SML Planning Minute

Episode 218 – New Year’s resolutions rarely work out. Instead, how about making some small changes in your financial habits? Here are five simple things you can try.

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®. The content provided is intended for educational and informational purposes only. Information is provided in good faith. However, the Company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information.

The information presented is designed to provide general information regarding the subject matter covered. It is not to serve as legal, tax or other financial advice related to individual situations, because each individual’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation.

To help reach your goals, you need a skilled professional by your side. Contact your local Security Mutual life insurance advisor today. As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives. For more information, visit us at SMLNY.com/SMLPodcast. If you’ve enjoyed this podcast, tell your friends about it. And be sure to give us a five-star review. And check us out on LinkedIn, YouTube and Twitter. Thanks for listening, and we’ll talk to you next time.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances. Results may vary, and products and services discussed may not be appropriate for all situations. Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently. We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances. Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York. Product availability and features may vary by state.

• COVID-19 (coronavirus) Information

Episode 217 – You’re nearing or in retirement and the kids have graduated from college, out of the house, or are, at least, gainfully employed. You don’t need life insurance anymore, right? Think again!

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®. The content provided is intended for educational and informational purposes only. Information is provided in good faith. However, the Company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information.

The information presented is designed to provide general information regarding the subject matter covered. It is not to serve as legal, tax or other financial advice related to individual situations, because each individual’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation.

To help reach your goals, you need a skilled professional by your side. Contact your local Security Mutual life insurance advisor today. As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives. For more information, visit us at SMLNY.com/SMLPodcast. If you’ve enjoyed this podcast, tell your friends about it. And be sure to give us a five-star review. And check us out on LinkedIn, YouTube and Twitter. Thanks for listening, and we’ll talk to you next time.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances. Results may vary, and products and services discussed may not be appropriate for all situations. Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently. We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances. Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York. Product availability and features may vary by state.

• COVID-19 (coronavirus) Information

Episode 216 – Most people don’t like thinking about life insurance but understand its importance to providing financial protection to their family or business. That conflict causes many to make mistakes with life insurance.

The information presented is designed to provide general information regarding the subject matter covered. It is not to serve as legal, tax or other financial advice related to individual situations, because each individual’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation.

To help reach your goals, you need a skilled professional by your side. Contact your local Security Mutual life insurance advisor today. As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives. For more information, visit us at SMLNY.com/SMLPodcast. If you’ve enjoyed this podcast, tell your friends about it. And be sure to give us a five-star review. And check us out on LinkedIn, YouTube and Twitter. Thanks for listening, and we’ll talk to you next time.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances. Results may vary, and products and services discussed may not be appropriate for all situations. Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently. We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances. Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York. Product availability and features may vary by state.

• COVID-19 (coronavirus) Information

Episode 215 – Most people don’t like thinking about life insurance but understand its importance to providing financial protection to their family or business. That conflict causes many to make mistakes with life insurance.

The information presented is designed to provide general information regarding the subject matter covered. It is not to serve as legal, tax or other financial advice related to individual situations, because each individual’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation.

To help reach your goals, you need a skilled professional by your side. Contact your local Security Mutual life insurance advisor today. As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives. For more information, visit us at SMLNY.com/SMLPodcast. If you’ve enjoyed this podcast, tell your friends about it. And be sure to give us a five-star review. And check us out on LinkedIn, YouTube and Twitter. Thanks for listening, and we’ll talk to you next time.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances. Results may vary, and products and services discussed may not be appropriate for all situations. Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently. We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances. Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York. Product availability and features may vary by state.

• COVID-19 (coronavirus) Information

Episode 214 – Every year a substantial number of people go from married to single, either through divorce or death. A recent article looked at some of the estate planning steps you may need to take if it happens to you.

Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode, Estate Planning After Divorce or the Death of a Spouse.

One oft-repeated statistic is that half of all marriages end in divorce. That estimate may have been accurate a few decades ago, but more recent statistics indicate that the current number may be closer to 40 percent. This is good news, but it’s still true that an enormous number of adults go from married to single every year, either through divorce or death.

