March 2011 - Susman
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Life Insurance–How Much Is Enough?

You are probably aware of the importance of having enough life insurance coverage to handle the financial contingencies that may affect your family in the event of your death. However, determining the necessary amount of life insurance can be complicated. One general rule of thumb is that you should have enough coverage to equal five to seven times your annual salary. However, you may want to determine the “right” amount of life insurance coverage with a careful “needs analysis,” rather than using an arbitrary formula.

The needs analysis approach incorporates an evaluation of your family’s most important financial obligations and goals. This leads to planning insurance coverage to help address mortgage debt, college expenses, and future family income, as well as to provide liquidity for meeting future estate tax liabilities.

Mortgage Debt

The first point worthy of consideration is whether your life insurance proceeds will be sufficient to help pay the remaining mortgage on your home. If you are carrying a large mortgage, you may need a sizable amount. If you own a second home, that mortgage should also be factored into the formula.

College Expenses

Many people want life insurance proceeds large enough to help cover their children’s college expenses, and possibly, graduate school. The amount needed can be roughly calculated by matching the ages of your children against projected college costs adjusted for inflation. This calculation should be revised periodically as your children get closer to college age, and it may be a good idea to be as conservative as possible when estimating long-term savings goals.

Continuing Income for Your Family

The amount of income you will need to help provide for your surviving spouse and dependents will vary greatly according to your age, health, retirement plan benefits, Social Security benefits, other assets, and your spouse’s earning power. Many surviving spouses may already be employed or will find employment, but your spouse’s income, alone, may not be sufficient enough to cover the monthly expenses of your family’s current lifestyle. Providing a supplemental income fund can help your family maintain its standard of living.

Estate Taxes

Life insurance has long been recognized as an effective method for establishing liquidity at death to pay estate taxes and maximize asset transfers to future generations. However, this use of life insurance requires qualified legal expertise to help ensure the proper results.

Existing Resources

If your current assets and retirement plan death benefits are sufficient to cover your financial needs and obligations, you may not need additional life insurance for these purposes. However, if they are inadequate, the difference between your total assets and your total needs may be funded with life insurance.

There are many factors to consider when completing a needs analysis. In addition to the areas already mentioned, some other questions you might want to address include the following:

1. How much will Social Security provide and for how long?

2. How do you “inflation-proof” your family income, so the real purchasing power of those dollars does not decrease?

3. What is the earning potential of your surviving spouse?

4. How often should you review your needs analysis?

5. How can you use life insurance to help provide retirement income?

6. How do you structure your estate to reduce the impact of estate taxes?

7. Which assets are liquid and which would not be reduced by a forced sale?

8. Which assets would you want your family to retain because of sentiment or future growth possibilities?

As you develop an insurance strategy, remember to analyze your existing policies. Calculate the additional coverage you may need based on your family’s financial obligations and any other resources, such as retirement benefits and savings. Remember, having the proper life insurance coverage can play a major role in any family’s financial protection.

MetLife, its agents, and representatives may not give legal or tax advice. Any discussion of taxes herein or related to this document is for general information purposes only and does not purport to be complete or cover every situation. Tax law is subject to interpretation and legislative change. Tax results and the appropriateness of any product for any specific taxpayer may vary depending on the facts and circumstances. You should consult with and rely on your own independent legal and tax advisers regarding your particular set of facts and circumstances.

Copyright © 2010 Liberty Publishing, Inc. All Rights Reserved.

L0410101464(exp0411)(All States)(DC)

This article appears courtesy of Karl Susman.  Karl Susman is a representative of the New England Life Insurance Company. He focuses on meeting the individual insurance and financial services needs of people on the West Coast.  You can reach Karl at the office at (424) 785-4337. New England Life Insurance Company, 501 Boylston Street, Boston, MA 02116

Asset Allocation: Composing Your Financial Symphony

Any classical music composer will tell you that creating a symphony requires a delicate balance of sounds, melodies, and harmonies. Each instrument creates unique sounds and vibrations, which, when heard alone, may not be particularly compelling. However, when the orchestra plays in unison, the end result can be a masterful composition. Hence, the true art of creating a masterpiece is arranging melodies and blending sounds. In this respect, composers and investors share some similarities. Successful investing typically combines a number of different investments in order to create a portfolio that is “in tune” with the investor’s goals and objectives. It’s no coincidence that such a technique is the foundation for one of the most basic financial investment principles—asset allocation.

