We'd like to share the following article in an attempt to impress upon you the crucial need for advance planning with a certified elder law attorney. Now, more than ever, planning is a necessity.
December 30, 2006 - The New York Times
By JANE GROSS
To care for her ailing 97-year-old father over the past three years, Elizabeth Rodriguez, a vice president at the Federal Reserve Bank in New York, has borrowed against her 401(k) retirement plan, sold her house on Staten Island and depleted nearly 20 years of savings.
The money has gone to lawyers' fees ($50,000) to win a contested guardianship. It has gone for home-care equipment like the mattress for his hospital bed (about $3,000 in all) and for a food service to deliver meals ($400 a month).
It has gone for a two-bedroom rental apartment big enough for herself, her dad and a home aide ($1,600 a month more than a one-bedroom apartment in the same building), and for a wheelchair-accessible van to get him to doctors' appointments ($330 a trip).
Asked to tally the costs, Ms. Rodriguez, 58, said she had no idea how much she was spending. "A shower chair, body cream with no alcohol, new shoes," she said. "You don't stop and calculate. You just buy what you have to buy."
Ms. Rodriguez is among the legion of adult children - more than 15 million, according to various calculations - who take care of their aging parents, a responsibility that often includes paying for all or part of their housing, medical supplies and incidental expenses. Many costs are out of pocket and largely unnoticed: clothing, home repair, a cellular telephone.
Adult children with the largest out-of-pocket expenses are those supervising care long distance, those who hire in-home help and those whose parents have too much money to qualify for government-subsidized Medicaid but not enough to pay for what could be a decade of frailty and dependence.
The burden is compounded by ignorance, according to a study by AARP, released in mid-December, which found that most Americans have no idea how much long-term care costs and believe that Medicare pays for it, when it does not.
Families have always looked after their elderly loved ones. But never has old age lasted so long or been so costly, compromising the retirement of baby boomers who were expecting inheritances rather than the shock of depleted savings.
"There is a myth out there that families abandon their frail elders," said Dr. Robert L. Kane, a geriatrician at the University of Minnesota School of Public Health. "Instead, across the income spectrum, children are sacrificing to care for their parents to the limit of their means and sometimes beyond."
Researchers have documented the time spent by adult children, and others, caring for ailing elatives. But data is woefully inadequate on how much they actually spend, health economists say, because most people do not keep itemized entries as they write checks, use their credit cards or pocket money to meet the demands of the day.
"When you're in the middle of the forest, with so many things coming at you, you can't really see the trees," Ms. Rodriguez said. "But each one of those trees has actual dollars connected to it."
Costs are astronomical for long-term, low-tech care, the sort most often needed by those who linger with Alzheimer's disease or are too frail to get around on their own. Medicare is of almost no help, since it covers only acute episodes like a heart attack, cancer or repair of a broken hip.
That means the elderly and their families are left to pay for assisted living (which averages $35,000 a year), nursing homes ($74,000) or home health aides. Only the very poor receive Medicaid, which pays nursing-home bills nationwide but home care in only a few states (New York among them), and nothing toward assisted-living rent.
Nor does Medicare cover equipment like grab bars for the shower and incontinence supplies, which alone can run $2,000 a year, or travel expenses for an adult child responding to medical emergencies.
Marilyn de Leo, for instance, has made two trips from New York City to Los Angeles since September, when her mother fell in the bathroom and broke her neck and both ankles. Ms. de Leo, 62, an associate director in the development office of Mount Sinai Medical Center, spent $800 on
airfare for the first frantic trip , plus $50 a day on taxis, since she had left her eyeglasses behind in a mad dash to the airport and therefore could not rent a car. Ms. de Leo has no savings left, and is $5,000 in debt. When asked about her own future, she said, "I'll have to work till I drop."
Only one authoritative survey, in 2004, has even asked adult children how much they contribute to their parents' support. Half said they did, and the average monthly expenditure was $200. espondents who looked after their parents at least 40 hours a week said they spent an average of $324 a month.
But those figures were based on "quick, top-of-the-head estimates," said Gail Hunt, president of the National Alliance for Caregiving, which conducted the survey.
Knowing the extent of these expenses might inform public policy, some experts say, calling attention to a gap in the government safety net for the elderly.
"Should this burden fall solely on the individual and the family?" asked Judy Feder, dean of the Public Policy Institute at Georgetown University. "And can we really expect this arrangement to keep doing the job as a larger and larger population comes to grips with it?"
Congress recently passed a poorly financed bill that would help family members who need a break to pay for substitute care of an ailing loved one. But the Bush administration, to date, has preferred a private sector solution, recommending long-term insurance and reverse mortgages.