And when the change does occur, there are often things that the newly single miss, or never even think of when it comes to their estate planning. A recent article at ThinkAdvisor.com, written by Roger Wohlner, covered eight important estate planning steps for newly single clients. Here they are in order.

1. Discuss Planning Objectives

It’s almost certain that your objectives are going to change when you are newly divorced or widowed. The author suggests staying away from technical issues at first and focusing on your distribution desires, which have likely changed since when you were married.

2. Update Beneficiary Designations

Many people seem to forget that you can’t change the distribution of certain assets simply by changing your will. This often comes into play with retirement plans, IRAs, life insurance policies, and employer-provided group life insurance, where a change in beneficiary may be required. This is an especially significant concern when you get divorced as you may not want your ex to benefit from your assets. You need to make sure that your intended heirs are named as the beneficiaries.

3. Revisit Wills

Reviewing your will from time to time is a good idea, but it becomes critical when the potential beneficiaries change. This is true whether the change is due to the death of a spouse or divorce. Either way, you need to make sure that your assets are distributed in accordance with your (revised) wishes.

4. Revise Trusts

Many people–especially high net worth individuals–like to use trusts as estate planning tools. Structured properly, they can be effective in protecting family assets from creditors, divorce and mismanagement.

Very often, when family circumstances change, family trusts need to change. But there are limitations. Revocable trusts are usually easy to change. Not so with irrevocable trusts. If a change is required, you will need the help of an estate planning attorney.

5. Retitle Accounts and Other Assets

It is likely that some assets will need to be re-titled when you get divorced or your spouse dies. When a spouse dies, it is common that the surviving spouse will need to change the title on what was their primary residence, but this can apply to other accounts as well. With a divorce, title changes become part of the divorce settlement.

6. Name Durable Powers of Attorney

A durable power of attorney is a common estate planning technique. It allows you to specify someone else to act on your behalf in the event of disability or incapacity.

It is common for spouses to name each other as their agent in this capacity. When circumstances change, you may need to name someone else you trust to protect your finances as the agent on your power of attorney.

7. Name Medical Powers of Attorney

A medical power of attorney is commonly referred to as a health care proxy. This is where you appoint someone to make medical decisions on your behalf if you’re unable to do so. When your spouse dies or you get divorced, the document will likely need changing.

8. Decide Guardianship of Minor Children

This decision is complicated enough when both parents are alive. It’s even more complicated—and more critical—when one of the spouses dies. You need to find someone you trust to act as guardian in the event of your own death or incapacity. This may not be the case when there’s a divorce rather than a death. It all depends on the family situation.

People who are newly single almost always face a daunting series of emotional and financial challenges. While this list does not include every conceivable scenario; simply because every situation is different, it certainly provides a good place to start.

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®. The content provided is intended for educational and informational purposes only. Information is provided in good faith. However, the Company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information.

The information presented is designed to provide general information regarding the subject matter covered. It is not to serve as legal, tax or other financial advice related to individual situations, because each individual’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation.

To help reach your goals, you need a skilled professional by your side. Contact your local Security Mutual life insurance advisor today. As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives. For more information, visit us at SMLNY.com/SMLPodcast. If you’ve enjoyed this podcast, tell your friends about it. And be sure to give us a five-star review. And check us out on LinkedIn, YouTube and Twitter. Thanks for listening, and we’ll talk to you next time.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances. Results may vary, and products and services discussed may not be appropriate for all situations. Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently. We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances. Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York. Product availability and features may vary by state.

• COVID-19 (coronavirus) Information

Episode 213 – Part Two: SECURE 2.0 is now law.  What does it mean for your individual retirement planning goals?  What does it mean for your business and your employer-sponsored retirement plan?

Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute.  In todays’ episode, SECURE 2.0 is Now Law. How Does That Impact Retirement Planning?  Part two.

In our previous episode, we examined how SECURE 2.0 affects individuals.  Today we take a look at how the new law affects small businesses.

For small businesses:

As we previously indicated, this is just a quick summary of a few of the many provisions that impact the retirement planning goals of individuals, as well as the retirement plans sponsored by employers.  There are many other provisions to consider which may impact your unique situation. Contact your Security Mutual Life insurance advisor today to review your goals and objectives for yourself, your family, or for your business.  Your SML insurance advisor will work closely with your tax and legal advisors to create a plan that best fits your goals and objectives.

