Obamacare Plan

ObamaCare: Game (Really) On The wait is over. In the next few months nearly all the remaining pieces of Obamacare will fall into place. On Jan. 1, just about everyone must have health insurance (with government help, if sorely needed) or face a penalty, and everyone must be able to get coverage, no matter how sick. To make that happen, insurance exchanges in the 50 states and the District of Columbia are scheduled to start selling policies online Oct. 1. The largest overhaul of the country's health system since Medicare was launched in 1966 will finally be up and running. And with its arrival comes widespread confusion, made worse by delays, prices scares, and continued political rancor. Money Magazine October 2013 By: Amanda Gengler

Get an Early Start on Retirement

Think you can’t afford to save in your 401(k) when you make $50,000 or less?  You can’t afford not to.

Whether or not you’ve just thrown your graduation cap in the air or you’ve been building a career for a few years now, you’ve probably had more pressing financial concerns than saving for retirement.  Like how you’ll make the rent and also eat.  Or whether you’ll ever get out from under the crush or your student loans.  No wonder that a recent Wells Fargo survey found that fewer than half of millennials ages 22 to 32 were socking away cash for retirement—and that nearly 90% of those who weren’t said lack of money was the reason.

Waiting until you’re more secure financially, though, will cost you plenty.  Contribute steadily to your company savings plan starting in your twenties, and you have a good shot at being a millionaire by the time you retire.  Hold off, and that seven-figure stash gets more elusive.  How can you swing it?  These tips will help.

Get Some Perspective

Eight in ten of the nonsavers in the Wells Fargo study said they needed to pay down debt first.  A worthy goal, but one you should pursue simultaneously with, not ahead of, saving for retirement.  For one thing, most employers kick in $0.50 for every dollar you put in, up to the first 6% of your salary.  That’s an automatic minimum of 50% return versus, say, a 6.8% return whey you pay down student loans at that interest rate.  Plus, as Wharton professor Olivia Mitchell notes, “The money you put into a 401(k) or IRA benefits from a lifetime of tax-free compounding.”  That is, you not only earn money on your investment, but your earnings earn money.  The sooner you start, the greater the magnifying effect.  The bite from your paycheck may also be more manageable than you think, since you contribute with pre-tax dollars.  The after-tax cost of saving $3,000 a year, or 6% of a $50,000 salary: just $43.00 per week.

Free Up Cash

To come up with that scratch, eat a brown-bag lunch a couple of times a week, and drink the office swill instead of caramel macchiatos.  Opting for income-based repayment of your federal student loans instead of your standard plan can also help—if you make $50,000 and owe $30,000 you’d reduce payments by $68 a month, says financial aid advisor Kal Chany of Campus Consultants.  Sure, that will extend the life of your loan, but it’s worth it if you put the cash in your 401(k) and get an employer match.

Take Baby Steps

Start contributing a modest amount—say, 3% of your salary—then bump up by a percentage point a year, until you’re up to the recommended savings rate of 10%.  Time the hikes to your annual raise, and you won’t even feel the pinch.  Or, if your employer offers this feature, elect automatic annual increases.  Research shows that workers who use this set-it-and-forget-it approach end up with substantially bigger balances.

Article by Zain Asher in the September, 2013 issue of Money Magazine.

Tom Newsad has been building relationships in the Middletown area for over 20 years.  Newsad Insurance Services offers life, health, disability and long term care insurance as well as fixed and fixed index annuity products.  Tom serves clients in Butler, Hamilton, Montgomery, Preble, Miami, and Warren counties and beyond.

What is Life Insurance?

            As agents and advisors, our creed is to help society help itself.  We support the American public in the most personal and meaningful ways.  When everyone else is at the door with his or her hands out, we are there to give and aid those who need it most.  There is no doubt that the insurance industry is one of the solutions to America’s economic woes.  Let us not forget this as we go about our everyday business lives.