For spouses, most expenses are tax-deductible if they exceed 7.5 percent of adjusted gross income. But children cannot claim parental expenses unless they pay more than half of a parent's support, which is often not the case when the parents are on Medicaid, likeMs. Rodriguez's father, or have savings, like the Schoengood family.
The elder Schoengoods, both 86, own a home in Yonkers and a condominium in Florida and have assets enough for round-the-clock care, which can cost $100,000 a year. Still, their son, Matthew G. Schoengood, 49, vice president of student affairs at the Graduate Center at the City University of New York, has kicked in at least $1,000 a month since 2005, when his mother had the first of two strokes.
Mr. Schoengood flew his family nanny to Florida, for example, to look after his father. Now that his parents are permanently up north, Mr. Schoengood orders their groceries online along with his own. "As a child, it's just something you do," he said. "Mostly you don't even
think about it."
His father makes a half-hearted effort to pay him back, but Mr. Schoengood always says, jokingly, "I'll put it on your tab, Dad." Typical of their generation, his parents fret about every penny. His father asks, incessantly, "Do we have enough?" Mr. Schoengood tells him not to worry.
For sure, he hopes his own children will do for him what he is doing for his parents, but he cringes at the prospect of burdening them - one reason long-term care insurance is becoming attractive.
Mr. Schoengood's out-of-pocket spending is not sensible, elder-care experts say, but the result of the awkward minuet of preserving a parent's pride.
If families behaved logically, said Steven Schurkman, an elder-care lawyer in White Plains, all expenses would be paid from the parents' money, which if depleted would entitle them to Medicaid. "What most of us do isn't sound financial planning," Mr. Schurkman said. "But it's healthy for the family dynamic."
Carol Levine, director of the Families and Health Care Project at the United Hospital Fund in Manhattan, said that paying for her mother's needs required delicacy, even subterfuge. When Ms. Levine went shopping, her mother would say, "Take $5 out of my purse." Her daughter would return with 10 bags of groceries, and both would pretend that was all she had spent.
Both Mr. Schoengood and Ms. Rodriguez say their out-of-pocket expenses will not ruin them. Others are not so lucky.
Take Patrice B., 47, who returned to her childhood home in Jacksonville, Fla., seven years ago to move in with her mother, 84, who has Alzheimer's disease, and her father, 86, who has congestive heart failure. (They requested that the family's last name be omitted so neighbors would not know their plight.)
In their African-American culture, Ms. B. said, putting her parents in a nursing home would have been shameful. Plus, they could pay for some home care out of pensions as well as military disability checks. She, on the other hand, after years of sporadic part-time work and untallied
out-of-pocket expenses, is broke.
She has catastrophic health insurance, but it will not pay for the hysterectomy she needs. She has lost her credit cards after accumulating $20,000 in debt. "Honestly," Ms. B. said, "I've got nothing anymore. I go from very angry to very depressed."
Kate Mesmer, a single mother in Northern California who had always worked for nonprofit organizations, was living paycheck to paycheck when her mother had a stroke in 2001. Ms. Mesmer took a tenant into her house so she could contribute to her mother's $6,000-a-month rent at an
assisted living center.
Then Ms. Mesmer lost her job and had to move her mother to a board-and-care home. A second stroke forced her mother into a nursing home, where she qualified for Medicaid. That is where she died last year, with nothing left but an $18,000 I.R.A. The State of California is seeking that, contending the $18,000 should have gone toward nursing-home fees.
Given what she learned in the final years of her mother's life, Ms. Mesmer said: "I have a panic attack at least once a day. It's frightening to think about our generation and what's going to happen to us."
Saturday, January 27, 2007
Friday, January 5, 2007
2007 Medicaid Rates
The following is a listing of the 2007 Medicaid regional rates which must be used to determine a transfer of assets penalty period when applying for Medicaid. You must refer to the rate for the region in which the facility is located. These rates are based on average nursing home costs in each of the seven regions in the State.
Central New York: $6506
Long Island: $10,123
New York City: $9,375
Northeastern New York: $7,189
Northern Metropolitan Area: $9,074
Rochester: $8,002
Western New York: $6,820
In addition, due to an increase in the consumer price index, the federal maximum community spouse resource allowance (CSRA) increases to $101,640 effective January 1, 2007. The State’s minimum CSRA will remain unchanged at $74,820. Therefore, in determining the community spouse resource allowance on and after January 1, 2007, the community spouse is permitted to retain resources in an amount equal to the greater of the following amounts:
1. $74,820 (the State minimum community spouse resource allowance); or
2. The amount of the spousal share up to $101,640 (the new federal maximum).
“Spousal Share” is the amount equal to one-half of the total value of the countable resources of the couple as of the beginning of the most recent continuous period of institutionalization of the institutionalized spouse on or after September 30, 1989.