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®. The content provided is intended for educational and informational purposes only. Information is provided in good faith. However, the Company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information.

The information presented is designed to provide general information regarding the subject matter covered. It is not to serve as legal, tax or other financial advice related to individual situations, because each individual’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation.

To help reach your goals, you need a skilled professional by your side. Contact your local Security Mutual life insurance advisor today. As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives. For more information, visit us at SMLNY.com/SMLPodcast. If you’ve enjoyed this podcast, tell your friends about it. And be sure to give us a five-star review. And check us out on LinkedIn, YouTube and Twitter. Thanks for listening, and we’ll talk to you next time.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances. Results may vary, and products and services discussed may not be appropriate for all situations. Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently. We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances. Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York. Product availability and features may vary by state.

• COVID-19 (coronavirus) Information

Episode 212 – Part One: SECURE 2.0 is now law.  What does it mean for your individual retirement planning goals?  What does it mean for your business and your employer-sponsored retirement plan?

Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute.  In todays’ episode, SECURE 2.0 is Now Law. How Does That Impact Retirement Planning?  Part one.

On December 29, 2022, President Joe Biden signed into law the Consolidated Appropriations Act, 2023 (“the Act”) which funds the federal government and a range of domestic and foreign priorities through the end of the fiscal year ending September 30, 2023. The Act also funds continuing assistance for the ongoing war in Ukraine.

For Americans trying to save enough for retirement, the most important section of the Act is the portion often dubbed the SECURE Act 2.0 or more appropriately the Setting Every Community Up for Retirement Enhancement 2.0 Act of 2022 (“SECURE 2.0”).  The original SECURE Act or Setting Every Community Up for Retirement Enhancement Act of 2019 was signed into law by President Donald Trump on December 20, 2019.  The SECURE Act made many changes to the retirement landscape including, raising the age in which to commence required minimum distributions (“RMDs”) from age 70 ½ years to 72 years; eliminating the Stretch IRA concept by requiring inherited IRAs to be distributed to beneficiaries within 10 years from the original account owner’s death with some exceptions; and many other changes to IRAs and employer sponsored retirement plans.

SECURE 2.0 builds upon the original SECURE Act in a few notable ways. There are numerous provisions that impact individual savers as well as businesses that sponsor qualified retirement plans for their workers.  We will summarize just a few of those provisions.

For individuals:

As we previously indicated, this is just a quick summary of a few of the many provisions that impact the retirement planning goals of individuals, as well as the retirement plans sponsored by employers.  There are many other provisions to consider which may impact your unique situation. Contact your Security Mutual Life insurance advisor today to review your goals and objectives for yourself, your family, or for your business.  Your SML insurance advisor will work closely with your tax and legal advisors to create a plan that best fits your goals and objectives.

This concludes part one.  In our next episode, we will examine how Secure 2.0 affects small businesses.

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®. The content provided is intended for educational and informational purposes only. Information is provided in good faith. However, the Company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information.

The information presented is designed to provide general information regarding the subject matter covered. It is not to serve as legal, tax or other financial advice related to individual situations, because each individual’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation.

To help reach your goals, you need a skilled professional by your side. Contact your local Security Mutual life insurance advisor today. As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives. For more information, visit us at SMLNY.com/SMLPodcast. If you’ve enjoyed this podcast, tell your friends about it. And be sure to give us a five-star review. And check us out on LinkedIn, YouTube and Twitter. Thanks for listening, and we’ll talk to you next time.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances. Results may vary, and products and services discussed may not be appropriate for all situations. Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently. We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances. Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York. Product availability and features may vary by state.

• COVID-19 (coronavirus) Information

Episode 211  – Most, if not all of us, own several forms of digital assets in the form of online accounts. These assets must be included in your estate plan. Failure to do so may result in the loss of financial value or sentimental and legacy value.

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®. The content provided is intended for educational and informational purposes only. Information is provided in good faith. However, the Company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information.

The information presented is designed to provide general information regarding the subject matter covered. It is not to serve as legal, tax or other financial advice related to individual situations, because each individual’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation.