Asset allocation is the process of attempting to decrease financial risk by investing monies in different asset categories. To effectively diversify, consider investing in at least three different asset classes. The major asset categories include stocks, bonds, and cash (saving and checking accounts, certificates of deposit, money market accounts, and Treasury securities). Mutual funds often represent a combination of asset categories, but they may consist of just one asset category, such as a bond fund.

Overall, asset allocation may help reduce investment risk while achieving potentially higher returns. That’s because different categories of investments react differently to changes in the economy. For example, while stock values might be plummeting, bond values may be rising or remaining level. With a well-diversified portfolio, you can ultimately come to own many asset categories, thus potentially reducing the impact market volatility may have on your total investments.

Creating Your Own Ensemble

Before deciding where to invest, you should review your personal financial goals and ask yourself the following questions:

  • What are my goals for my money?
  • How can I keep inflation from eroding my purchasing power?
  • How much risk am I willing to take with my money?
  • Will I be comfortable holding investments with daily price fluctuations?

Many investors use asset allocation as the foundation of their portfolios. However, it is essential to realize that this strategy does not eliminate risk or guarantee a profitable investment return.

To reduce risk, your financial portfolio should reflect your own personal financial goals and investment style. Among other factors, your age, income, expenses, family responsibilities, and risk tolerance can influence how you should build your portfolio.

Arranging a Masterpiece

One of the biggest challenges facing the average investor is deciding how to allocate personal savings or retirement assets. Naturally, most individuals hope to create an investment portfolio that is consistent with their personal objectives and risk tolerance level. However, the lure of potentially high rates of return can easily skew an investor’s objectivity, resulting in unrealistic expectations and unnecessary exposure to risk. Thus, it is important to adhere to a diversified investment strategy that conforms with your short- and long-range goals. With a little bit of patience, your future may bring music to your ears.

Copyright © 2010 Liberty Publishing, Inc. All Rights Reserved.

L0410102864(exp0511)(All States)(DC)

 

This article appears courtesy of Karl Susman.  Karl Susman is a representative of the New England Life Insurance Company. He focuses on meeting the individual insurance and financial services needs of people on the West Coast.  You can reach Karl at the office at (424) 785-4337. New England Life Insurance Company, 501 Boylston Street, Boston, MA 02116

Your Estate and Life Insurance: It All Adds Up

It’s easy to underestimate your net worth. After all, without a crystal ball, the future value of your home and savings is hypothetical. What’s not hypothetical, however, is the fixed amount of the death benefit provided by your life insurance policy. Adding this often significant sum to your asset pool could expose your estate to Federal estate taxes. Fortunately, there are trusts that can exclude life insurance from an estate.

Many people assume that because death benefit proceeds from a life insurance policy are generally not considered taxable income to the beneficiary, a life insurance policy is out of the reach of the Internal Revenue Service (IRS). However, when the policy’s death benefits are added to the appreciated value of your home and savings, it may come as a shock to find that the value of your estate may exceed the applicable exclusion amount.

Taxpayers should be aware that, under current law, Federal estate taxes are repealed in 2010. However, according to the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), estate taxes will be reinstated in 2001, with an applicable exclusion amount of $1 million and a top tax rate of 55%. Congress may retroactively change the rules before the end of 2010, reinstating the estate tax at the same or new levels.

Although the unlimited marital deduction allows spouses to transfer assets to each other without assessment of estate taxes, non-spousal heirs face the possibility of seeing a life insurance policy inflate an estate’s value past the scheduled exemption amount in the year of death.

One Strategy: A Credit-Shelter Trust

One way to protect life insurance policy proceeds from estate taxation is to use a type of bypass trust known as a credit-shelter trust. This trust can be established during life, even if left unfunded, or at death through a will.

For estate conservation purposes, a trust could be set up to maximize each spouse’s applicable exclusion amount, perhaps sheltering more assets from estate taxation than may be possible through use of just the unlimited marital deduction. At the death of one spouse, an amount equal to his or her applicable exclusion amount could pass to a trust to benefit the surviving spouse but intentionally designed not to qualify for the marital deduction, with the remainder of the assets passing outright to the spouse. Then, at the death of the surviving spouse, assets in the credit-shelter trust could be paid to the couple’s children—without being subject to Federal estate tax. Any assets outside the trust upon the surviving spouse’s death, and therefore potentially subject to estate tax, could be further sheltered by the second spouse’s applicable exclusion amount for that year.

