer a partner who is financially fit (64%) over someone who is wealthy (16%). And we explored a whole host of factors, from looks to money to relationships. And I think it’s only natural that when people are dating, all the factors that we explored in the survey come into play.
It’s when things become serious and you’re looking to settle down that you have to start asking some of the tougher questions, questions that may make you feel uncomfortable. For example, does the other person have a lot of debt or other financial obligations?
Remember, if you marry and sign on the dotted line, you become responsible for each other’s debt. I’ve seen divorces happen where one partner was racking up a huge amount of credit card debt without the other one knowing, and then in the divorce proceedings the other partner finds out that they are responsible for half that debt.
In the end, it comes down to being financially aware, asking the appropriate questions, even if they are uncomfortable ones. You need to go into a long-term relationship with your eyes and ears wide open.
SOURCE: Feldman, M. (5 June 2018) "Wealthy vs Financial Fit. Here’s the Difference and Why It Matters" (Web Blog Post). Retrieved from https://lifehappens.org/blog/wealthy-vs-financial-fit-heres-the-difference-and-why-it-matters/
Providing an HSA, FSA, or HRA Health Plan for your Employees
When open enrollment hits annually, it is not uncommon for employers to feel exasperated when staring down a list of acronyms such as HSA, FSA and HRA. As it should go without saying, the most common first thought is, “What does any of this mean?” Even the most seasoned experts have difficulty with understanding the complexities of various care options. That’s why in this installment of CenterStage, Kelley Bell, a Group Health Benefits Consultant at Saxon Financial, is here to break down the ‘alphabet soup’ that is HSAs, FSAs and HRAs.
What Is an HSA?
An HSA stands for a Health Savings Account. Kelley stated that HSAs work in conjunction with your existing HDHP plan (given you already have one) to cover costs associated with eligible medical, dental and vision expenses. Available to open just like a bank savings account, Kelley said, “It is your account; yours if you leave the employer and can contribute as long as you have an HDHP and can use the funds until they are gone, even if you are no longer in an HDHP.” For most, this applies to retirement. If you are reasonably healthy throughout your working life, Kelley said you can carry a large HSA balance into retirement. At that point, the funds can be used to cover the out-of-pocket medical costs that often increase with you as you age.
In addition to all the above, certain tax advantages exist within an HSA plan:
- Contributions are excluded from federal income tax.
- Interest earned is tax referable.
- Withdrawals for eligible expenses are exempt from federal income tax.
HSAs are typically available through employers, but individuals can establish one, as well. Many banks offer HSA programs for their customers, meaning if your employer does not offer the benefit, you can create an HSA account there.
What Is an FSA?
An FSA is a Flexible Savings Account. Much like an HSA, these plans cover the payment of medical, dental and vision-related expenses, and contributions you make to the plan are tax-deductible. Similarly, when you open an FSA account, you’re typically provided with a debit card or checkbook, so the funds can be accessed in the account. However, Kelley stated an FSA plan has a catch: “An FSA cannot roll over unused funds from year to year and is not portable.” Therefore, any contributions made to the plan that have not been spent by the end of the year are forfeited.
Some employers, as Kelley noted, do have options that will help you avoid complete forfeiture of unused funds. Certain employers allow their employees to carry over up to $500 of unused funds into the following year, while others will extend the use of the funds for up to two and a half months into the new year. Employers generally will offer one or the other, but never both. Some, however, offer no such option at all.
Kelley mentioned general purpose FSA coverage, and stated it can “make you ineligible for HSA contributions.” She continued to add that certain types will not prevent HSA eligibility, i.e. limited FSA for vision, dental, parking or “post-deductible FSA” which reimburses you for preventative care or for medical expenses that are incurred “after the minimum annual HDHP deductible has been met.” As a result of forfeiting any unused funds in the account, an FSA is best used by someone who has ongoing and predictable medical expenses. In this situation, it is likely you will deplete the funds in the account, whereas if you are considered healthy and have limited medical expenses (i.e. minor illness, sinus infection), the potential for forfeiture is high, and you may have to forgo the account. FSAs are employer-sponsored and typically are an option as part of a ‘cafeteria plan’.
What Is an HRA?
