Obamacare upheld again: Consequences for Business Owners and Investors

Presidential Seal

 

 

 

 

Last week the Supreme Court ruled that all qualifying Americans are entitled to receive subsidies to purchase health insurance under the Affordable Care Act, regardless of where in the country they live.  The decision leaves the status quo in place but nonetheless raises considerations for investors and business owners:

  • As interpreted by the Administration, the ACA requires small business owners with more than fifty employees to provide health coverage to their employees beginning in 2016.
  • There remains a concern about inadequate ACA enrollment, particularly by middle- and higher-income Americans.  If enrollment continues to lag, it could lead to significant premium increases, as the insurance pool will not have sufficient “good” risks to balance out the less favorable ones.
  • Speaker Boehner’s legal action against President Obama remains outstanding.  Boehner’s suit objects to the Administration’s unilateral decisions to delay the employer mandate and to reimburse insurance carriers for losses incurred from insuring high-risk people.  A Boehner victory (which most legal experts consider a long shot) could end the carrier subsidies, which likely would prompt carriers to increase premiums or cut coverage to recoup the lost revenue.
  • The decision avoids a decline in health care stock values.  Many companies – particularly for-profit hospitals – benefit from the greater insurance coverage provided by the ACA.  However, premium increases discussed above could cause the feared “death spiral”, in which higher premiums leads to fewer healthy enrollees, which leads to higher premiums, etc.  That consequence could hurt health care stock values down the road.
  • The decision eliminates any realistic possibility of repeal of the 3.8% surtax on investment income for higher-income taxpayers.  Revenue from that tax is used to pay for the bulk of the insurance subsidies that the Court upheld.  There is no realistic prospect of a reduction in tax rates in sight.

 


Andrew H. Friedman is the principal of The Washington Update LLC and a former senior partner in a Washington, D.C. law firm.  He speaks regularly on legislative and regulatory developments and trends affecting investment, insurance, and retirement products.  He may be reached at www.TheWashingtonUpdate.com.

Neither the author of this paper, nor any law firm with which the author may be associated, is providing legal or tax advice as to the matters discussed herein.  The discussion herein is general in nature and is provided for informational purposes only.  There is no guarantee as to its accuracy or completeness.  It is not intended as legal or tax advice and individuals may not rely upon it (including for purposes of avoiding tax penalties imposed by the IRS or state and local tax authorities).  Individuals should consult their own legal and tax counsel as to matters discussed herein and before entering into any estate planning, trust, investment, retirement, or insurance arrangement.

Copyright Andrew H. Friedman 2015.  Reprinted by permission.  All rights reserved.

What is the Generation Skipping Transfer Tax?

Recently, M Financial posted a brief blog on the generation skipping transfer tax.  Please copy and paste the link below into your internet browser to read.Transfer Tax

http://mfin.com/m-intelligence-details/Understanding the Generation Skipping Transfer Tax

 

Life Insurance in a Rising Tax Environment

In March, we posted an article about investing in a rising tax environment.  We at WealthPoint thought the article in the link below would be a good follow up to that article.  Please take a moment to read through it.

Rising Tax Environment

Please click the link below.

WP_Marketing Intelligence Report – Life Insurance in a Rising Tax Environment

Life Insurance Basics

M Financial put together a piece on life insurance basics that we thought our readers would find educational.  Please take a moment to read through it and use it as a reference.

To view the file, select the link below:

WP_Life Insurance Basics

Life Insurance Policy

 

U.S. HOUSE PASSES ESTATE TAX REPEAL DESPITE VETO THREAT

US House of Rep

By Richard Cowan and David Lawder

WASHINGTON (Reuters) – The U.S. House of Representatives on Thursday ignored a White House veto threat and passed legislation to repeal the estate tax that hits inherited assets worth $5.4 million or more.

By a mostly partisan 240-179 vote, the Republican-backed bill will be sent to the Senate, where Democrats are expected to use procedural hurdles to try to block it. Even if it passes the Senate, it would likely fail to achieve a two-thirds majority needed to override a veto.

House passage was timed for the week when most Americans file their tax returns. Conservatives, who refer to the estate tax as the “death tax,” have long railed against it, arguing it hurts the families of small business owners and farmers.

“It’s past time to repeal this unacceptable tax. Every American deserves the ability to pass their life’s savings to their kids,” said Representative Tom Graves, a conservative Republican from Georgia.