Another Approach: An ILIT

Especially when children are intended to receive the proceeds of a life insurance policy and the owner wants to exempt the policy from the estate’s total worth, an irrevocable life insurance trust (ILIT) is another approach. In this case, the trust is the owner and the beneficiary of the policy. Keep in mind, however, the term “irrevocable” means beneficiaries may not be changed and loans for the benefit of the insured may not be paid out from the policy once it is put into the trust. Putting a hefty life insurance policy into such a trust could help beneficiaries finance the purchase of a family business or pay estate taxes. However, funding an ILIT may result in gift taxes due.

Park Your Policy in the Right Spot

A trust, depending on the type, can help reduce or defer taxes on high-value assets such as life insurance. More broadly, a trust can be the means to help ensure the policy’s benefits go directly to the intended beneficiary. With the flexibility of trusts, however, comes complexity. It is always best to consult with an estate attorney who is experienced in tax matters before proceeding.

MetLife, nor its affiliates, their agents, and representatives, may not give legal or tax advice. You should consult with and rely on your own independent legal and tax advisors regarding your particular set of facts and circumstances.

Copyright © 2010 Liberty Publishing, Inc. All Rights Reserved.

L0310095214(exp0311)(All States)(DC)

This article appears courtesy of Karl Susman. Karl Susman is a representative of the New England Life Insurance Company. He focuses on meeting the individual insurance and financial services needs of people on the West Coast. You can reach Karl at the office at (424) 785-4337. New England Life Insurance Company, 501 Boylston Street, Boston, MA 02116

Life Insurance—How Much Is Enough?

You are probably aware of the importance of having enough life insurance coverage to handle the financial contingencies that may affect your family in the event of your death. However, determining the necessary amount of life insurance can be complicated. One general rule of thumb is that you should have enough coverage to equal five to seven times your annual salary. However, you may want to determine the “right” amount of life insurance coverage with a careful “needs analysis,” rather than using an arbitrary formula.

The needs analysis approach incorporates an evaluation of your family’s most important financial obligations and goals. This leads to planning insurance coverage to help address mortgage debt, college expenses, and future family income, as well as to provide liquidity for meeting future estate tax liabilities.

Mortgage Debt

The first point worthy of consideration is whether your life insurance proceeds will be sufficient to help pay the remaining mortgage on your home. If you are carrying a large mortgage, you may need a sizable amount. If you own a second home, that mortgage should also be factored into the formula.

College Expenses

Many people want life insurance proceeds large enough to help cover their children’s college expenses, and possibly, graduate school. The amount needed can be roughly calculated by matching the ages of your children against projected college costs adjusted for inflation. This calculation should be revised periodically as your children get closer to college age, and it may be a good idea to be as conservative as possible when estimating long-term savings goals.

Continuing Income for Your Family

The amount of income you will need to help provide for your surviving spouse and dependents will vary greatly according to your age, health, retirement plan benefits, Social Security benefits, other assets, and your spouse’s earning power. Many surviving spouses may already be employed or will find employment, but your spouse’s income, alone, may not be sufficient enough to cover the monthly expenses of your family’s current lifestyle. Providing a supplemental income fund can help your family maintain its standard of living.

Estate Taxes

Life insurance has long been recognized as an effective method for establishing liquidity at death to pay estate taxes and maximize asset transfers to future generations. However, this use of life insurance requires qualified legal expertise to help ensure the proper results.

Existing Resources

If your current assets and retirement plan death benefits are sufficient to cover your financial needs and obligations, you may not need additional life insurance for these purposes. However, if they are inadequate, the difference between your total assets and your total needs may be funded with life insurance.

There are many factors to consider when completing a needs analysis. In addition to the areas already mentioned, some other questions you might want to address include the following:

1. How much will Social Security provide and for how long?

2. How do you “inflation-proof” your family income, so the real purchasing power of those dollars does not decrease?

3. What is the earning potential of your surviving spouse?

4. How often should you review your needs analysis?

5. How can you use life insurance to help provide retirement income?

6. How do you structure your estate to reduce the impact of estate taxes?

7. Which assets are liquid and which would not be reduced by a forced sale?

8. Which assets would you want your family to retain because of sentiment or future growth possibilities?

As you develop an insurance strategy, remember to analyze your existing policies. Calculate the additional coverage you may need based on your family’s financial obligations and any other resources, such as retirement benefits and savings. Remember, having the proper life insurance coverage can play a major role in any family’s financial protection.