An HRA is a Health Reimbursement Arrangement. Like the other plans described in this article, an HRA is a tax-free employer funded amount of money for healthcare expenses. Contributions, as Kelley explained, “can be excluded from gross income, meaning that won’t pay taxes on that money and reimbursements from the HRA are tax-free when used for qualified medical expenses.” Depending upon the type of HRA, unused funds may or may not be rolled over from one year to the next. However, employers may also allow employees to use their HRA funds even into their retirement.
The benefits of an HRA take action after the employee has met a specific portion (i.e. employee meets 1st $2500 of a $5000 deductible), making it easier for the employee to meet their high deductible. HRAs are good for employers who want more control over how their medical dollars are put to use. Naturally, if the employer is paying the cost of the HRA, it can be of an increased advantage than contributory health insurance premiums and direct payment for out-of-pocket expenses. With an HRA, the employer determines the reimbursements and does not have to contribute the same amount for all employee groups (i.e. tiers of employee coverage, employee/child, employee/spouse and family).
How Saxon Helps
It is important to understand the needs of every client and educate their employees on how to use their healthcare. Saxon values client education and service above all else. We make educating employees a priority and ensure their benefits are understood and easy to use. Saxon represents all of the major carriers, allowing us to secure the best plans and rates for you and your staff, which we review annually.
If you are considering offering an HSA, FSA or HRA insurance plan to your employees, contact Kelley Bell today at (937) 672-1547 or kbell@gosaxon.com to begin exploring the benefits of adding this superior level of coverage today.
Key elements to consider when researching financial wellness programs
With financial wellness programs becoming a staple employee benefit, organizations find themselves implementing programs that only offer a few tools or resources. Read the following blog post from Employee Benefit Advisor for key elements to consider when researching financial wellness programs.
Financial wellness programs are becoming a staple in the employee benefit universe. But what should a successful financial wellness program encompass? As a rapidly growing industry, we often lack a consistent definition for financial wellness. This leads to organizations believing they have implemented a financial wellness program, when they may only be offering a few tools like education or counseling.
I define financial wellness as the process by which an individual can efficiently and accurately assess their financial posture, identify personal goals, and be motivated to gain the necessary knowledge and resources to create behavioral change. Behavioral change will result in improved emotional and mental well-being, along with short- and long-term financial stability.
As the administrator of your company’s benefits, you are responsible for bringing the best possible solution to your employees. That’s a tough ask, given the growing number of service providers. So, what is the most efficient and effective way to assess financial wellness services to determine which solution best fits your organizational needs? Ask yourself these questions:
Does the platform offer a personal assessment of each employee’s current financial situation and help them identify their financial goals? If the answer is yes: Does the assessment return quantifiable and qualifiable data unique to each individual employee?
Does the platform address 100% of your employee base, including the least sophisticated employees at various levels of employment? Much of your ROI from a financial wellness program does not come from your top performers. It comes from creating behavioral changes within your employees who need the most financial guidance.
Does the platform integrate the various components to provide a personalized roadmap for each employee? It should connect program elements like personal assessments, educational resources, tools, feedback and solutions to ensure the employee is presented with a cohesive, comprehensive plan to attack and improve their financial situation.
Does the platform offer solutions for short-term financial challenges like cash flow issues, as well as long-term financial challenges associated with saving and planning? A major return on your investment comes from reduced employee stress, which is substantially driven by short-term needs versus long-term objectives. The program must help employees deal with current financial challenges before they can focus on their longer-term vision.
About 78% of U.S. workers live paycheck to paycheck to make ends meet, according to data from CareerBuilder.com. The need for financial wellness is clear, but there are consistent pillars that must be addressed in any successful financial wellness program to affect change: spend, save, borrow and plan. When evaluating financial wellness programs, it’s important that these dots all connect if you are truly going to motivate behavioral change and recognize the ROI of a comprehensive financial wellness program.
SOURCE: Kilby, D. (13 September 2019) "Key elements to consider when researching financial wellness programs" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/opinion/key-considerations-for-employee-financial-wellness-programs
5 Questions Expecting Moms Have About Life Insurance
Are you considering life insurance? If this is your first time looking for coverage, you most likely have questions. Read this blog post from Life Happens for five questions expecting mothers typically ask when looking at life insurance.