            Recently I delivered a death claim to a client.  This process was two parts: I met with my client in the comfort of her own home and was able to spend a few minutes with her discussing recent events, and I assured her not to worry, that I would process the claim in a timely manner.  Ten days passed and I received a check in the mail for the death benefit amount and interest.  I reconnected with my client and returned to her home the next day.  When I saw her she seemed to have shrunk, her face swollen with grief and sadness.  She had lost all of her normal happy glow.  She said that she loved her husband and never thought she would need to call me.  When I presented her with the check, all of her emotion came to a head.  I instantly hugged her and offered my sincerest apologies.  Her lips were barely able to move, but the words “thank you” came out.  Every situation in which I present a death claim, no matter if these are clients I have known for my entire career or for just a short time, lives with me every day.

            I am grateful to be able to offer my services to my clients.  An agent that I worked with many years ago told me that when an agent has a death claim, it is his or her “turn to shine”.  What I do is not just sell life insurance, but also provide a lifetime of security.

Thomas Newsad sells life insurance, annuities, long term care, and disability insurance and serves communities such as Middletown, Franklin, Monroe, Lebanon, Trenton, Hamilton, Oxford, Miamisburg, West Carrollton, Springboro, and more.  For more information, call Tom Newsad at 513-424-6871 or check out www.newsadinsurance.com

Executive Bonus Plans: Rewarding Employee Performance

Executive Bonus Plans: Rewarding Employee Performance

Rewarding employee performance strengthens the stability of a business and reduces employee turnover among the ranks of valuable employees.  Losing an important employee to a competitor can disrupt current and future business profitability.

Privately-held businesses entities have limited options when designing compensation packages for their employees.  Many small companies are unwilling to establish qualified retirement plans because of the high cost of the plans and because they have to include all eligible employees.

Nonqualified deferred compensation plans are an option but participation is restricted to certain highly paid management employees.  Having benefits in addition to normal compensation is a proven method for improving employee morale and job satisfaction and thereby reducing costly employee turnover.

An Executive Bonus Plan (also known as a Section 162 plan after the section of the Internal Revenue Code that permits an employee to deduct compensation paid to employees) offers the opportunity to reward any employee.  It could be a one-off bonus for exceptional work in any year or, more commonly, an on-going arrangement to provide additional compensation annually.  To enhance the future value to the employee and the employee’s family, the payment is usually paid as the premium for a cash value life insurance or annuity contract owned by the employee.

Attaching conditions, such as job performance or continued employment, to the right to continue receiving this additional compensation increases the attractiveness of such a plan to the employer and further increases the likelihood that the employee will remain with the company. 

The employee is responsible for payment of income tax on the bonus paid by the employer.  In some cases, the employer will pay an additional amount to cover the associated income tax liability in which case the plan is known as a “double bonus” plan.

As long as the bonus represents “reasonable compensation”, the business can deduct the bonus used to pay the life insurance policy premium.  The employee owns the life insurance policy and names his or her beneficiary.

An employer can place certain restrictions on the policy as an incentive to the insured employee to remain with the company.  One such restriction can be limiting access to policy cash values by the employee for a selected period of time, such as the employee’s expected date of retirement.

Additional Considerations

Employers should seek legal counsel regarding creating a formal agreement between the employer and the employee governing the Executive Bonus Plan.  Any corporate records notation or agreement should spell out who will participate in the executive bonus program, why such employee or employees were selected for participation, and the nature of the benefit these employees will receive.  Any restrictions on an employee’s rights to access insurance policy cash value, or any “golden handcuffs” arrangement, should be spelled out in the written agreement between employer and employee.

Actual restrictions on the policy itself, such as limiting the employee’s access to cash values, can be enforced using a policy endorsement filed with the insurance company. The endorsement should indicate the time period during which policy restrictions will remain in effect, and list the conditions for removal of any restrictions on the employee’s access to the policy.

The purposes of a permanent cash value life insurance Executive Bonus Plan include growing funds on a tax-deferred basis to be made fully available to the employee for supplemental income in retirement.