This article appears courtesy of Karl Susman.  Karl Susman is a representative of the New England Life Insurance Company. He focuses on meeting the individual insurance and financial services needs of people on the West Coast.  You can reach Karl at the office at (424) 785-4337. New England Life Insurance Company, 501 Boylston Street, Boston, MA 02116

 

MetLife, its agents, and representatives may not give legal or tax advice. Any discussion of taxes herein or related to this document is for general information purposes only and does not purport to be complete or cover every situation. Tax law is subject to interpretation and legislative change. Tax results and the appropriateness of any product for any specific taxpayer may vary depending on the facts and circumstances. You should consult with and rely on your own independent legal and tax advisers regarding your particular set of facts and circumstances.

Copyright © 2011 Liberty Publishing, Inc. All Rights Reserved.

L0410101464(exp0411)(All States)(DC)

Understanding the Importance of Insurance

An unexpected occurrence, such as a death, disability, or other personal loss, is certainly not the type of event for which you can easily plan. Yet the financial ramifications can be staggering—not only to you, but to your family as well. Therefore, it is important to make a risk management plan part of your overall financial strategies.

Insurance, in all its varied forms, is quite simply a method for handling risk. In order to plan an effective insurance program, you need to consider the risks to which you and your family are exposed and how financial loss could affect you. For each risk exposure, the key elements to consider are the severity and frequency of loss.

All Risks Are Not Created Equal

Insurance is oftentimes required in certain situations: For example, some states require a driver to obtain auto insurance in order to receive or maintain a license, and some lending institutions will not approve a mortgage application if the potential owner does not also purchase homeowner’s insurance. In these situations, while a base level of coverage may be required, you, as the insured, still may have choices as to the amounts and levels of coverage purchased, according to your specific risk needs.

Some risks may be so negligible that you may decide to accept more responsibility for any potential loss. In insurance language, you “self-insure” for risks you choose to accept. For example, it is rarely cost-effective to carry a large amount of collision coverage on a ten-year-old automobile. Since collision coverage generally pays actual cash value, and since a ten-year-old car may have little current fair market value (FMV), it is common to self-insure a larger portion of collision coverage in such cases. In making this choice, you assume more responsibility for any accidental damage to the vehicle that you might cause.

In contrast, in other situations, the risk is so large (or the cost of self-insurance so great) that the best strategy is to try to avoid the risk entirely. You practice risk avoidance in daily life when you invoke the phrase “not worth the risk” to describe your decision not to participate in some events. In addition to required coverages, you may oftentimes customize insurance to protect against certain extras according to your needs. For example, it may be wise to purchase a policy rider for your homeowners policy if you own an antique art collection that is worth more than the value of more standard coverage.

Sometimes, for instance, risk can be reduced by taking extra measures to control the potential conditions that may lead to loss. Installing an automobile anti-theft device or a home security system may reduce the chances of burglary to your car or home.

Risk Transfer and Risk Sharing

Buying insurance is the process of transferring risk you cannot afford, or choose not to accept. Since you may be unable to afford to rebuild your home and replace all its contents in the event of fire, you may choose to transfer that risk to an insurer by purchasing the appropriate amount of homeowners insurance. However, even in situations of risk transfer, it is quite common to share some of the risk. For example, the deductible on an automobile or homeowners insurance policy is a form of risk sharing—you accept responsibility for a small portion of the risk while transferring the bulk of the risk to the insurer.

Taking a closer look at the different types of risks that are faced on a daily basis can help you answer questions such as the following: What is my risk level and how much of that risk can I afford to shoulder? What types of insurance, in addition to required coverage, might I need? And, how much coverage should I purchase? The fundamental rationale behind all forms of insurance is to determine what risks can be transferred on a cost-effective basis.

This article appears courtesy of Karl Susman.  Karl Susman is a representative of the New England Life Insurance Company. He focuses on meeting the individual insurance and financial services needs of people on the West Coast.  You can reach Karl at the office at (424) 785-4337. New England Life Insurance Company, 501 Boylston Street, Boston, MA 02116

 

Copyright © 2011 Liberty Publishing, Inc. All Rights Reserved.