Also effective January 1, 2007, the community spouse minimum monthly maintenance needs allowance (MMMNA) increases to $2,541. The increased MMMNA, family member allowance, federal maximum CSRA, and State minimum CSRA must be used when completing an assessment of a couple’s resources and income.
Central New York: $6506
Long Island: $10,123
New York City: $9,375
Northeastern New York: $7,189
Northern Metropolitan Area: $9,074
Rochester: $8,002
Western New York: $6,820
In addition, due to an increase in the consumer price index, the federal maximum community spouse resource allowance (CSRA) increases to $101,640 effective January 1, 2007. The State’s minimum CSRA will remain unchanged at $74,820. Therefore, in determining the community spouse resource allowance on and after January 1, 2007, the community spouse is permitted to retain resources in an amount equal to the greater of the following amounts:
1. $74,820 (the State minimum community spouse resource allowance); or
2. The amount of the spousal share up to $101,640 (the new federal maximum).
“Spousal Share” is the amount equal to one-half of the total value of the countable resources of the couple as of the beginning of the most recent continuous period of institutionalization of the institutionalized spouse on or after September 30, 1989.
Also effective January 1, 2007, the community spouse minimum monthly maintenance needs allowance (MMMNA) increases to $2,541. The increased MMMNA, family member allowance, federal maximum CSRA, and State minimum CSRA must be used when completing an assessment of a couple’s resources and income.
Wednesday, December 20, 2006
FDIC Misconceptions: A Top 10 List (Part I)
FDIC Insurance
To help depositors avoid repeating the mistakes of others, FDIC Consumer News has compiled this “Top 10" list of misconceptions that some people have about FDIC Insurance. This list is based on discussions with FDIC deposit insurance specialists, including representatives at our toll-free Call Center, which handles hundreds of calls a month from consumers asking about their deposit insurance.
1. The most a consumer can have insured is $100,000.
Too many people assume - often incorrectly - that if their bank fails their share all their accounts would be added together and insured up to a combined total of $100,000. Others have notions even further from the truth, such as the idea that the FDIC knows how much each customer has in every bank in the United States (rest assured, we don’t) and that the grand total of all those accounts is insured to no more than $100,000. The reality is that your accounts at different FDIC insured institutions are separately insured, not added together, and you may qualify for more than $1000,000 in coverage at each insured bank if you own deposit accounts in different “ownership categories.”
Suppose you have a variety of accounts at one bank. The funds you have in various checking and savings accounts (other than retirement accounts) in your name alone are insured up to $100,000. Your portion of joint accounts - those with other people - is also separately insured to $100,000. If you also have “revocable trust accounts” at the bank, the total can be separately insured up to $100,0000 for each beneficiary if certain conditions are met. And, under new rules, certain retirement accounts are insured up to $250,000, up from $100,000 previously.
“Depending on the circumstances, a family of four could have well over $1 million in deposit insurance coverage at the same bank,” said James Williams, an FDIC Consumer Affairs Specialist. “And that coverage is separate from what is protected at any other FDIC-insured institution.”
2. Changing the order of names or Social Security Numbers can increase the coverage for joint accounts.
Many depositors mistakenly believe that by changing the order of Social Security Numbers, rearranging the names listed on joint accounts, or substituting “and” for “or” in account titles, they can increase their insurance coverage.
“Consumers are always telling us that they thought they could get more coverage if they did something like title one account for ‘Mary and John Smith’ and another account for “Mary or John Smith,” said Kathleen Nagle, chief of the Deposit Insurance Section in the FDIC’s Division of Supervision and Consumer Protection. “These moves will have no impact on joint account coverage. The FDIC will simply add each person’s share of all the joint accounts at the same institution and insure the total up to $100,000.” (Note: Each person’s share is presumed to be equal unless stated otherwise in the deposit account records.)
3. If a bank fails, the FDIC could take up to 99 years to pay depositors for their insured accounts.
This is a completely false notion that many bank customers have told us they heard from someone attempting to sell them another kind of financial product.
The truth is that federal law requires the FDIC to pay the insured deposits “as soon as possible: after an insured bank fails.” Historically, the FDIC pays insured deposits within a few days after a bank closes, usually the next business day. In most cases, the FDIC will provide each depositor with a new account at another insured bank. Or, if arrangements cannot be made with another institution, the FDIC will issue a check to each depositor.