If you are expecting a child and are considering life insurance, the first thing I have to say is—smart move! But if this is your first time looking for coverage, you may have questions. Here are some typical ones I’ve heard over the years:
1. What type of life insurance coverage is best for new parents—term or permanent?
Before figuring out what kind of coverage you need, you first have to understand how much death benefit you need to protect your family. You can do an easy calculation online to get a working idea of how much you may need with this Life Happens Life Insurance Needs Calculator.
Then you can move on to what kind of coverage—term or permanent—meets your needs. An advantage of term life insurance is that it costs less than permanent, at least initially. This makes it affordable for young families that may not have a lot of disposable income, but have a large need for coverage. Permanent insurance provides both lifelong coverage and a cash accumulation feature, which can be a valuable source of money that you can tap in the future.
Often, the best solution can be a combination of term and permanent life insurance. The term policy can give you extra coverage during the years when the children are at home, with the permanent policy offering lifelong coverage.
2. Should you consider different types of coverage if you are working mom versus a stay-at-home mom?
Both working and stay-at-home moms need protection because what they do for their families is so valuable. While a stay-at-home mom isn’t compensated for her work, if something were to happen to her, it would be expensive to replace all those things she does—from childcare to home care to ensuring the family gets where they need to go when they have to be there.
The difference between the two is that a working mother also contributes an income, which may be critical to the family financially. That means she needs to think about replacing that income when considering how much life insurance coverage she may need.
3. The company where I work offers life insurance, is that enough?
Group insurance is a great benefit to have, but it’s limited in a number of ways. First, the coverage is often a lump sum, such as $50,000, or it may be one to two times your salary. That may sound like a lot of money, but my question to you is: Honestly, how long would that money last? And what would happen to your family financially after that was gone?
Second, when you leave that job, you generally lose that coverage. If you don’t have an individual policy that you own, you’ll be leaving your family at risk. Think of how many times people change jobs, and you’ll quickly realize that group coverage, which is limited in scope and amount, is not a proper life insurance plan.
4. Are there any restrictions I have to consider now that I’m pregnant?
If it’s early in your pregnancy, and there are no medical complications, you should be able to get life insurance. If you’re farther along and there are medical issues, it may difficult to obtain. The life insurance company may want to wait until after your child is born. That’s why I advise those that are planning to have children to get the coverage as soon as possible.
5. What can I expect to pay for life insurance?
How much you pay for life insurance is based on a number of things but most importantly age and health. So, it depends on how old and how healthy you are! But here’s an example: A healthy 30-year-old woman could get $250,000 in life insurance coverage (for a 20-year level term policy for a nonsmoker) for about $13 a month. That’s certainly a lot of peace of mind for $13.
And don’t forget about your spouse or partner. The two of you could get $500,000 of combined coverage (using the example of two 30-year-olds that each get a $250,000 20-year level term policy) for right around $26 a month.
And my last piece of advice: talking with a life insurance agent at this stage can be very valuable. They can do a needs assessment and come up with the right type and amount of life insurance that works for your family budget. And what many people don’t realize is that an agent will sit down and offer this advice free of charge, with no strings attached. If you’d like help finding a life insurance professional, you can start here.
SOURCE: Feldman, M. (23 August 2019) "5 Questions Expecting Moms Have About Life Insurance" (Web Blog Post). Retrieved from https://lifehappens.org/blog/5-questions-expecting-moms-have-about-life-insurance/
15 states where $1 million in retirement savings will last the longest
How much do you have saved for retirement? According to GOBankingRates data, employees who have $1 million in retirement savings can make it last for more than 20 years in Mississippi, Arkansas, Oklahoma and Missouri. In this article, Paola Peralta writes on the importance of understanding what better retirement choices can do for your future.
Employees with $1 million in retirement savings can make it stretch for more than 20 years in Mississippi, Arkansas, Oklahoma and Missouri, according to GOBankingRates data in an article from Business Insider. Retirees in New Mexico, Tennessee, Michigan and Kansas can also live on a similar amount of savings, data shows. Retirees with $1 million can expect their savings to last in average span of 19 years, GOBankingRates estimates.
Less choice could mean better retirement outcomes
The amount of income that seniors can replace in retirement is a good measure to determine whether there is a looming retirement crisis in the U.S., according to retirement expert Mark Miller in this article from Morningstar. However, it is hard to make generalizations, he explains. “I think it varies tremendously, depending which demographic group you’re looking at, you can do it generationally or otherwise,” Miller says.