L0910130651(exp0911)(All States)(DC)

Divorce and Retirement Plan Proceeds

Unfortunately, divorce is increasingly common in our society. Because divorce entails the dividing of assets, some of which have tax implications, it is important to be aware of potential “tax traps” when you begin planning. One such trap in the area of retirement plan assets is the existence of vested account balances.

In the past, with traditional defined benefit plans, the plan participant was promised a retirement benefit, but he or she had no vested retirement account balance. However, with the shift toward defined contribution plans, vesting for employee contributions is immediate, and vesting for employer contributions builds quickly. Consequently, as more Americans participate in 401(k) plans and other defined contribution retirement plans, dividing vested retirement plan assets in divorce situations has created complex financial issues.

Protect Yourself with a QDRO

A qualified domestic relations order (QDRO) is a judgment or order that involves child support, alimony, or property rights pertaining to a spouse, former spouse, child, or other dependent. A QDRO can be used to establish one spouse’s right to part or all of the other spouse’s retirement plan(s)—and to ensure that the recipient spouse pays the tax.

To be protected through a QDRO, it must specify the following:

o The name and address of the plan participant and the “alternate payee” (typically, the participant’s spouse).

o The name and account number of each retirement account involved.

o The percentage (or dollar amount) of each plan that is to be paid to the alternate payee.

o The period of time or the number of payments covered by the QDRO.

The QDRO must be a part of the divorce decree or a court-approved property settlement document. The decree should also specify that a QDRO is being established under Section 414(p) of the Internal Revenue Code (IRC) and the particular state’s domestic relations laws. Intent to establish a QDRO is insufficient; it must be spelled out in the divorce papers.

Getting divorced can be “taxing” enough, but it need not be made more difficult by mishandling the division of assets in a retirement plan. And, although this particular decision does appear to provide room for straying from the precise wording of the statute, applying the proper language in a divorce decree may help ease some of the inevitable complications that can arise, facilitating a smoother transition for all involved. Qualified legal advice should be obtained to help ensure that any desired planning actions are worded and structured properly.

This article appears courtesy of [Reps full name]. [Reps first name] is a Registered Representative offering securities through MetLife Securities, Inc.(MSI) (member FINRA/SIPC), New York, NY 10166. Insurance and annuities offered through Metropolitan Life Insurance Company (MLIC), New York, NY 10166. MSI and MLIC are MetLife companies. [He/She] focuses on meeting the individual insurance and financial services needs of people [in/from] [name occupation/profession/business/or lifestyle market]. You can reach [rep first name] at the office at [registered branch office address and phone number, including area code]. MetLife does not provide tax or legal advice.

Copyright © 2010 Liberty Publishing, Inc. All Rights Reserved.

L0210091158(exp0311)(All States)(DC)

This article appears courtesy of Karl Susman. Karl Susman is a representative of the New England Life Insurance Company. He focuses on meeting the individual insurance and financial services needs of people on the West Coast. You can reach Karl at the office at (424) 785-4337. New England Life Insurance Company, 501 Boylston Street, Boston, MA 02116

Institute of Business & Finance Announces a New CFS® Designee

San Diego, CA, March 22, 2011 – The Institute of Business & Finance (IBF) recently awarded
Karl Susman with the first nationally recognized mutual fund designation, CFS® (Certified Fund
Specialist®). This graduate-level designation is conferred upon candidates who complete an 135+
hour educational program focusing on closed-end funds, mutual funds, ETFs, REITs, UITs and
modern portfolio theory. Over $10 trillion is invested in mutual funds in the United States; half
of all households own shares in at least one mutual fund.

CFS® certification requires mastery of portfolio construction, risk measurement, manager
selection, monitoring, income strategies, retirement accounts, titling, taxation and the
psychological aspects of finance. According to IBF, “The vast majority of investors and advisors
do not know how to properly select a mutual fund, understand what criteria are important, asset
category correlation or what historical statistical information is a good predictor and what is a
poor indicator of what is likely to happen in the future.”
The student must pass three comprehensive exams and a written case study as well as adhere to
the IBF Code of Ethics and IBF Standards of Practice as well as fulfill annual continuing
education requirements. The CFS® program, since 1988, is designed for brokers and advisors
who have clients that either own or are considering investing in mutual funds or exchange-traded
funds.