4. The FDIC only pays failed-bank depositors a percentage of their insured funds.
All too often we receive questions similar to this one: “Is it true that if my FDIC-insured bank fails, I would only get $1.31 for every $100 in my checking account?” As with “misconception number 3, “ this misinformation appears to be spread by some financial advisors and sales people.
Federal law requires the FDIC to pay 100 percent of the insured deposits up to the federal limit - including principal and interest. If your bank fails and you have deposits over the limit, you may be able to recover some or , in rare cases, all of your uninsured funds. However, the overwhelming majority of depositors at failed institutions are within the insurance limit, and insured funds are always paid in full.
5. Deposits in different branches of the same bank are separately insured.
FDIC insurance is based on how much money is in various ownership categories (single, joint, retirement, and so on) at the same insured institution. It doesn’t matter if the accounts were opened at different branches - they are considered the same bank for insurance purposes.
Distinguishing one bank from another isn’t easy these days. Some banks have similar names but they’re not the same institution. And then there are banks that use different “trade” names in different parts of the country or use a different name for their online banking activities or Internet divisions, but they’re all the same bank for FDIC insurance purposes. The FDIC and other federal regulators have advised banks to clearly identify their legal names in advertisements and on Web sites.
When in doubt, you may contact the FDIC. “One way to be extra sure you are depositing money in different banks is to ask the FDIC for each bank’s insurance ‘certificate number’,” noted Williams. “If the FDIC certificate numbers are different, the banks are different.”
Source: www.emaxhealth.com
To help depositors avoid repeating the mistakes of others, FDIC Consumer News has compiled this “Top 10" list of misconceptions that some people have about FDIC Insurance. This list is based on discussions with FDIC deposit insurance specialists, including representatives at our toll-free Call Center, which handles hundreds of calls a month from consumers asking about their deposit insurance.
1. The most a consumer can have insured is $100,000.
Too many people assume - often incorrectly - that if their bank fails their share all their accounts would be added together and insured up to a combined total of $100,000. Others have notions even further from the truth, such as the idea that the FDIC knows how much each customer has in every bank in the United States (rest assured, we don’t) and that the grand total of all those accounts is insured to no more than $100,000. The reality is that your accounts at different FDIC insured institutions are separately insured, not added together, and you may qualify for more than $1000,000 in coverage at each insured bank if you own deposit accounts in different “ownership categories.”
Suppose you have a variety of accounts at one bank. The funds you have in various checking and savings accounts (other than retirement accounts) in your name alone are insured up to $100,000. Your portion of joint accounts - those with other people - is also separately insured to $100,000. If you also have “revocable trust accounts” at the bank, the total can be separately insured up to $100,0000 for each beneficiary if certain conditions are met. And, under new rules, certain retirement accounts are insured up to $250,000, up from $100,000 previously.
“Depending on the circumstances, a family of four could have well over $1 million in deposit insurance coverage at the same bank,” said James Williams, an FDIC Consumer Affairs Specialist. “And that coverage is separate from what is protected at any other FDIC-insured institution.”
2. Changing the order of names or Social Security Numbers can increase the coverage for joint accounts.
Many depositors mistakenly believe that by changing the order of Social Security Numbers, rearranging the names listed on joint accounts, or substituting “and” for “or” in account titles, they can increase their insurance coverage.
“Consumers are always telling us that they thought they could get more coverage if they did something like title one account for ‘Mary and John Smith’ and another account for “Mary or John Smith,” said Kathleen Nagle, chief of the Deposit Insurance Section in the FDIC’s Division of Supervision and Consumer Protection. “These moves will have no impact on joint account coverage. The FDIC will simply add each person’s share of all the joint accounts at the same institution and insure the total up to $100,000.” (Note: Each person’s share is presumed to be equal unless stated otherwise in the deposit account records.)
3. If a bank fails, the FDIC could take up to 99 years to pay depositors for their insured accounts.
This is a completely false notion that many bank customers have told us they heard from someone attempting to sell them another kind of financial product.
The truth is that federal law requires the FDIC to pay the insured deposits “as soon as possible: after an insured bank fails.” Historically, the FDIC pays insured deposits within a few days after a bank closes, usually the next business day. In most cases, the FDIC will provide each depositor with a new account at another insured bank. Or, if arrangements cannot be made with another institution, the FDIC will issue a check to each depositor.
4. The FDIC only pays failed-bank depositors a percentage of their insured funds.
All too often we receive questions similar to this one: “Is it true that if my FDIC-insured bank fails, I would only get $1.31 for every $100 in my checking account?” As with “misconception number 3, “ this misinformation appears to be spread by some financial advisors and sales people.