From an employee’s perspective there are two concerns with this type of arrangement.  If this is not a “double bonus” plan, the employee may be concerned about having the funds to pay the income tax liability.  Also the employee may be concerned about the viability of the life insurance contract if the employer does not pay the bonus each year.  To address some of these concerns, the employer and the employee could agree to establish the plan for a limited period and make payments in an amount sufficient to sustain the policy after the payment period.

With a properly structured executive bonus plan, both the employer and the employee win.  The employer benefits from greater employee loyalty and lower staff turnover; the employee benefits from expanded compensation options.

Article written by Columbus Life appeared in Columbus Life Advanced Market Insights October 2011 edition.

Tom Newsad has been building relationships for over twenty years in his community.  Newsad Insurance Services offers life insurance, fixed index annuities, health insurance, and disability and long term care insurance.  For more info see www.newsadinsurance.com . Tom serves clients in the Butler, Hamilton, Montgomery, Warren, Miami, and Preble county areas and beyond.

Indexed Annuity Magic: How Do They Do It?

One of the greatest mysteries in the indexed annuity market is how insurance companies are able to offer market-linked gains on an annuity with a principal protection feature.  Many are familiar with the strong guarantees that fixed annuities offer, but it comes at the cost of low potential for gains.  On the other hand, variable annuities provide unlimited potential for gains, but you must be willing to stomach unlimited risk to achieve it.

The indexed annuity is a unique gem amidst a pebble-lined beach—but how is this awesome feat accomplished?  How can insurance companies offer purchasers market-linked interest without the risks associated with VAs and still afford to offer a guarantee?  It is actually pretty amazing and extraordinarily simple to accomplish.

For comparison, let’s explore what the insurer does with the purchaser’s money when offering fixed annuities.  When an annuity purchaser makes a premium payment into a fixed annuity, the insurance company turns around and uses that premium to purchase bonds.  Generally, the bonds are high quality and they mature at the same time the surrender charges expire on the purchaser’s annuity (i.e. I buy a 10 year surrender charge annuity and the insurance company then purchases 10 year Grade “A” bonds to cover my annuity’s guarantees).  This provides a relatively safe investment vehicle for the insurer to make enough interest off of in order to earn their spread/profit.

So, just for simplicity’s sake, let’s make the assumption that the bonds are paying 4% interest and the insurance company is crediting 3% interest on its fixed annuities.  This means that the difference of 1% is what the insurance company is using to cover its expenses and anything that is left of its spread/profit.  Makes sense, right?

OK, let’s move over and apply this to fixed annuities: instead of putting 100% of the purchaser’s premium payment in bonds, with an indexed annuity, the insurance company puts about 97% of the premium payment in bonds.  (Some companies might use 96%, 98%, etc. of the premium payment; you get the idea!)  The bond covers the indexed annuity’s annual 0% floor, which protects the annuity purchaser from market losses.  It also covers the minimum guaranteed surrender value, providing a return of premium plus interest to the beneficiaries in the event of death, in addition to providing the same benefit to the purchaser if the indexed crediting does not perform.

Now, let’s get to the other 3% of the purchaser’s premium payment, where the real magic happens: this portion of the purchaser’s premium payment is used to purchase options.  It is the options that provide the index-linked interest on indexed annuity contracts. Today, we might take that three cents of our one dollar to the options-seller and ask that he sell us an option for the S&P 500, using an annual point-to-point crediting method with a cap being used to limit the exceeded interest.  The option-seller might tell us that our three cents will buy our customers a cap of 3.85%, which isn’t so hot.  Then again, the S&P 500 is relatively low right now.

However, if the market suddenly goes back up, and the S&P 500 returns to 1500 the next month, that option-seller will likely offer a much higher cap for our three cents.  (After all, if it is already at 1500, what is the likelihood that the S&P 500 will increase tremendously over a one-year period?)

So there you have it, folks.  No tarot cards, no voodoo dolls—just plain and simple math.  And even though the logic behind indexed annuities is rather simple, it is magical nonetheless.

Author: Sheryl Moore, President and CEO of AnnuitySpecs.com and LifeSpecs.com

Taken from Annuity News.com from article posted 9/7/2011.