To help reach your goals, you need a skilled professional by your side. Contact your local Security Mutual life insurance advisor today. As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives. For more information, visit us at SMLNY.com/SMLPodcast. If you’ve enjoyed this podcast, tell your friends about it. And be sure to give us a five-star review. And check us out on LinkedIn, YouTube and Twitter. Thanks for listening, and we’ll talk to you next time.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances. Results may vary, and products and services discussed may not be appropriate for all situations. Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently. We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances. Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York. Product availability and features may vary by state.

• COVID-19 (coronavirus) Information

Episode 210 – We take a look back at how the SECURE Act eliminated the use of the “stretch” IRA, but there may be a way to replace that lost wealth and accomplish a similar goal by using the combination of a life insurance trust and a Single Premium Immediate Annuity.

This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®. The content provided is intended for educational and informational purposes only. Information is provided in good faith. However, the Company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information.

The information presented is designed to provide general information regarding the subject matter covered. It is not to serve as legal, tax or other financial advice related to individual situations, because each individual’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation.

To help reach your goals, you need a skilled professional by your side. Contact your local Security Mutual life insurance advisor today. As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives. For more information, visit us at SMLNY.com/SMLPodcast. If you’ve enjoyed this podcast, tell your friends about it. And be sure to give us a five-star review. And check us out on LinkedIn, YouTube and Twitter. Thanks for listening, and we’ll talk to you next time.

The applicability of any strategy discussed is dependent upon the particular facts and circumstances. Results may vary, and products and services discussed may not be appropriate for all situations. Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently. We encourage individuals to seek personalized advice from a qualified Security Mutual life insurance advisor regarding their personal needs, objectives, and financial circumstances. Insurance products are issued by Security Mutual Life Insurance Company of New York, Binghamton, New York. Product availability and features may vary by state.

Episode 209 – What type of retirement plan is best for you and your business? In this podcast, we learn all the details you need to know with special guest Lucas Benson.

Hello, this is Bill Rainaldi with another edition of Security Mutual’s SML Planning Minute. In today’s episode, “Retirement is Better with a Plan” with special guest Lucas Benson.

Luke is a Vice President of Operations at Security Administrators Inc. Security Administrators was established in 1984 to provide third-party administrative and actuarial services to businesses of all types. Their clients range in size and diversity from individuals and professional service corporations to universities and manufacturing companies. In addition, Luke is an enrolled actuary, so you know he’s a smart guy.

So Luke, welcome to the program.

Lucas Benson:
Hi everybody. How are you doing today? How’s it going, Bill?

Bill Rainaldi:
Good.

Lucas Benson:
I could pass tests, but thanks for having me on.

Bill Rainaldi:
Great. So Luke, what exactly does Security Administrators do?

Lucas Benson:
Sure. We’re what’s called a TPA, a third-party administrator. If you’re familiar with retirement planning at all, you’ve also always heard of the three-legged stool of retirement, that being your pension plan, your 401(k) plan, and Social Security. There’s another three legged-stool in retirement, and those are the people that service your plan as a plan sponsor or an employer. So those people would be your financial advisor, who services the plan in regards to picking out different investment options, where to invest your portfolios, where to go, and they’re basically the quarterback of it all. Then there’s also the record keeper. This will be your American Funds, you’re Empower, the place where if you have a defined contribution plan, the participants log onto the website and the review their balances and all the funds are held there.

Well, there’s also a third-player in that game, the third leg of the stool, which is called the TPA, the third-party administrator. And we’re more behind the scenes. And what we do is we design the plan, we maintain the plan document, and we run all of the governmental administration tasks. That being, we file the form 5500s for the plan, we create the summary annual plan reports, we process distributions. And one of the most important tasks is we do all of the required government testing to make sure that the plan passes all the laws and myriad of regulations that go into maintaining a qualified plan.

Bill Rainaldi:
Okay, perfect. Luke, I see a lot of confusion among consumers out there about retirement plans. And for example, a lot of people, they hear this thing called a defined contribution plan, and they hear about this thing called a defined benefit plan, and they don’t really understand the differences between those types of plans. So how would you best describe the differences between those two?