Federal law requires the FDIC to pay 100 percent of the insured deposits up to the federal limit - including principal and interest. If your bank fails and you have deposits over the limit, you may be able to recover some or , in rare cases, all of your uninsured funds. However, the overwhelming majority of depositors at failed institutions are within the insurance limit, and insured funds are always paid in full.
5. Deposits in different branches of the same bank are separately insured.
FDIC insurance is based on how much money is in various ownership categories (single, joint, retirement, and so on) at the same insured institution. It doesn’t matter if the accounts were opened at different branches - they are considered the same bank for insurance purposes.
Distinguishing one bank from another isn’t easy these days. Some banks have similar names but they’re not the same institution. And then there are banks that use different “trade” names in different parts of the country or use a different name for their online banking activities or Internet divisions, but they’re all the same bank for FDIC insurance purposes. The FDIC and other federal regulators have advised banks to clearly identify their legal names in advertisements and on Web sites.
When in doubt, you may contact the FDIC. “One way to be extra sure you are depositing money in different banks is to ask the FDIC for each bank’s insurance ‘certificate number’,” noted Williams. “If the FDIC certificate numbers are different, the banks are different.”
Source: www.emaxhealth.com
Friday, December 8, 2006
8 Steps for Mangaing Parents' Finances
So, the event you’ve worried about much of your adult life has finally happened: You need to take over Mom’s or Dad’s financial affairs.
In addition to the stress and sadness over what’s happened, you immediately have to deal with practical matters: Will Mom be able to live in her home again? Can she afford a nursing home? Will insurance cover all of Dad’s medical bills?
And, speaking of bills, you’ve got to start paying them–everything from utilities to credit cards.
Even if you’re not at this point with your parents yet, this list can help you decide what to do now–before anything happens.
8-Step Plan
The need to take over your parents’ financial life, especially if it happens suddenly, can be extremely stressful. However, if you approach it one step at a time, you’ll get a handle on what needs to be done.
1. Find all financial accounts and documents.
2. Collect and start paying bills.
3. Locate power of attorney or living trust.
4. Open your parents’ safe-deposit box - with a witness.
5. Become your parents’ guardian.
6. Document everything you do.
7. Consider hiring a financial planning team.
8. Consider updating investments.
Advance planning tip: There are three important documents you can help your parents prepare before they become ill.
1. A power of attorney form, which allows you to take care of their finances.
2. A health care proxy, which allows you to make life-and-death medical decisions.
3. A will, which determines how their assets will be divided when they're gone.
Source: Written by Teri Cettina, Bankrate.com.
In addition to the stress and sadness over what’s happened, you immediately have to deal with practical matters: Will Mom be able to live in her home again? Can she afford a nursing home? Will insurance cover all of Dad’s medical bills?
And, speaking of bills, you’ve got to start paying them–everything from utilities to credit cards.
Even if you’re not at this point with your parents yet, this list can help you decide what to do now–before anything happens.
8-Step Plan
The need to take over your parents’ financial life, especially if it happens suddenly, can be extremely stressful. However, if you approach it one step at a time, you’ll get a handle on what needs to be done.
1. Find all financial accounts and documents.
2. Collect and start paying bills.
3. Locate power of attorney or living trust.
4. Open your parents’ safe-deposit box - with a witness.
5. Become your parents’ guardian.
6. Document everything you do.
7. Consider hiring a financial planning team.
8. Consider updating investments.
Advance planning tip: There are three important documents you can help your parents prepare before they become ill.
1. A power of attorney form, which allows you to take care of their finances.
2. A health care proxy, which allows you to make life-and-death medical decisions.
3. A will, which determines how their assets will be divided when they're gone.
Source: Written by Teri Cettina, Bankrate.com.
Wednesday, November 22, 2006
Seniors Can Change Medicare Prescription Drug Plans Beginning November 15th
Medicare recipients with changes in their drug needs, who want to explore less costly drug plans, or for other reasons desire to change their last year’s plan, now have the chance to choose a new drug plan that better fits their needs.
Beginning November 15th, the Medicaid Part D enrollment window will re-open for seniors and other Medicare recipients. The window will close December 31st. However, the Centers for Medicare and Medicaid Services state that seniors need to enroll in a new plan by December 8, to ensure their new prescription drug card in early January 2007.
New plans will go into effect January 1, 2007, and remain in place for another year. Alternatively, a recipient satisfied with their current Part D plan does not have to re-enroll. For more information contact 1-800-MEDICARE. Or visit the website: www.medicare.gov for the available Medicare D plans.
