Health Care Reform Timeline

January 20, 2011

2010 –New Coverage Options
• Health care tax credit for small employers
• Children covered to age 26
• High-risk pools

2011 –New Taxes
• Medicare tax rate increases 0.9% for higher-income taxpayers
• New 3.8% tax on unearned income for higher-income taxpayers

2011 –Medicare Changes
• Part D
• Medicare Supplement
• Medicare Advantage

2014–Exchanges and Subsidies
• State Health Insurance Exchanges
• Premium subsidies for individuals with incomes below $47K (based on CBO estimate for 2016)

2014–Individual and Employer Coverage Requirements
• Employers with more than 50 employees
• Individuals who can find workplace, exchange, or other policies that cost less than 8% of their income

With the recent elections, we’ll have to watch and see what happens in the meantime, there is new legislation, which goes by the name Patient Protection and Affordable Care Act.

There are two main pieces of Health Care Reform
• One piece aims to make health coverage nearly universal by requiring employers to provide insurance and requiring individuals to buy it (tax credits & subsidies help pay for it).

• Part two tries to make Medicare, a popular and effective, but expensive, program that serving people 65 and older, more efficient.


Ten Thing You Should Know About Medicare – Part Two

January 18, 2011

6. Medicare doesn’t cover all your expenses.
You may find that each part of Medicare has some things it doesn’t cover.

7. Start by looking at what you have now.
Look at your current health coverage. For example, if you have group coverage from your job, or retiree insurance from a former employer, you’ll want to see how this coverage fits with Medicare.

8. You won’t want to put this off.
Timing matters when you’re choosing Medicare coverage.
Your enrollment window begins just before you turn 65 or when you become eligible for Medicare due to disability.

9. It’s smart to review your choices once a year.
Once you choose your Medicare coverage, you’re not locked into that choice. You’ll have the chance to change your choices at least once a year. That’s why it makes sense to check your coverage every year to make sure it still fits your health needs.

10. Don’t be afraid to ask for help.
There’s help available for everyone making Medicare choices. And there’s extra help with the cost of Medicare for people with little income and few assets.

Open enrollment starts on November 15. You are limited in when you can change your Medicare health plan during the year. You can switch during the Annual Coordinated Election Period which runs from November 15 through December 31 every year.

New coverage starts January 1. During this period you can change your choice of health coverage, and add, drop or change Medicare drug coverage.

A licensed broker can help you with these specifics.
Sources:
United HealthCare.com


Ten Thing You Should Know About Medicare – Part One

January 13, 2011

1. There are two ways to get Medicare, turn age 65 or become disabled.
Your biggest decision is choosing between Original Medicare (Part A and Part B) and the Medicare Advantage plan. If you choose Original Medicare, decide whether to buy a stand alone prescription drug plan or Medigap (Medicare supplemental insurance) policy. If you choose Medicare Advantage, pick a specific plan from a specific company.

2. There is drug coverage available.
Medicare now includes prescription drug coverage also known as Part D.
This coverage is optional. You can get prescription drug coverage through a Medicare Advantage plan. Some of them include drug coverage. Or you can enroll in a standalone Part D prescription drug plan to go with your Original Medicare coverage.
This is important to know: If you don’t sign up for Part D prescription drug coverage as soon as you become eligible for Medicare, you may pay a penalty on your premium unless you qualify for an exception.

3. Even for covered expenses, you’ll pay a share of the cost.
Medicare helps you get the health care you need when you’re sick, but you’ll still be expected to pay a share of the cost. You contribute to Medicare by paying taxes while you work. When you start to use your Medicare benefits, you’ll pay a share of the costs of the care you receive.

4. Your share may be larger than you expect.
If you choose Medicare Parts A and B, you’ll find that there are some expenses Medicare doesn’t cover. If you are seriously ill, these gaps create big bills. Some people who choose Medicare Parts A and B also buy a Medicare supplement insurance policy. Another alternative is to choose a Medicare Advantage plan that can also help you avoid these gaps.

5. Where you live makes a difference.
Medicare Parts A and B are the same across the United States. But other parts of Medicare (Parts C and D) are offered by private companies and may be available in specific counties, states, or regions, and not in others. There are Part C or Part D plans that offer nationwide coverage.


Your Health and Wealth in Retirement

January 11, 2011

Traditionally, there have been 5 things that may impact retirement savings during retirement:
• Inflation
• Market volatility
• Taxes
• Health care costs
• Longevity
A comprehensive study by LPL Financial, United HealthCare, Age Wave and Northstar Research found that health care expenses are the #1 worry for people nearing and in retirement.