ABOUT THE INSTITUTE OF BUSINESS & FINANCE – Founded in 1988, IBF is a nonprofit
provider of financial education and designations to members of the financial services
industry. IBF is the fourth oldest provider of financial certification marks in the United States. In
1988, IBF launched its first certification program, CFS® (Certified Fund Specialist®). Today IBF
offers four additional financial designation programs: CAS® (Certified Annuity Specialist®),
CES™ (Certified Estate Planning Specialist™), CIS™ (Certified Income Specialist™) and CTS™
(Certified Tax Specialist™).

Appeals information updated

Although the appeals provision of the health care reform law was effective in 2010, the U.S. Department of Labor provided an enforcement grace period until July 2011 for some requirements until additional guidance is issued. We are anticipating further guidance, which we believe may address some requirements that we and other carriers have expressed concern about, including:

· Diagnosis codes and treatment codes (and their descriptions) on explanation of benefit forms, which raises privacy concerns

· Group-specific language requirements, which put additional responsibilities on customers 

For details on our current implementation efforts, please review the fact sheet that outlines our implementation efforts for both parts of the appeals provision: (1) adverse benefit determinations and (2) appeals process.

New fact sheets outline market reforms in 2014

In 2014, some of the most significant requirements of the health care reform law will take effect. In addition to the availability of exchanges, 2014 will bring changes to health insurance markets, product designs and employer responsibilities. 

We’ve developed a new fact sheet that outline key changes coming in 2014, including:

· Exchanges

· Health plan product framework

· Additional product requirements

· Free choice vouchers

· Rating requirements (small group only)

· Combined risk pool (small group only)

The information in the fact sheet is based on the provisions in the health care reform law. Many of the details about 2014 market reforms will need to be clarified by regulations.

Healthcare Reform updates

In a recent sit down in Washington, regulators and policymakers from several key agencies and associations sat down to discuss several issues.  Amongst those issues discussed were:

Several common themes emerged during the meetings:

  • Timelines
    • Both the public and private sector policy experts appear to be genuinely concerned about addressing PPACA’s quick timelines for implementation. Beyond the politics, there appears to be an apolitical sentiment that we need to move more slowly. However, the regulators would need additional legislative or regulatory guidance to change the major timelines that were established through PPACA statutory requirements.  
  • Exchanges1
    • Most states are busy sorting out the governance structure of the public exchanges and beginning to identify some of the key exchange operational elements in 2011.
    • PPACA authorizes a variety of options related to how the exchange models can be configured ranging from the Massachusetts’ “active purchaser” model to Utah’s “all comers” approach.  
    • The Small Business Health Options Program (SHOP) exchange concept appears to be a legislative after-thought and more details need to be sorted out.
    • The same rating rules should be implemented both inside and outside each public exchange to help avoid adverse selection.
    • Tracking eligibility for individuals and families overtime is going to be a challenge and might generate privacy concerns.
    • Policymakers were very interested in learning more about how private exchanges, such as BenefitMall, have been successful.
  • Benefits
    • The definition of the essential benefit package(s) offered through the exchanges will have a profound impact on PPACA’s ultimate success.
    • Existing and future federal/state mandated benefits will likely be unaffordable.
    • After the BenefitMall meetings, regulators appear to have a greater understanding of the wide range of current benefit offerings (which supports the premise that one size does not fit all.)
  • Funding
    • Many of PPACA’s original cost estimates were not accurate.
    • Significant cost and implementation challenges lie ahead – both at the state and federal levels.
    • The threat of de-funding PPACA and the ongoing budget battles are having a chilling effect on some regulatory activities.
  • Understanding the Market
    • There appears to be a greater appreciation of how PPACA could help and hurt the private sector.
    • More attention needs to be devoted to the impact of PPACA’s insurance market reforms.  
    • Regulators are interested in learning more about local market purchasing trends from experts like BenefitMall.
  • Supporting the Consumer2
    • Meeting participants appear to recognize that inexperienced Navigators (a concept embedded in PPACA) should not replace the role of a licensed broker.

o A greater awareness of the backend support services is more apparent, including the need for a broker’s services to help consumers answer health questions.