Beginning November 15th, the Medicaid Part D enrollment window will re-open for seniors and other Medicare recipients. The window will close December 31st. However, the Centers for Medicare and Medicaid Services state that seniors need to enroll in a new plan by December 8, to ensure their new prescription drug card in early January 2007.
New plans will go into effect January 1, 2007, and remain in place for another year. Alternatively, a recipient satisfied with their current Part D plan does not have to re-enroll. For more information contact 1-800-MEDICARE. Or visit the website: www.medicare.gov for the available Medicare D plans.
Friday, November 3, 2006
Friends of Karen
From time to time we are lucky enough to come in contact with a very special organization filled with very special people and a very worthwhile cause. The attached message is from such an organization and we're proud to share it with you.
DID YOU KNOW?
For over twenty-eight years, Friends of Karen has provided financial, emotional and advocacy support to families with children from birth to 21 years of age with cancer and other life-threatening illnesses and living in the tri-state area. Friends of Karen’s goal is to help maintain the highest quality of life and prevent the financial and emotional collapse of the family, as they go through this most difficult time.
Last year, Friends of Karen helped 577 families with children with life-threatening illnesses. Additionally, we helped 805 of their siblings.
HOW DOES FRIENDS OF KAREN HELP?
They Pay -
• Basic living expenses, such as rent and mortgage, utilities, car payments, etc. that
become unmanageable due to lost wages and the high cost of medical care.
• Medical co-payments, hospital bills including television and telephone
• Transportation to/from medical treatment
• Childcare for siblings
• Health insurance payments
• Special home care needs and food
• Funerals
• Counseling
Friends of Karen’s Back to School program provides much needed school supplies to our Friends of Karen children and their brothers and sisters. Holiday Adopt-A-Family program, which begins in the Fall, assures festive holidays for those unable to provide for themselves because of the cost of their child’s illness, and Children Helping Children programs collaborating with schools and service clubs gives children the opportunity to help other children in their community.
Please visit their website at: www.friendsofkaren.org or call them at 631-473-1768 for more information about their services and their up-coming Open House scheduled for late November.
Friends of Karen, 21 Perry Street, Port Jefferson, NY 11777
“When the parents of a terminally or catastrophically ill child receive financial and emotional help, they then have more time to love.”—Sheila Petersen, Founder, 1978.
DID YOU KNOW?
For over twenty-eight years, Friends of Karen has provided financial, emotional and advocacy support to families with children from birth to 21 years of age with cancer and other life-threatening illnesses and living in the tri-state area. Friends of Karen’s goal is to help maintain the highest quality of life and prevent the financial and emotional collapse of the family, as they go through this most difficult time.
Last year, Friends of Karen helped 577 families with children with life-threatening illnesses. Additionally, we helped 805 of their siblings.
HOW DOES FRIENDS OF KAREN HELP?
They Pay -
• Basic living expenses, such as rent and mortgage, utilities, car payments, etc. that
become unmanageable due to lost wages and the high cost of medical care.
• Medical co-payments, hospital bills including television and telephone
• Transportation to/from medical treatment
• Childcare for siblings
• Health insurance payments
• Special home care needs and food
• Funerals
• Counseling
Friends of Karen’s Back to School program provides much needed school supplies to our Friends of Karen children and their brothers and sisters. Holiday Adopt-A-Family program, which begins in the Fall, assures festive holidays for those unable to provide for themselves because of the cost of their child’s illness, and Children Helping Children programs collaborating with schools and service clubs gives children the opportunity to help other children in their community.
Please visit their website at: www.friendsofkaren.org or call them at 631-473-1768 for more information about their services and their up-coming Open House scheduled for late November.
Friends of Karen, 21 Perry Street, Port Jefferson, NY 11777
“When the parents of a terminally or catastrophically ill child receive financial and emotional help, they then have more time to love.”—Sheila Petersen, Founder, 1978.
Friday, October 27, 2006
The Pension Protection Act of 2006
The Pension Protection Act of 2006 was signed into law by President Bush on August 17, 2006. It is the most significant pension legislation since the Employee Retirement Income Security Act of 1974 (ERISA). Among other things, the new law makes a number of retirement savings incentives permanent, toughens the funding rules that govern traditional pension plans, and authorizes 401(k) plans to provide investment advice and automatic enrollment of participants. These changes should help promote retirement income security.