Why? People feel unprepared, overwhelmed and frustrated. Health care planning is one of the things you need to think about and understand how it may impact your financial situation, especially your distribution planning. Consider overall health, you should plan for good health and you should plan for not-so-good health, also called planning for the “certainty of uncertainty.”

It also helps to understand the types of available insurance, such as Medicare, Medicaid and Supplemental.

Sources:
AgeWave, LPL Financial and UnitedHealthcare, Health and Wealth Planning in Retirement Survey, July 2010
LPL Financial and Northstar Research Partners, Advisor Health Insurance Study, May 2010


Our “One and a Half Cents” on the Fourth Quarter – Part Two

January 6, 2011

At Wealth Enhancement Group, financial education has always been a priority and a commitment to our clients and the community. This article summarizes the details of the recent legislation. If you have questions about how these changes impact you personally, we are offering a complimentary 2011 tax planning review for those who are interested.

On December 17, 2010, President Barack Obama signed into law The Reid-McConnell Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010. The Act is the result of a compromise struck between President Obama and Republican leaders of the Senate and House of Representatives to temporarily extend unemployment benefits, reduce Social Security taxes, extend the “Bush Tax Cuts,” and make a host of other tax changes.

The Act now extends most of the provisions of two separate tax relief laws, which were set to expire, until the end of 2012. It offers citizens a variety of benefits, primarily in the areas of estate tax and individual income tax.

Individual Income Tax Rates
As part of the Bush Tax Cuts extension, the Act extended the expiration date on income tax rates by an additional two years. The current income tax rates (top federal income tax bracket is 35% and the lowest income tax bracket is 10%) will remain the same for the next two years.

By keeping the rates unchanged, 2010 Roth conversions are more valuable. Individuals can opt for the two-year deferral and no additional costs are incurred.

Long-term capital gains and dividend tax rates stay at 15% if your taxable income is in the 25% tax bracket or higher, or 0% if your taxable income is in the 15% tax bracket or lower.

Estate Tax
Under the new tax revisions, the estate tax rates are simply shortened by the Act at the top marginal rate of 35%. The brackets between 18% and 34% remain exactly the same, and the 35% bracket is imposed as the maximum rate.

The exemption amount has been raised to $5 million per person or $10 million per couple. Exemptions are portable between couples. This amount is indexed for inflation in multiples of $10,000 beginning in 2012. Starting January 1, 2013, the applicable exemption amount will revert back to $1 million as it was scheduled to do under previous legislation. The $5 million exemption amount is also applicable to gift taxes and the generation-skipping transfer tax.

As a result, more Roth IRAs and traditional IRAs will pass estate tax-free, and inherited Roth IRAs will be not only income tax-free but also estate tax-free.

Charitable Contributions
Required minimum distributions (RMD) that have not been met in 2010 can still be taken and allocated as a donation to a specific charity until the end of January 2011. If one does not want to donate the IRA distribution to charity, then the 2010 RMD must be taken by year-end as usual. If it is not timely taken, the 50% penalty on the amount not taken will apply.

The Bottom Line
There are plenty of provisions to the Tax Relief Act, including the extension of charitable IRA distributions and land conservation easements, and these changes provide many tax planning opportunities for individuals.

It is important to remember that the Act is essentially a two-year patch to prevent economic damage from tax provisions that are expiring at an inconvenient time. This will all have to be revisited in two years, when the political party balance in Washington may be very different than it is today.

The national tax provisions can be complicated. At Wealth Enhancement Group, our knowledgeable team of specialists can help you better understand the changes and use them for your long-term financial success.


Our “One and a Half Cents” on the Fourth Quarter – Part One

January 4, 2011

The stock market posted strong gains during the third quarter after rebounding from the low of the year that occurred near the end of the second quarter. The S&P 500 posted an 11% gain for the quarter. The strong gains during the quarter were far from steady. Volatility was high as the S&P 500 moved up and down within a 10% trading range. Cyclical, Mid-Cap, and European stocks fared the best during the quarter:

The highly cyclical Materials, Industrial, and Consumer Discretionary sectors were among the best performers while the legislation-sensitive Financials and Health Care sectors lagged.

According to data from the U.S. Treasury, purchases of U.S. stocks by foreigners in the third quarter of 2010 were likely strong based on the latest data available for July. On average, demand in recent quarters has only been exceeded in the past by the surge in buying around the market peaks in 2000 and 2007.

However, those foreign investors saw almost none of the strong gains in the U.S. stock market translate into their holdings due to the decline in the value of the dollar. The performance of the dollar-denominated S&P 500, when adjusted for the value of the dollar against major trading partners, was relatively flat for the quarter. If foreign investors fear further declines in the dollar, they may restrict their buying of U.S. stocks.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance reference is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.