IRS Benefit Plan Limits for 2015

Presented by Mark Phillips

he Internal Revenue Service (IRS) has announced contribution limits for retirement plan participants for 2015. Many of the limits will change because the Consumer Price Index met the statutory thresholds that trigger their adjustment.

The maximum annual contribution employees can make through salary reduction to a 401(k), 457(b), or 403(b) has increased to $18,000. Catch-up contributions for employees 50 years of age and older has also increased, to a maximum of $6,000 per year. SIMPLE IRA limits have increased from $12,000 to $12,500, while the compensation limit for SEPs has also increased from $550 to $600.

 

The dollar limit used in the definition of a key employee for top-heavy purposes remains unchanged at $170,000, but the definition of a highly compensated employee has increased to $120,000.

401(k) Plan Limits for Plan Year	2015 Limit	2014 Limit	IRC Reference
401(k) Elective Deferral Limit1	$18,000	$17,500	402(g)(1)
Catch-Up Contribution2	$6,000	$5,500	414(v)(2)(B)(i)
Defined Contribution Dollar Limit	$53,000	$52,000	415(c)(1)(A)
Compensation Limit3	$265,000	$260,000	401(a)(17); 404(i)
Highly Compensated Employee Income Limit	$120,000	$115,000	414(q)(1)(B)
Key Employee Officer Limit	$170,000	$170,000	416(i)(1)(A)(i)
Non-401(k) Limits
403(b) Elective Deferral Limit1	$18,000	$17,500	402(g)(1)
Defined Benefit Dollar Limit	$210,000	$210,000	415(b)(1)(A)
457 Employee Deferral Limit	$18,000	$17,500	457(e)(15)
SEP and SIMPLE IRA Limits
SEP Minimum Compensation	$600	$550	408(k)(2)(C)
SEP Maximum Compensation	$265,000	$260,000	401(a)(17); 404(i)
SIMPLE Contribution Limit	$12,500	$12,000	408(p)(2)(E)
SIMPLE Catch-Up Contribution2	$3,000	$2,500	414(v)(2)(B)(i)

¹ Employee deferrals to all 401(k) and 403(b) plans must be aggregated for purposes of this limit.

² Available to employees age 50 and older during the calendar year.

³ All compensation from a single employer (including all members of a controlled group) must be aggregated for purposes of this limit.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Investors should consult a tax preparer, professional tax advisor, and/or a lawyer.

IRS CIRCULAR 230 DISCLOSURE:
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax information contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed here.

 

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Securities and advisory services offered through Commonwealth Financial Network® , Member FINRA/SIPC,
a Registered Investment Adviser. Rev. 10/14

 

 

 

 

When Will Your Long-Term Care Benefits Kick In?

Presented by Mark Phillips

Long-term care refers to a broad range of medical and personal services for people with chronic disabilities who have lost the ability to function independently. Long-term care services can be divided into three levels:

·         Skilled care is continuous, around-the-clock care designed to treat a medical condition from which the patient is expected to recover. Skilled medical personnel, such as registered nurses or professional therapists, perform this type of care under a physician’s orders.

·         Intermediate care is intermittent nursing and rehabilitative care provided by registered nurses, licensed practical nurses, or nurse’s aides under the supervision of a physician.

·         Custodial care is designed to help an individual perform the activities of daily living (ADLs). It can be provided by someone without professional medical skills but is supervised by a physician.

Medicare and other forms of health insurance do not pay for custodial care, which is why your long-term care policy benefits are so important.

When will you qualify for custodial care?

If you own long-term care insurance (LTCI), you can qualify for custodial care if:

·         Your doctor certifies it is medically necessary.

·         You have a severe cognitive impairment.

·         You are unable to perform a certain number (usually two to three) of the six ADLs for 90 days or more. The ADLs are:

-          Eating

-          Bathing

-          Dressing

-          Toileting

-          Transferring (into or out of bed, a chair, or a wheelchair)

-          Continence and personal hygiene

Be sure to check the details of your LTCI policy to determine the specific medical conditions it covers.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

IRS CIRCULAR 230 DISCLOSURE:

To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

For IARs: Mark Phillips is a financial advisor located at Mark Phillips & Associates, 19712 MacArthur Boulevard, Suite 225, Irvine, CA 92612. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network^®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at (949) 333-6394 or at mark@phillipswealthmanagement.com.