First, the Pension Protection Act permanently extends a variety of pension and savings incentives that were scheduled to sunset in 2011. The annual limit on Individual Retirement Account (IRA) contributions will increase from $4,000 this year to $5,000 in 2008, and it will be indexed for inflation thereafter. The provision that allows individuals who are at least 50 years old to make an additional "catch-up" contribution of $1,000 a year is also made permanent. Also, starting in 2007, taxpayers will be able to have a portion of their income tax refunds directly deposited into their IRAs.
Similarly, the annual limit on 401(k) plan contributions has increased to $15,000 in 2006 (plus another $5,000 for those over age 50), and these amounts are indexed for future inflation.
The Act also expands the saver's tax credit for low- and moderate-income workers. The credit is equal to a percentage-50, 20, or 10 percent, depending on income level-of up to $2,000 of qualified retirement savings contributions ($1,000 maximum credit in 2006). The credit was scheduled to expire at the end of 2006, but the Act makes it permanent and indexes the income and rate levels for inflation.
Second, the Pension Protection Act toughens the funding rules that govern traditional "defined benefit" pension plans. One provision generally requires employers to fix any funding shortfall within seven years, and new disclosure rules give workers more information about the financial status of their pension plans. Moreover, poorly funded plans will be subject to limitations on benefit increases, lump sum payments, and shutdown benefits. Employers will, however, be able to deduct more in the years in which they can afford to make larger contributions.
The Act also makes it easier for employers to utilize cash balance and other innovative pension plan designs, and it allows employers to set up Roth 401(k) plans, under which employees will be able to designate their salary deferral contributions as after-tax Roth contributions.
Third, the Pension Protection Act encourages employers to automatically enroll employees in their 401(k) plans. Starting in 2008, employers will be able to satisfy the IRS's so-called "nondiscrimination" test if they automatically enroll each employee in the 401(k) plan, withhold and contribute a few percent of compensation on behalf of those employees, and make small matching contributions. These 401(k) plans will qualify for favorable tax treatment, even if many employees instead elect to contribute at less than the target levels, or not at all.
Also, starting in 2007, employers will have an easier time providing investment advice to help their employees manage their 401(k) accounts. Employers will be able to provide investment advice through computer models that take into account the employee's age, expected retirement age, income, risk tolerance, and other variables. Alternatively, investment advice could be provided by certain third-party experts on an individual basis, but only if that advice is based on a flat fee charged to each employee, regardless of the investments selected or amounts involved. Another provision protects plans that use a diversified stock and bond fund as the default investment, rather than an ultra-safe but low-yield, money market fund. The Act also requires plans that invest in publicly traded employer stock to allow employees to diversify their individual account holdings. In general, employees must have the right to diversify their own contributions immediately and must be allowed to diversify most employer contributions after three years of service. Together, these investment provisions should help employees get better rates of return on their retirement savings.
The Pension Protection Act also accelerates the vesting of employer contributions to 401(k) and similar plans. Starting next year, employer contributions need to be either 100 percent vested after three years of service (down from five years) or 20 percent vested after two years with an additional 20 percent vesting each year thereafter until 100 percent is vested after six years of service (down from three-to-seven-year graduated vesting).
Another provision facilitates phased retirement by allowing workers over the age of 62 to take in-service distributions from their traditional pensions. Eligible workers will be able to go from full-time to part-time work and receive pension benefits to maintain their current income levels. Also, 401(k) plans will be allowed to let participants make hardship withdrawals to help parents or other beneficiaries, even if those beneficiaries are not dependents or spouses.
The Act also includes a number of provisions that make it easier to fund health care and long-term care costs. For example, one provision makes it easier for pension plans to use excess assets to fund retiree health care, and another provision allows long-term care insurance to be offered as part of an annuity or life insurance contract.
Finally, the Act also includes a package of charitable giving incentives and loophole closers. For example, one provision allows tax-free distributions from IRAs for charities. Otherwise taxable distributions of up to $100,000 a year will be excluded from the IRA owner's taxable income as long as the distribution is made after the owner has reached age 70½ and is made payable to the charity.
Another provision makes it harder to take a current deduction for contributions of a future interest in paintings and other collectibles. A charity receiving a fractional interest in tangible personal property must take complete ownership of the property within 10 years or the death of the donor, whichever is first. In addition, the charity must take possession of the property and use it at least once during the 10-year period as long as the donor remains alive.
The Act also increases the penalties on taxpayers and charities that abuse the charitable contribution rules. Also, one provision denies the deduction for contributions of clothing and household items unless the items are in good condition, and another provision requires that donors have a receipt or cancelled check for all cash donations.
Source: NAELA E-Bulletin, October 3, 2006; written by Jon Forman.
