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August News From Golden & Cohen

The Future of Medicare

By Scott Golden
Co-Owner and CFO
Scott@Golden-Cohen.com

On August 3, Agent's Sales Journal reporter Heather Trese published an article featuring my comments about the future of Medicare.

She wrote: Some people, including Scott Golden, chief financial officer of the health benefits consulting company Golden & Cohen, predict that Medicare plans – such as original Medicare with a Part D or Med supp addition – will start to become more attractive as Medicare Advantage loses its luster.

I said: "Whenever you make one product less attractive, you'll make the other product more attractive. So it does work to an advantage for those who work in the indemnity market." Click here to read Heather's entire article.

This issue is incredibly timely. In fact, back in March our monthly newsletter focused on Medicare – an important topic, especially if you or a loved one is nearing age 65. The process is complicated, and try as you might, don't be surprised if you can't get all the information you need to understand how to apply, what benefits you will receive, and a myriad of other questions you are likely to have. Click here for details.

Also in this issue:
• You'll find an article by our accountant Eric Cohen, who asks, "Is it time for a Roth conversion?"
• And check out the 10th chapter in our upcoming book, "You Gotta Laugh: Life in the Trenches of the Health Insurance Business." In this month's insurance issue, my wife and business partner Stephanie Cohen and I explain why you need to carefully track and pay your premiums at the same time each month.

From all of us at Golden & Cohen, here's to your good health!

Stephanie Cohen, CEO, stephanie@golden-cohen.com
Scott Golden, CFO, scott@golden-cohen.com
Jack Cohen, COO, jack@golden-cohen.com


Is It Time For a Roth Conversion?

By Eric Cohen, president
E. Cohen and Company
www.ecohencpas.com

As you may be aware, since January 1, 2010, the income limitation on Roth IRA conversions has been eliminated, making virtually all taxpayers eligible to convert to a Roth IRA.

This presents an excellent opportunity for many taxpayers to shelter future income and appreciation from income taxes. However, there are several factors to consider in determining whether a Roth IRA conversion is right for you.

A little background

In 1997, Congress introduced the Roth IRA, which allowed taxpayers with less than $100,000 ($150,000 – married filing jointly) adjusted gross income (AGI), to make contributions of after-tax dollars to a Roth IRA. Upon retirement, the distributions from the Roth IRA account were free from income taxes.

Additionally, taxpayers who met the AGI limitation of $100,000 could convert their Traditional IRAs to a Roth IRA by paying income tax on the current value of the account. The ultimate question when considering a Roth IRA conversion is whether to pay tax now or later.

Why incur the tax now?

It may be beneficial in the long run for either you or your beneficiaries to pay income tax now and allow the assets to grow income tax free. However, the following factors should be considered:

1. Your current tax rate v. expected future tax rate,
2. Your current cash flow needs v. anticipated future cash flow needs,
3. Any favorable tax carryovers,
4. Family and personal health history,
5. Estimated federal estate tax liability, and
6. Anticipated return on the IRA assets, as well as your non-IRA assets at retirement age.

Looking forward over the next few years, it is highly likely that Congress will increase income tax rates, especially the two highest income tax rates, in an attempt to offset record deficits and to pay off the national debt.

By converting to a Roth IRA today, at lower income tax rates, you, in all likelihood, will convert future income and appreciation within the IRA to tax-free income at a relatively low tax cost.

It's beneficial to convert, if:

1. Tax rates increase in the future,
2. You can afford to use non-IRA assets to pay the income tax incurred on conversion,
3. You will not need to withdraw IRA assets during your lifetime,
4. The assets in the Roth IRA appreciate,
5. You will be subject to estate taxes,
6. You plan to leave the Roth IRA to young beneficiaries.

The 2010 IRA income incurred upon conversion is automatically deferred equally over 2011 and 2012 at the effective tax rates for those years.

However, you can make an election to pay the entire income tax for the conversion in 2010 based on 2010 tax rates. Additionally, you can do a partial conversion of your Traditional IRA in 2010 and another part in 2011, 2012, etc.

Questions? Contact us at 301.917.6200 if you would like to discuss your specific situation.

About Eric Cohen, CPA
President, E. Cohen and Company

Eric Cohen is the president and founder of E. Cohen and Company, CPAs, which specializes in auditing, taxation, accounting services, computer systems, internal control evaluations, and litigation support services.

For more than 25 years, he has provided services to entities of all sizes in the Washington, DC metropolitan area, advising them on tax compliance and planning, estate planning, and business development.

Eric primarily provides tax research, planning and compliance services to high-income individuals, C-corporations, LLC's, S-corporations and partnerships. He also provides audit and accounting services to these same entities.

Additionally, he has extensive experience with computer applications for financial/tax planning and analysis, accounting systems design and implementation, and database management. His industry specializations include real estate, government contractors, not-for-profit, wholesalers and professional service companies.

He has provided expert testimony in the District Court of Maryland and has provided litigation support services. These services include providing legal analysis, tax analysis, and acting as liaison between counsel on legal matters.

Eric has acted as managing partner for various partnerships and has managed the financial affairs of their affiliated entities and trusts.

Contact Eric Cohen at ECohen@ecohencpas.com.

Sign up to receive his monthly newsletter at www.ecohencpas.com.



 

You Gotta Laugh: Life in the Trenches of the Health Insurance Business

By Scott Golden and
Stephanie Cohen
www.golden-cohen.com

This month's health insurance issue: You do not receive your bill from the insurance carrier, but are responsible for the payment.

The situation: Claudia, a business owner who has HMO and PPO coverage for her employees, did not receive her bill for the PPO insurance. When she realized there was a problem, she called the carrier to find out what was going on.

Her partner, Zayne, was nervous because he wanted to be sure the firm did not get billed for two PPO payments the following month. It was also time to renew the insurance policies, and he didn't want to be penalized for a missed payment.

What you need to know: Zayne's concern was valid because many insurance companies will not send out a bill until they receive payment for the prior month. All bills are due on the first of the month, but there is a 30 day grace period. Many people wait to pay their bill until the end of the month; thus there is a delay in billing.

Additionally, many insurance companies do not consolidate their bills, but rather send out separate bills based on the different products that one firm may purchase.

And do keep this in mind: Some carriers have also ceased sending out paper bills and now operate solely online. What's more, they typically do not announce this change widely – so if you hire a new HR manager, he/she may not know how to maneuver his/her way through the system.

The solution: Claudia and Zayne called us to intervene. We found out that their insurance company was in the process of changing its internal billing system, so no PPO bill was generated. Once we requested a bill, they emailed it to Claudia.

Lesson learned: Do not assume the insurance company is going to send you a bill. Mark the date on your calendar when it should be received, and if you don't get it, call to find out what is going on. It's also a good policy to always pay your bill prior to the first of the month, and if possible, pay it on a specific day each month, so that you maintain consistency.

If we were the Health Insurance Ambassadors: We would require all bills be sent by snail mail and email. That would put the onus on the insurance company to produce the bill on time, and on a specific date each month, regardless of when they received the previous payment.

If the insurance company does not send out a bill by the agreed upon date, we would give the policy holder a reasonable grace period. We're all human.

The painful truth: At this point, it is your responsibility to pay your health insurance premium on time each month. Don't assume you will get a bill. The insurance company can cancel your policy for fraud - or nonpayment. Therefore, this must be taken seriously.

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