Lucas Benson:
Sure. You basically just have to unpack the names. So defined contribution plan is going to be the thing that everybody’s familiar with nowadays. The 401(k) plan is a defined contribution plan. The profit sharing plan is defined contribution plan. Because your employer is just defining the contributions that go into the plan. So anything after your employer has put in the contributions is basically on you. So all of the investment choices, while they may be limited by the employer, by the plan provider, oftentimes the participants can make those investment choices. The gains and losses are all attributable to the balance that the participant has. So once the employer puts their money in, once they define that contribution, then the money that comes out of the plan eventually when you hit retirement age is entirely up to the plan participant in as much of as control as they have over the investments.

A defined benefit plan is the exact opposite. The employer’s not defining the contribution that goes into the plan, they’re defining the benefit that comes out of the plan. So these would be more synonymous with what people used to know 50 years ago, pension plans. So instead of saying the employer gives you $10,000 as profit sharing now, the employer’s saying, “Hey, you work here 30 years, I’m going to give you 60% of your compensation as an annuity when you retire.” Well, it sounds great, but the problem is remember, whereas the participant has all the control over and ends up with the results of all those gains and losses and the defined contribution plan, the employer is instead the one that is responsible for defining the benefit and funding that benefit at retirement. And so, that’s where pension plans have temporarily fallen out of place in regards to the employer no longer wants to take on that risk, or they didn’t use to. And we’re finding that pension plans, or at least a version of them, are making a roaring comeback.

Bill Rainaldi:
So generally speaking, with the defined contribution plan, the future retiree is the one who basically is taking the risk. Is that correct?

Lucas Benson:
That’s correct.

Bill Rainaldi:
Whereas with the defined benefit, it’s more on the employer, they’ve got to make that payment, so they have to figure out how to get from point A to point B.

Lucas Benson:
Exactly.

Bill Rainaldi:
Okay, good. I know in your job, you deal with a lot of financial service professionals, but you also deal with some of the eventual clients. In other words, the people who are putting their money into these plans, and you deal with a lot of business owners. I just wonder if maybe you can talk about a few of the concerns people have when putting together one of these plans?

Lucas Benson:
Sure. There’s always going to be two main concerns. The first concern is complexity. There’s a lot of plans you can have where you just have a 401(k) plan and you do the same matching contribution every year. That could be 3% match on 100% a pay. And at the end of the day, that’s all you want and that’s great. And so, with plans like that, sometimes you don’t even need a TPA, you can just go to a payroll provider and they’d be happy to run that because there’s no complexity. But with complexity comes the ability to reach your goals. And so, for example, if you wanted a large tax deduction, then your plan is going to become more complex than just doing a 3% match. And that’s where you bring in a TPA. And so basically, one of the main objections that the client has is that, “This is all too complex, this is too hard. I don’t understand all of that.”

Well, that’s why you hire us. So the whole job of a good TPA, besides obviously doing the administrative work and all the testing and everything behind the scenes, is to make everything that is complex as easy to understand as possible. Well, it’s our job to know the rules so you don’t have to. There’s tons of regulations, there’s tons of laws, there’s tons of mathematical tests, and we’ll only tell you about those tests when it’s pertinent to your situation. For example, if your company has 200 employees and everybody has an equal share, you don’t ever need to know about a top heavy test. We’re going to run it, but we’re never going to discuss it with you because it’s not something that you are required to know or to weigh in on. So we’ll take all those complex things and drill down and just have the conversations with you that you need to have and you need to understand, so that you can have a very complex plan design without having to be involved in every minute detail of that design.

And one of those things is, for example, life insurance in a plan. Life insurance and a qualified plan is a fantastic idea. There’s no better way to both engage a tax deferral strategy, as well as protecting your loved ones, protecting your estate. But the rules behind life insurance in a qualified plan are very complex to the point that for a lot of TPAs, it’s even above their knowledge base. They won’t touch life insurance in a qualified plan. Well, we’re a TPA who’s a wholly owned subsidiary of an insurance company, so that’s what we do. So when you do have life insurance in a qualified plan, there’s this wonderful ability to mesh both tax deferrals, as well as the state planning strategy. And we have the ability and we know the rules, so we can help you with that. We could say, “All right, your goal is to have life insurance in a qualified plan. Let’s craft the plan that meets this exact goal.”