Retirement requires a shift in thinking
As retirees needs change, they should be ready to adjust their mindset and modify their investment strategies, an expert in Kiplinger writes. Retirees should focus more on preservation and distribution after the accumulation phase, the expert writes. “In retirement, it’s important to think of your savings as income rather than a lump sum. It’s not all about achieving maximum return on investment anymore," the expert says. "It’s about how you can get the maximum return from your portfolio and into your pocket."
Employees nearing retirement? 12 features to look for in their next home
Seniors who intend to move to a new home in retirement should consider a property that offers low yard maintenance, a single-story open floor plan and easy access to loved ones and essential amenities, according to a Forbes article. They should ensure that the new house is cheap to maintain and won’t trigger a hefty tax bill, says one expert. “If those costs are low, it can be a great investment.”
SOURCE: Peralta, P. (15 August, 2019) "15 states where $1M in retirement savings lasts the longest"(Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/news/states-where-retirement-savings-will-last-the-longest
Association Health Plans & Their Benefits
Many individuals do not understand various insurance terms and the plans available to them. Most employers have a hard time trying to find the best and the most affordable coverage for their employees. It is important you find an insurance company or agent that can break it down for you to get the best coverage.
We asked our founding partner and CEO, Jamie Charlton, to shed some light on Association Health Plans (AHPs) and also give their advantages and disadvantages.
What is an AHP, and How Does it Work?
According to Charlton, AHP or Association Health Plans are a conglomeration of smaller groups that come under the guise of a larger umbrella to leverage bulk buying power. They might not be small companies per se, but are those that come together under one industry or from the same geographic area to strengthen their negotiating power. They can be a group of manufacturers, printers or self-employed individuals from the same jurisdiction. An example of such an association is the Chamber Alliance.
Ideally, small businesses, including self-employed individuals in the same industry or geographic location, can merge to form larger groups to get healthcare plans as one large group. Coalitions are more or less the same as these associations, only that coalitions are groups made up of non-profit institutions such as schools. Associations are mostly businesses or organizations aimed at making profits.
AHP Expansion
United States (US) President, Donald Trump, issued an executive order to promote healthcare coverage in the US on October 12, 2017. The order aims at expanding access to small businesses to get the same competitive advantage as large corporations when purchasing health insurance. This order was meant to provide more affordable health insurance plans to as many individuals as possible. These individuals include farmers, wage earners and employees of any small business in the US.
Charlton has a slightly different view of this expansion. Though it has helped a few individuals, the expansion does not present any advantage as the rates keep going higher with age. He explained, “AHPs don’t have an advantage in the long run, unless they have a long-term sponsor.” AHPs have always been in existence, and the expansion is just political rhetoric that will give the plans some credibility.
Advantages of an AHP to Smaller Employers
There are some advantages that come with AHPs, both to the employer and the employees. These include:
- Negotiating power
- Spreading the risk
- Maintaining lower rates instead of lumping them into unverified age groups
- No charging different premiums to employees based on health status
- No charging different rates to employers based on the health status of their employees
- Healthy, younger groups will be fully underwritten
- Self-employed individuals with a few employees and those with no employees are also eligible
- Will not cherry pick or discriminate based on the status of an applicant pre-existing or previous health condition.
There are also some disadvantages. They include:
- Many of these plans might not allow single person groups.
- An individual must be a bona-fide member of a group and pay a membership fee.
The Role Saxon Plays in Helping the Employer
Saxon prides itself as a top provider of AHPs. The company has experts with knowledge of how this system works. Writing these plans for the last four years, Saxon can offer stable rates and consistent, professional assistance.
For more information regarding employee benefits and competitive benefits packages that fit your business strategy, you can contact Jamie Charlton at 513-573-0129 or via email at jcharlton@gosaxon.com.
4 Things Life Insurance Is Not
What is life insurance? People often get confused about what life insurance is and what it is not. Read this blog post for four things life insurance is not and a few tips on understanding them.
Are you confused about life insurance? I don’t blame you. When I first started writing about finances more than a decade ago, my understanding of life insurance was limited.