Repealing the tax would boost the federal deficit by about $269 billion over 10 years, according to Congress’ Joint Committee on Taxation.

Few Americans pay the 40 percent tax on assets above the $5.4 million exclusion amount. About 5,400 estates, equal to 0.2 percent of taxpayers, will owe such taxes in 2015, according to the JCT.

(Reporting By Richard Cowan and David Lawder; Editing by Dan Grebler)

The Impact of True Collaboration

Recently, Ryan and Tim were asked by STAFDA, a large national trade association we have spoken to, to write an article for their upcoming trade magazine.  This article highlights the impact of collaboration with an entrepreneurial family group and their advisory team.

Please click the link below to view the PDF file.

The Impact of True Collaboration – Ryan Barradas – Tim Young

Common Life Insurance Mistakes

We at WealthPoint continually strive to provide insight to our clients and advisory community.  The attached piece was written by M Financial and discusses life insurance policy issues that have been encountered through the years.  Please click the link to review the white paper.

 

 WP_AMI_Common Life Insurance MistakesMistake

Investing in a Rising Tax Environment

Rising Tax Environment

We at WealthPoint are always looking for pieces that educate our readers and provide insight.  Andrew H. Friedman of TheWashingtonUpdate.com recently wrote the article attached to this post.   This white paper discusses the likely future direction of taxes, and what investors can do to minimize the tax impact on their investment returns.

Investing_in_a_Rising_Tax_Enviroment_2015

Click on the link above to view the full article (PDF)

 

Importance of Life Insurance Policy Reviews

M Financial is constantly writing material for member firms to share with the advisor community and clients on the subject of life insurance.  WealthPoint is a member firm of M Financial and we wanted to make this article available.

WP_AMI_May 2014_Importance of Life Insurance Policy Reviews

Click on the link above to view the full article (PDF)

How To Get Started

Part 4 of a 4 part series

Provided by Ryan F. Barradas and Tim Younggetting-started

In order for you to confidently move forward with big decisions in a manner you haven’t previously, you need an approach that invites three key dynamics into the room: your entrepreneurial spirit, the relational factors unique to closely-held or family business and the technical aspects of sound planning. You have to get to that point of instinctual clarity about how you’d like your story to play out from here forward.

However, your advisors also have a responsibility to know your story. In order to do this, there must be a process that allows them to take the time and have the respect to hear the full story of all the stakeholders in the planning process before recommending any action. You need to learn how potential planning will affect their lives; how they make decisions and the motivations they bring to their role. Sometimes people just need to be heard. Yet sometimes they have a legitimate issue that will impact the plan. I believe it’s imperative to get all the necessary players into the arena and on the team at the onset. Anything else is inefficient.

So how do you do this? You do it through deep discovery with all key stakeholders – meaning anyone who’s going to be affected by decisions you will make either financially, emotionally or from a business perspective. This can include: spouses, business partners, key employees, active and inactive children, key advisors, bankers, key business relationships and more. It’s the people part where most if not all planning processes get derailed, technical solutions come later.

Once this deep discovery is complete, the findings should be organized and distilled down into a document that outlines ten to twenty of your macro goals. These are goals and objectives that absolutely cannot be violated, period. Regardless of the effectiveness of a strategy, if it violates one or more of the macro goals, it should never be presented for consideration. This will keep you on track and provide you with benchmarks for measuring success.

Next, you must embrace a process that allows advisors to truly collaborate. Some families feel that bringing advisors together for group meetings may increase fees. Ironically, if organized properly the opposite occurs. With communication occurring real-time amongst all parties, better ideas are formulated in less time, often reducing fees, taxes or other expenses. The team arrives at more relevant solutions faster and there’s less chance of one person’s style driving the result.

Last but not least, do not try to do this yourself! It’s hard enough to run your business, but doing it while managing a complex process with so much at stake is nearly impossible. As soon as the process diverts your attention from what makes you money, you’ll table the subject until the “right time” which never comes. Procrastination can cost money and more important, it limits your choices. Hire a professional with a multidisciplinary background. Make sure they have the capacity to understand all the dynamics at play (entrepreneurial, relational and technical), and will hold all the accountable parties accountable.

Ryan Barradas (ryan@wealthpoint.net) and Tim Young (tim@wealthpoint.net) are co-founders and partners of WealthPoint, LLC in Phoenix, AZ.  WealthPoint is a nationally recognized firm focusing in the areas of succession, exit and wealth transfer planning for entrepreneurial family groups.