Current PPACA activities in the pipeline include:

  • On Thursday, Representatives Mike Rogers and John Barrow introduced legislation to exempt broker compensation from the medical loss ratio calculations.
  • A myriad of funding and defunding measures continue to wind their way through the halls of Congress.
  • Health care providers continue to wait for the Centers for Medicare and Medicaid Services (CMS) to publish regulations governing accountable care organizations (ACOs).
  • The Institute of Medicine is currently studying how PPACA’s Essential Benefit packages should be designed.3
  • State activity continues to heat up with almost 500 bills recently introduced in the majority states which reference PPACA’s state-based exchanges.4
  • The five court cases challenging PPACA’s individual mandate will likely be appealed to the U.S. Supreme Court.5
  • With Republicans beginning to announce their intention to run for President, the 2012 campaign season will begin shortly – which will provide an opportunity to re-evaluate PPACA’s insurance market pre-suppositions and legislative policy goals.
  • Congress is still addressing the repeal of the 1099 reporting requirements.6
  • With 42 out of 100 Senators firmly opposed to the nomination of Don Berwick as CMS Administrator, President Obama will likely need to consider new candidates since 60 senators must vote for the nomination.

Interestingly, this week HHS Chief Sibelius again signaled more flexibility in how the states can implement PPACA. However, Republicans continue to complain that they are not seeing enough follow-up to these promises.7

1. BenefitMall’s Issue Brief on Exchanges at https://www.benefitmall.com/PORTAL/Portals/0/BenefitMall Brief.pdf

2. Unfortunately, many policy experts still believe that offering an online web portal will be enough to empower employers and individuals to make a health insurance purchasing decision.  This is just not the case.

3. http://www.iom.edu/Activities/HealthServices/EssentialHealthBenefits.aspx

4. Based upon Westlaw search run on March 17, 2011 (Search Terms “Patient Protection and Affordable Care Act” and “Exchanges” used in the same bill).

5. http://www.healthcareexchange.com/blog/michael-gomes/eleventh-circuit-court-appeals-hear-vinson-case-declared-ppaca-unconstitutional

6. https://www.benefitmall.com/PORTAL/Portals/0/Legislative Alert/20101029LegislativeAlert.pdf

http://www.politico.com/news/stories/0311/51269.html

A Short Course in Budgeting for College Students

One “extracurricular” activity that every student should master while in college is personal money management. Typically, a student’s day-to-day spending is done on an improvised basis, meaning that overspending is often the norm rather than the exception.

It is estimated that during a school year the average college or university student will spend approximately $4,000 for books, supplies, transportation, and personal expenses (Trends in College Pricing—2009, The College Board). However, there is often room for economizing. The first place to look is at food and telephone calls. Difficulty may occur in controlling these expenses, especially if pizza is ordered regularly at 2 am and long-distance friends are simply a phone call away.

While many students may assume it costs less to live off campus than in a dorm, they may be in for a surprise. In college towns with a high demand for off-campus housing, accommodations within walking distance of the campus may tend to be expensive. Some landlords require a one-year lease—a period longer than the school year—thus, subleasing privileges should be included as part of an “economical” lease. However, off-campus students can save money by sharing housing and doing their own cooking.

Money Smarts 101

The following may serve as important steps toward helping your student understand college finances:

1. Before your student leaves for college, sit down and have an open discussion of expectations—both your child’s and yours.

2. Consider providing a lump sum each semester, making it clear how long the money must last.

3. Explain when checks or money transfers can be expected, the amounts that will be received, and any rules concerning the use of funds.

Since most students rely on savings and checking accounts—regardless of whether they include parental funds, their own, or a combination of both—it is important for them to understand how these accounts work. The ability to balance an account accurately and make needed corrections is especially critical.

Many undergraduates may keep most of their funds in hometown financial institutions. However, managing financial affairs long-distance can be difficult. Verifying an account balance quickly with an out-of-state bank can be both costly and time-consuming. So, it may be a good idea to keep a smaller account on campus.

While some parents may fear a credit card can give a student who has difficulty managing his or her affairs too much of a cushion, others find a credit card can provide a useful backup, especially in an emergency or for certain expenses. For instance, it can help with car rentals, plane fares, and railroad tickets. In addition, trying to get money to college students in different locations can be frustrating, and it is often impossible for anyone to cash personal checks away from home.

Making the Grade

Ideally, college students should take full charge of a semester’s spending. Life becomes much easier for parents when college-age children can manage their own finances, and the students will learn valuable life skills in the process.

This article appears courtesy of Karl Susman.  Karl Susman is a representative of the New England Life Insurance Company. He focuses on meeting the individual insurance and financial services needs of people on the West Coast.  You can reach Karl at the office at (424) 785-4337. New England Life Insurance Company, 501 Boylston Street, Boston, MA 02116

 

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