A plan sponsor’s personal liability

A recent seminar focusing on fiduciary responsibilities as they pertain to company retirement plans was so well-received we thought it would be a good idea to share this information with our clients and friends. As plan sponsors are aware, performing certain duties within the company retirement plan renders the plan sponsor personally liable. Understanding that often leaves plan sponsors wondering what steps should be taken to properly manage that liability.

What constitutes liability?

Liability comes in all shapes and sizes. This article does not claim to be an inclusive look at all potential liability, but instead focuses on the investment selection and monitoring ‘piece of the pie.’ If the plan sponsor is not an expert they must hire one to properly select and monitor the investments in the plan. Seems simple enough, right? Well not exactly. Not all advisors are created equal, and in ...

I recently met with a client—let’s call him Joe Plumber—who did not have a ‘typical’ estate plan in place, but rather had the majority of his assets held jointly with his wife.  When I raised the issue of establishing a ‘typical’ estate plan, Joe’s response was that he had somewhat of a bias against an estate plan with numerous trusts because he simply did not understand the complex setup.  My goal, then, was to provide an explanation of a ‘typical’ estate plan and its benefits, in an easy to understand format.  For clients who turn glassy-eyed during the estate planning discussions in review meetings, this explanation is intended to help you understand more easily the ways of the estate planning world.  Believe me, I recognize that this is a very complex subject, one which can be difficult to understand short of spending three years in law school.  I would also ...

Over the past several months, clients have been asking a lot of questions relating to fixed income yields. Here is just a sample of what they’re asking:

• Why would I invest in bonds paying such low yields?
• Why would I rebalance and invest in such low yielding bonds, especially since I am getting a better dividend yield in my equities?
• Should I stay in cash for the short run until bond yields improve?
• How can I enhance my yield?

I always find myself coming back to the very fundamental investment theme of risk vs reward. In other words, clients should consider how much more risk they are willing to take on in pursuit of higher yields.

I think it is important not to lose sight of the role fixed income plays in a well-diversified portfolio. That role is to reduce risk and add stability. The current low yield environment is ...

The Alternative Minimum Tax originally took effect in 1970 as a separate tax system built around the notion that high-income individuals should pay a minimum amount of tax, even if they qualify for tax benefits that would otherwise allow them to pay less.[1]  For most of you, the 2009 tax season has come and gone and you may have already had to deal with the AMT nightmare. But for those who have yet to pay 2009 taxes, the Alternative Minimum Tax may still be waiting for you.    For most of you, the 2009 tax season has come and gone and you may have already had to deal with the AMT nightmare. But for those who have yet to pay 2009 taxes, the Alternative Minimum Tax may still be waiting for you. 

In order to ensure that certain taxpayers who benefit from regular tax deductions and credits ...

At around 2:40 p.m. on Thursday, May 6, (2010), I pulled up Yahoo Finance to see how the market was reacting to the demonstrations in Greece earlier that day. To my surprise, with every website update, the market dropped another 200 points.  At one point, the DJIA was down almost 1,000 points.  My stomach churned.  I can recall only two other times when the market experienced such a radical drop: on 09/11/01 and after the collapse of Lehman Brothers.  What was going on?

Why the 1,000 point drop?

I scanned the headlines.  As expected, Greece agreed to accept aid from the rest of Europe and some demonstrations got a little out of control.  The news hadn’t changed from the morning updates.  Before the day was over, the irregular trading activity was widely reported as a trading error.  More than a week later, investigators still do not know what exactly ...

Recently, I met with prospective clients to discuss their financial goals and objectives, as well as the many services Moneta Group could offer them. One of their primary concerns was an emphasis on working with an advisor they could “trust” and who they felt was “competent.”   These were simple requirements, I thought.  In fact, I wondered why they even needed to be discussed. Clearly, anyone seeking financial advice would have the expectation that the person they are entrusting with their family’s financial future would act only in their best interests.

Unfortunately, there are a number of individuals and firms who do not hold themselves to that key aspect of the fiduciary standard, although many consumers assume it is inherent in any financial advice they receive.  However, there are two very different standards in our industry, and not all advisors are held to the fiduciary standard, but instead abide by a ...

The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) initiated a series of tax cuts, including reductions in the income and estate tax rates.  However, the act included a ‘sunset provision,’ which takes effect December 31, 2010.  This means that as of that date, various tax laws revert to pre-2001 status, as if EGTRRA had never happened—unless additional legislation has been passed between 2001 and today. We are midway through 2010 and many clients want to know which provisions are expiring and which are here to stay.  A few major EGTRRA provisions of importance to many of our clients are summarized here.

Income Tax Rates

The EGTRRA income tax rate reductions are among those set to expire at year-end.  The lowest income tax bracket will increase to 15 percent (from 10 percent), while the highest bracket reverts to 39.6 percent (from 35 percent).

Long Term Capital ...

What is this new 3.8 percent Medicare tax everyone is talking about?  If your income is defined as ‘high,’ meaning you earn more than $200,000 as a single filer and more than $250,000 as a married couple filing jointly, this new tax will affect you. Fortunately, we have some time to digest the concept and potentially plan accordingly, because the tax does not go into effect until 2013. 

The tax results from the new health care reform law. First, let’s review the current Medicare tax:  At present, the Medicare tax is a “payroll” tax of 2.9 percent.  Employees pay 1.45 percent and their respective employers pay the other 1.45 percent.  Self-employed workers pay the entire 2.9 percent. 

Under the new law, high income households will pay (at least) an additional 0.9 percent on income over the thresholds listed above. This means that taxpayers will pay 2.35 percent total ...

Recently, the Wall Street Journal reported that the index of leading economic indicators posted a large gain in March, 2010, capping a full year of increases.  Mortgage delinquencies declined in March for the second month in row.  Housing starts are improving for home construction companies.  Financial companies, such as Citigroup, are reporting improved profits and earnings as the dust settles from strategic moves undertaken during the height of the financial crisis.  These reports are only a sampling of the positive news currently impacting the U.S. economy and contributing to one of the most significant 12-month rallies in U.S. stock market history.  At the end of the first quarter 2010, the stock market, as measured by the S&P 500 Index, is up an astounding 49.8 percent on a trailing 12-month basis (April 1, 2009 to March 31, 2010).  The Russell 2000 Index, a proxy for smaller U.S. companies, is up even ...

If you follow this link (http://www.monetagroup.com/News/Blog/08-09-25/Rebalancing_Opportunity.aspx?ReturnURL=%2fNews%2fBlog.aspx) to the archives of Moneta Group blogs on our Website you’ll note that I last discussed the topic of rebalancing in September, 2008.  The market was in a tailspin, to put it mildly.  The Dow Jones Industrial Average was at 10,800, off considerably from its October, 2007, high of 14,000.  Bear Stearns was gone.  Lehman Brothers was gone.  AIG was effectively owned by the U.S. Taxpayers.  The credit markets were in complete disarray and confidence in our financial system seemed to be worsening every day.

In the midst of this financial chaos, I ‘blogged’ that the market had created an opportunity for clients to rebalance their portfolios.  What I should have continued ‘blogging’ was that this opportunity was not simply a ‘one time’ event in a market downturn, nor should it be considered a one-way street.  As most investors are well ...