First, the Pension Protection Act permanently extends a variety of pension and savings incentives that were scheduled to sunset in 2011. The annual limit on Individual Retirement Account (IRA) contributions will increase from $4,000 this year to $5,000 in 2008, and it will be indexed for inflation thereafter. The provision that allows individuals who are at least 50 years old to make an additional "catch-up" contribution of $1,000 a year is also made permanent. Also, starting in 2007, taxpayers will be able to have a portion of their income tax refunds directly deposited into their IRAs.
Similarly, the annual limit on 401(k) plan contributions has increased to $15,000 in 2006 (plus another $5,000 for those over age 50), and these amounts are indexed for future inflation.
The Act also expands the saver's tax credit for low- and moderate-income workers. The credit is equal to a percentage-50, 20, or 10 percent, depending on income level-of up to $2,000 of qualified retirement savings contributions ($1,000 maximum credit in 2006). The credit was scheduled to expire at the end of 2006, but the Act makes it permanent and indexes the income and rate levels for inflation.
Second, the Pension Protection Act toughens the funding rules that govern traditional "defined benefit" pension plans. One provision generally requires employers to fix any funding shortfall within seven years, and new disclosure rules give workers more information about the financial status of their pension plans. Moreover, poorly funded plans will be subject to limitations on benefit increases, lump sum payments, and shutdown benefits. Employers will, however, be able to deduct more in the years in which they can afford to make larger contributions.
The Act also makes it easier for employers to utilize cash balance and other innovative pension plan designs, and it allows employers to set up Roth 401(k) plans, under which employees will be able to designate their salary deferral contributions as after-tax Roth contributions.
Third, the Pension Protection Act encourages employers to automatically enroll employees in their 401(k) plans. Starting in 2008, employers will be able to satisfy the IRS's so-called "nondiscrimination" test if they automatically enroll each employee in the 401(k) plan, withhold and contribute a few percent of compensation on behalf of those employees, and make small matching contributions. These 401(k) plans will qualify for favorable tax treatment, even if many employees instead elect to contribute at less than the target levels, or not at all.
Also, starting in 2007, employers will have an easier time providing investment advice to help their employees manage their 401(k) accounts. Employers will be able to provide investment advice through computer models that take into account the employee's age, expected retirement age, income, risk tolerance, and other variables. Alternatively, investment advice could be provided by certain third-party experts on an individual basis, but only if that advice is based on a flat fee charged to each employee, regardless of the investments selected or amounts involved. Another provision protects plans that use a diversified stock and bond fund as the default investment, rather than an ultra-safe but low-yield, money market fund. The Act also requires plans that invest in publicly traded employer stock to allow employees to diversify their individual account holdings. In general, employees must have the right to diversify their own contributions immediately and must be allowed to diversify most employer contributions after three years of service. Together, these investment provisions should help employees get better rates of return on their retirement savings.
The Pension Protection Act also accelerates the vesting of employer contributions to 401(k) and similar plans. Starting next year, employer contributions need to be either 100 percent vested after three years of service (down from five years) or 20 percent vested after two years with an additional 20 percent vesting each year thereafter until 100 percent is vested after six years of service (down from three-to-seven-year graduated vesting).
Another provision facilitates phased retirement by allowing workers over the age of 62 to take in-service distributions from their traditional pensions. Eligible workers will be able to go from full-time to part-time work and receive pension benefits to maintain their current income levels. Also, 401(k) plans will be allowed to let participants make hardship withdrawals to help parents or other beneficiaries, even if those beneficiaries are not dependents or spouses.
The Act also includes a number of provisions that make it easier to fund health care and long-term care costs. For example, one provision makes it easier for pension plans to use excess assets to fund retiree health care, and another provision allows long-term care insurance to be offered as part of an annuity or life insurance contract.
Finally, the Act also includes a package of charitable giving incentives and loophole closers. For example, one provision allows tax-free distributions from IRAs for charities. Otherwise taxable distributions of up to $100,000 a year will be excluded from the IRA owner's taxable income as long as the distribution is made after the owner has reached age 70½ and is made payable to the charity.
Another provision makes it harder to take a current deduction for contributions of a future interest in paintings and other collectibles. A charity receiving a fractional interest in tangible personal property must take complete ownership of the property within 10 years or the death of the donor, whichever is first. In addition, the charity must take possession of the property and use it at least once during the 10-year period as long as the donor remains alive.
The Act also increases the penalties on taxpayers and charities that abuse the charitable contribution rules. Also, one provision denies the deduction for contributions of clothing and household items unless the items are in good condition, and another provision requires that donors have a receipt or cancelled check for all cash donations.
Source: NAELA E-Bulletin, October 3, 2006; written by Jon Forman.
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