I knew about life insurance because it was offered through my employer, and I thought a $50,000 policy was a lot of money. I also recognized insurance company names from late-night TV commercials and the occasional bit of junk mail.
I understood “insurance” to be that stuff that you had to have for your car, your home, and your health. The “life” part was a big, blurry blob of “other.” If that’s how you’re feeling, here are a few tips that might help bring things into focus—by understanding the “nots.”
1. Life insurance through work is generally NOT enough. Since learning this myself some years back, I’ve noticed that many people never explore life insurance past what is offered through their work. Policies through work are a great benefit to have, but are usually limited to one- or two-times your salary or a fixed amount like $50,000. Plus the coverage typically ends when your employment there does.
How far will an amount like that go when you consider what’s left behind for your loved ones: the loss of your income and mostly likely debts and bills. What about things like rent or mortgage, child-care and education costs?
An easy way to get a working idea of how much life insurance you need is with a Life Insurance Needs Calculator from a neutral source like www.lifehappens.org/howmuch.
2. Life insurance is NOT a luxury item. Many people have not even considered buying life insurance because they’re convinced it’s a luxury. In a recent study by Life Happens and LIMRA, consumers thought the cost of a 20-year, $250,000 level term life insurance policy for a healthy 30-year-old was three times higher than it generally is. Younger people, in particular, overestimate the cost of a term policy by a factor of five.
If you took a guess at what that policy above would cost, what would you say? It comes out to about $13 or so a month for that policy. Definitely not a luxury—most of us spend more than that on a meal out.
3. Life insurance is NOT just about covering funeral expenses. While covering funeral expenses is very important, and a major reason people purchase it, life insurance does so much more. If something happens to you, life insurance benefits can help replace lost income, or pay off a mortgage, or help ensure a college fund or safeguard a retirement nest egg.
The proceeds of a life insurance policy are generally tax-free and can be used for anything your loved ones may need now and well into the future. Amazing, right?
4. Life insurance is NOT just for really healthy people. Granted, life insurance is less expensive the younger and healthier you are but don’t discount it just because you’re not in triathlete shape!
Many people don’t considering buying life insurance because they think they won’t qualify. But when certain health conditions, such as diabetes or high blood pressure, are under control with a doctor’s guidance or medication, it’s often possible to qualify. You may even be able to get coverage after a heart attack. Just know that it is probably best to work with an experienced insurance agent if you are concerned about a health issue and qualifying for coverage.
Now, if you’re a bit overwhelmed with this information and perhaps don’t know where to start, just know that a life insurance agent will sit down with you at no cost to go over your needs and help you get life insurance coverage to fit your budget. If you don’t have an agent or advisor, go here for suggestions on how to find one. You can also tap the Agent Locator there to find someone in your area.
Remember, the right agent or advisor can help you make sense of the confusion and get you on track for the financial future you want—with the protection your loved ones need.
SOURCE: Mosher, H. (30 October 2018) "4 Things Life Insurance Is Not" (Web Blog Post). Retrieved from https://lifehappens.org/blog/4-things-life-insurance-is-not/
9 Reasons Why Stay-at-Home Parents Need Life Insurance
It's not just parents with full-time jobs that need life insurance. Stay-at-home parents also need coverage. Read this blog post for 9 reasons why stay-at-home parents should have life insurance as well.
You’re probably already aware that a parent with a job outside the house most likely needs life insurance to protect their loved ones in case something were to happen. But it’s not just breadwinners who need coverage—stay-at-home parents do, too. Here are nine reasons why.
1. To replace the value of their labor. Stay-at-home parents are caretakers, tutors, cooks, housekeepers, chauffeurs, and so much more 365 days a year. And all that work comes with a price tag: Salary.com reports that stay-at-home-parents contribute the equivalent of a $162,581 annual salary to their households. If the unthinkable were to happen, a surviving partner would be on the hook for a slew of new expenses that the stay-at-home parent previously shouldered. Term life insurance is generally a quick and affordable way to get a substantial amount of coverage like this for a specific period of time, such as 10 or 20 years—often until you pay of your mortgage or the kids are grown and gone.
2. To factor in the contributions of any future income. Many stay-at-home parents return to the workforce once their kids are older. Life insurance could help bridge the gap that their future earnings would have contributed to the household.