Tom Newsad has been building relationships for over 20 years in the financial services industry.  Newsad Insurance Services of Middletown, Ohio, offers life insurance, health insurance, fixed index annuities, long term care insurance, and disability income insurance and serves Hamilton, Butler, Warren, Montgomery, Clermont, and Miami Counties and beyond.  Visit www.newsadinsurance.com for more information.

Term insurance policies that Newsad Insurance Services has sold in the past were also called Mortgage Insurance. They are also a life insurance policy. One of these policies is a decreasing term contract and many people that bought these policies had the need to cover their mortgages in a 15 year or 30 year joint decreasing term. The disadvantage to these policies is that the premiums remain level and the total death benefit decreases in value. A review by your Life Insurance Adviser is the perfect time to re-evaluate your needs for this product and protection.

Tom Newsad offers Life Insurance and Financial products in Butler, Warre, Montgomery, and Preble County areas in Southwest Ohio. Contact me at tom@newsadinsurance.com

Changes to Health Insurance Coming in 2014

Changes to Health Insurance Coming in 2014

            There are sure to be winners and losers as the federal government finalizes new rules for health insurance plans in the coming months.

            Starting in 2014, the federal health care overhaul will limit the factors that insurance companies can use in setting rates, allowing premiums to be based only on a person’s age, history of tobacco use, family size, and geographic location.  And even those disparities in premium rates will be limited.

            Also, the law requires health insurers to provide “essential benefits” as part of their coverage, ranging from mental health services and prescription drugs to preventive and pediatric services.  That will provide a greater degree of health care security for people who buy health insurance on their own, but is will also increase the cost.

            The rules, proposed in late November 2012, are likely to have the greatest impact on those who buy health insurance on their own.  An estimated 350,000 Ohioans bought their own health insurance in 2010, but the number is expected to increase to 537,000 by 2014, according to a report produced by Milliman Incorporated last year for the Ohio Department of Insurance.

            In Ohio, overall premium rates for those who buy individual policies are expected to rise by 55 to 85 percent.  For employers with fewer than 100 workers, premium increases are expected to be 5 to 15 percent.  At employers with 100 workers or more, the increases, if any, should be less than 5 percent, according to Milliman.

            Young, healthy men are likely to see the biggest premium hikes under the new rules.  In part, that is because women can no longer be charged more than men for health insurance, and men who buy individual insurance will effectively subsidize the premiums of women, said Milliman.

            Currently, premium rates for those on the cusp of Medicare eligibility are about six times what they are for young adults, according to Milliman.  Under the new rules, those rates can be only three times as high.  That is likely to lower premiums for older workers who are ill.

            Health insurers are concerned that some young people will find that it is to their advantage to decline the purchase of health insurance and pay a penalty instead.

            “You need the young and healthy people in the system for this to work,” said Robert Zirkelback of America’s Health Insurance Plans, which represents insurance companies.

            There will also be implications for choice; those who are older than thirty won’t have the option of buying an individual health plan that provides only bare-bones, catastrophic coverage.

            Fabien Levy, press secretary for the U.S. Department of Health and Human Services, said alternatively that young adults will benefit from the law in several ways.  Those who don’t have health insurance coverage available elsewhere can remain on a parent’s health plan until age 26.  Also, tax credit subsidies of premiums should defray the cost as well, according to Levy.

            Aetna said the proposed rules’ limits on deductibles and their minimum coverage requirements will change the mix of plans it offers.  Kelly McGivern, Aetna’s senior director of government affairs, said the health insurer sees opportunities to customize its products and plans to meet its members’ health and financial needs even after the new rules take effect, however.

            “For instance, we could see a product that could be offered in the marketplace that has a more narrow network design focused on the highest quality providers,” which could result in lower premiums for consumers, McGivern said.

Information taken from the Middletown Journal, December 2012

Newsad Insurance Services has been providing insurance and financial services in the Middletown community for over 20 years and is affiliated with over 60 different companies.  Tom Newsad and Elaine Dominy cover the areas of Middletown, Trenton, Oxford, Dayton, Monroe, Liberty Township, greater Cincinnati, and beyond.