© 2014 Commonwealth Financial Network^®

 

Inheriting Debt from a Family Member

Presented by Eric Figarsky

When a loved one passes away, his or her outstanding debt (and how that debt will be paid) likely won’t be the first thing on your mind. Unfortunately, many people find themselves dealing with a deceased family member’s creditors as they grieve. While no one likes to think about a loved one’s passing, it makes good financial sense to consider these matters ahead of time.

Who’s responsible for outstanding debt?

Generally, the deceased person’s estate assets are used to satisfy creditor claims before assets are distributed to the beneficiaries. If the estate assets are insufficient to pay all of the outstanding debt, the estate is considered “insolvent,” and state law prioritizes the payment of the deceased person’s bills with the available assets.

In some cases, however, outstanding debts may not fall to the estate. For example:

·         Cosigned debts. If you’ve cosigned on a loan or credit card with the deceased person, you are financially responsible for that debt.

·         Guaranteed debts. Similar to cosigning, if you are the guarantor of a loan for someone who has passed away, you will owe the lender payment of any remaining debt.

·         Community property. If your spouse passes away, you may find yourself responsible for debts for which you weren’t a cosigner or coapplicant. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin are considered community property or quasi-community property states, meaning that all property and debt acquired during a marriage is considered jointly owned. If you live in one of these states, you could be held responsible for debts your spouse incurred.

How are different types of debt handled?

·         Credit card debt. Again, family members are not responsible unless they cosigned on the credit card. Although debt collectors may be aggressive, they can only make a claim against the estate. If you did cosign, you will be held responsible for the debt, even if you didn’t directly incur it.

·         Medical debt. If your parent qualified for Medicaid, the state may try to recover the payments made for his or her care. The state cannot ask you to pay, but it may be able to put a lien on your parent’s home to recover the funds. If a family member dies with other unpaid medical bills (unrelated to Medicaid), those bills become an estate debt. Keep in mind that many states have “filial responsibility” statutes that, under certain circumstances, hold adult children responsible for a deceased parent’s medical debt. Be sure to understand how state law may apply in your situation.

·         Mortgage debt. If you inherit a residence with a mortgage, you generally aren’t required to pay it off immediately. If you fail to make the mortgage payments, however, or cannot sell the house for a price that will pay off the mortgage, the lender will likely foreclose (or possibly agree to a short sale). If you don’t wish to own the real estate, you may disclaim it, at which point it would transfer to the next estate beneficiary.

·         Student loan debt. Federal programs, such as Perkins and Stafford loans, usually offer cosigners forgiveness if the borrower passes away. Private loans may be another story, however. Although some lenders have started to discharge the debt if a borrower dies or becomes disabled, many demand the money owed from cosigners.

·         Taxes. The estate is responsible for paying any property, income, or estate taxes. Tax authorities are usually given top priority as creditors.

Don’t be bullied

Family members of deceased debtors—and all consumers—are protected by the federal Fair Debt Collection Practices Act (FDCPA), which prohibits debt collectors from using abusive, unfair, or deceptive practices in attempting to satisfy a debt. Under the FDCPA, collectors can contact the deceased person’s spouse, guardian, executor, or administrator to discuss a debt, but you do have the right to control your interactions with these collectors. For more information, visit the Federal Trade Commission’s website at www.consumer.ftc.gov/articles/0081-debts-and-deceased-relatives.

Know where you stand

Inherited debt can be a complex issue to sort out. If you find yourself in this situation, seek advice from your financial advisor and an attorney who can guide you through the probate process and work with any debt collectors. Although dealing with a loved one’s death is never easy, getting your questions answered and protecting your inherited assets may make the situation a little less stressful.

 

Medicare Enrollment, and Changes to Enrollment… When?

Presented by Mark Phillips

Recently the Journal of Financial Planning provided a run down on five of the most common windows for Medicare enrollment and for making Medicare plan election changes. The following Graphic is a helpful guide:
 

Click on above image to access larger version

The Squared Away Blog (The Center for Retirement Research at Boston College) provided the following Critical Dates:
 

·         Failing to enroll in basic Medicare (parts A and B) three months before or during the month of one’s 65^th birthday creates at least a two-month delay in coverage.

·         People can buy or switch their Medicare Advantage and Part D drug plan between Oct. 15 and Dec. 7.   But Advantage plan disenrollment dates are Jan. 1 – Feb. 14, when simultaneous Part D enrollment is also permitted.

·         To avoid underwriting rules that may restrict coverage or increase premiums for private Medigap coverage, enroll in Medigap during the six-month period that starts the month of one’s 65^th birthday.

 
Click HERE for full Squared Away Blog Article