3. To pay off any debt. From student loans to credit card debt to an informal loan from a family member, there are lots of ways to owe money. Life insurance can help settle any debts left behind so they don’t create stress for grieving loved ones.
4. To cover funeral expenses. Would you believe that the average funeral runs between $7,000 and $10,000, according to parting.com? And that may not cover the cost of the burial, headstone and other expenses. Many families want to honor a loved one’s memory but have trouble finding the funds to cover all the costs. Fortunately, the payout from a life insurance policy can help cover final wishes.
5. To leave a legacy. If a stay-at-home spouse has a passion for a place of worship, an alma mater, or another nonprofit organization, life insurance proceeds can be used to leave a meaningful charitable gift.
6. To boost savings. Permanent life insurance, which offers lifelong protection as long as you pay your premiums, may offer additional living benefits such as the ability to build cash value. This can be used in the future for any purpose you wish, from making a down payment on a house to paying for college tuition. Keep in mind, though, that withdrawing or borrowing funds will reduce your policy’s cash value and death benefit if not repaid.
7. To guarantee insurability. Your health can change in an instant. Getting a permanent life insurance policy when you’re young and healthy means you’ll have lifelong coverage. Then you won’t have to worry if later on, you develop a health condition that would make it hard or even impossible to get life insurance.
8. To receive tax-free benefits. Life insurance is one of the few ways to leave loved one's money that is generally income-tax free.
9. To give loved ones peace of mind. Losing a parent and partner before their time is already hard enough without having to worry about unsettled debts, childcare costs, funeral bills, and other expenses.
As you can see, life insurance for stay-at-home parents is just as important as it is for parents who work outside the home. Schedule a time to talk with an insurance professional in your community to learn about your options and get coverage that fits your lifestyle and budget.
SOURCE: Austin, A. (11 December 2018) "9 Reasons Why Stay-at-Home Parents Need Life Insurance" (Web Blog Post). Retrieved from https://lifehappens.org/blog/9-reasons-why-stay-at-home-parents-need-life-insurance-2/
PCORI Fee Is Due by July 31 for Self-Insured Health Plans
The annual fee for the federal Patient-Centered Outcomes Research Institute (PCORI) is due July 31, 2019. Plans with terms ending after September 30, 2012, and before October 1, 2019, are required to pay an annual PCORI fee. Read this article from SHRM to learn more.
An earlier version of this article was posted on November 6, 2018
The next annual fee that sponsors of self-insured health plans must pay to fund the federal Patient-Centered Outcomes Research Institute (PCORI) is due July 31, 2019.
The Affordable Care Act mandated payment of an annual PCORI fee by plans with terms ending after Sept. 30, 2012, and before Oct. 1, 2019, to provide initial funding for the Washington, D.C.-based institute, which funds research on the comparative effectiveness of medical treatments. Self-insured plans pay the fee themselves, while insurance companies pay the fee for fully insured plans but may pass the cost along to employers through higher premiums.
The IRS treats the fee like an excise tax.
The PCORI fee is due by the July 31 following the last day of the plan year. The final PCORI payment for sponsors of 2018 calendar-year plans is due by July 31, 2019. The final PCORI fee for plan years ending from Jan. 1, 2019 to Sept. 30, 2019, will be due by July 31, 2020.
In Notice 2018-85, the IRS set the amount used to calculate the PCORI fee at $2.45 per person covered by plan years ending Oct. 1, 2018, through Sept. 30, 2019.
The chart below shows the fees to be paid in 2019, which are slightly higher than the fees owed in 2018. The per-enrollee amount depends on when the plan year ended, as in previous years.
| Fee per Plan Enrollee for Payment Due July 31, 2019 |
|
| Plan years ending from Oct. 1, 2018, through Sept. 30, 2019. | $2.45 |
| Fee per Plan Enrollee for Payment Due July 31, 2018 |
|
| Plan years ending from Oct. 1, 2017, through Dec. 31, 2017, including calendar-year plans. | $2.39 |
| Plan years ending from Jan. 1, 2017, through Sept. 30, 2017 | $2.26 |
| Source: IRS. |
Nearing the End
The PCORI fee will not be assessed for plan years ending after Sept. 30, 2019, "which means that for a calendar-year plan, the last year for assessment is the 2018 calendar year," wrote Richard Stover, a New York City-based principal at HR consultancy Buck Global, and Amy Dunn, a principal in Buck's Knowledge Resource Center.
For noncalendar-year plans that end between Jan. 1, 2019 and Sept. 30, 3019, however, there will be one last PCORI payment due by July 31, 2020.
"There will not be any PCORI fee for plan years that end on October 1, 2019 or later," according to 360 Corporate Benefit Advisors.
The PCORI fee was first assessed for plan years ending after Sept. 30, 2012. The fee for the first plan year was $1 per plan enrollee, which increased to $2 per enrollee in the second year and was then indexed in subsequent years based on the increase in national health expenditures.
FSAs and HRAs
In addition to self-insured medical plans, health flexible spending accounts (health FSAs) and health reimbursement arrangements (HRAs) that fail to qualify as “excepted benefits” would be required to pay the per-enrollee fee, wrote Gary Kushner, president and CEO of Kushner & Co., a benefits advisory firm based in Portage, Mich.
As set forth in the Department of Labor's Technical Release 2013-03:
- A health FSA is an excepted benefit if the employer does not contribute more than $500 a year to any employee accounts and also offers a group health plan with nonexcepted benefits.
- An HRA is an excepted benefit if it only reimburses for limited-scope dental and vision expenses or long-term care coverage and is not integrated with a group health plan.
Kushner explained that:
- If the employer sponsors a fully insured group health plan for which the insurance carrier is filing and paying the PCORI fee and the same employer sponsors an employer-funded health care FSA or an HRA not exempted from the fee, employers should only count the employees participating in the FSA or HRA, and not spouses or dependents, when paying the fee.
- If the employer sponsors a self-funded group health plan, then the employer needs to file the form and pay the PCORI fee only on the number of individuals enrolled in the group health plan, and not in the employer-funded health care FSA or HRA.
An employer that sponsors a self-insured HRA along with a fully insured medical plan "must pay PCORI fees based on the number of employees (dependents are not included in this count) participating in the HRA, while the insurer pays the PCORI fee on the individuals (including dependents) covered under the insured plan," wrote Mark Holloway, senior vice president and director of compliance services at Lockton Companies, a benefits broker and services firm based in Kansas City, Mo. Where an employer maintains an HRA along with a self-funded medical plan and both have the same plan year, "the employer pays a single PCORI fee based on the number of covered lives in the self-funded medical plan (the HRA is disregarded)."
Paying PCORI Fees
Self-insured employers are responsible for submitting the fee and accompanying paperwork to the IRS, as "third-party reporting and payment of the fee is not permitted for self-funded plans," Holloway noted.
For the coming year, self-insured health plan sponsors should use Form 720 for the second calendar quarter to report and pay the PCORI fee by July 31, 2019.
"On p. 2 of Form 720, under Part II, the employer needs to designate the average number of covered lives under its applicable self-insured plan," Holloway explained. The number of covered lives will be multiplied by $2.45 for plan years ending on or after Oct. 1, 2018, to determine the total fee owed to the IRS next July.
To calculate "the average number of lives covered" or plan enrollees, employers should use one of three methods listed on pages 8 and 9 of the Instructions for Form 720. A white paper by Keller Benefit Services describes these methods in greater detail.
Although the fee is paid annually, employers should indicate on the Payment Voucher (720-V), located at the end of Form 720, that the tax period for the fee is the second quarter of the year. "Failure to properly designate 'second quarter' on the voucher will result in the IRS's software generating a tardy filing notice, with all the incumbent aggravation on the employer to correct the matter with the IRS," Holloway warned.
A few other points to keep in mind: "The U.S. Department of Labor believes the fee cannot be paid from plan assets," he said. In other words, for self-insured health plans, "the PCORI fee must be paid by the plan sponsor. It is not a permissible expense of a self-funded plan and cannot be paid in whole or part by participant contributions."
In addition, PCORI fees "should not be included in the plan's cost when computing the plan's COBRA premium," Holloway noted. But "the IRS has indicated the fee is, however, a tax-deductible business expense for employers with self-funded plans," he added, citing a May 2013 IRS memorandum.
SOURCE: Miller, S. (2 July 2019) "PCORI Fee Is Due by July 31 for Self-Insured Health Plans" (Web Blog Post). Retrieved from https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/2019-pcori-fees.aspx