And so, when we craft that plan, we’ll go over it with you. We’ll say, “Okay. Once a year, you need to make a contribution of X.” We’ll make sure that that meets all the rules, that that contribution meets all the funding requirements. We’ll advise you when to make that contribution, how much to do it, who it goes into, where it goes, when to cut the check, and then we’ll give you your government filings at the end and just have you sign them and send them on its way. So we make the complex simple, and that’s our whole purpose.

Bill Rainaldi:
Got you. Yeah, I’m seeing a lot more life insurance inside of qualified plans, I think, than I ever did before, and there’s a lot of good reasons for that.

Lucas Benson:
There are. Life insurance in a qualified plan, it truly is the best of both worlds. A lot of our clients come to us because of tax deductions. It’s almost counterintuitive that you want to set up a retirement plan for your estate planning, you want to set up a retirement plan for your employees. But at the end of the day, a lot of what drives, especially in the small plan market, is going to be the tax deductibility that you get from any contributions to a qualified plan. So coupling that tax deduction goal along with the goal of adding the security and adding the estate planning to it makes just qualified plan life insurance just a win-win.

Bill Rainaldi:
Hmm, interesting. I wanted to move on and talk a little bit about business owners. I know you deal a lot with business owners, and I’m wondering about some of the concerns business owners when they have these types of plans set up as well.

Lucas Benson:
Sure. The one is always going to be what some people in the TPA world call efficiency. Efficiency would be the metric of, “I’m dropping $100,000 into my qualified plan every single year, and only $30,000 of that is going to me, or $20,000 of that is going to me. Why don’t I just might as well pay taxes on it?” And so, efficiency is a concern amongst a lot of business owners. So what you can do is that there are a myriad of different plan designs that you can focus in on. One of the most efficient being the cash balance 401(k) combo plan, which is a specific type of plan that actually combines a defined benefit and a defined contribution plan. And so, if you have a 401(k) cash balance combo plan, you can receive up to 90% efficiency sometimes, depending on the demographics of your employee base.

And so, you can go from a 401(k) plan with deferrals where you’re just getting 10% or 15% of the contributions of $100,000 to having a cash balance 401(k) combo plan where you’re putting $400,000 in tax deductible every single year, and you’re capturing 90% of that money.

So, a lot of it goes back to plan design. And for people who don’t know about all the plan design options out there who just stay with their payroll provider, who just have their 401(k) that has a basic match, they don’t look at it as a tax deduction vehicle or a vehicle to save for their own retirement because it’s just not efficient. However, if efficiency matters, we can absolutely create plan designs that will meet all of your needs and do so in a very efficient manner.

Another one, obviously, I touched on the tax deduction strategy. There’s also the idea of that, “Okay. Yeah, great. You’re saving me on my taxes now, even if the plan is 90% efficient, all that money that goes in has to come out eventually. I’m saving taxes now, but I’m going to have to pay this income tax as a retirement.”

Bill Rainaldi:
That’s something we talk about all the time on this program.

Lucas Benson:
Yep. You’re absolutely right. You do. But here’s the thing, and this is especially pertinent when it comes to small business owners, when it comes to professional employees, a doctor, a lawyer who has their own firm. Oftentimes, their only retirement strategy is going to be to sell their client list when they’re done. A doctor has another doctor come in and take over, or a manufacturing company that’s owned by one person ends up just selling the manufacturing company.

Well, what a qualified plan does, and what an efficient qualified plan does is over the course of 10, 15, 20 years, you’re able to extract money from your business before you sell it to use down the road. And the double bonus of this is that mostly you’re going to be doing this extraction when you’re in your 40s, when you’re in your 50s, when you’re in your early, mid, late 60s. And so, those are the times when you’re going to be in the highest tax bracket anyway. So while you’re having these deductions, those deductions are going to be taking you down, sometimes even out of the highest tax bracket. And when you’re in retirement, most likely, you’re not going to be in that high tax bracket anymore anyway. So you end up on a net case, saving more as far as taxes are concerned, even if you end up paying for it later because you’ll be in a lower bracket, as well as doubling up on the money that you’re able to extract from your business in a tax-deferred environment.

Bill Rainaldi:
Oh, fantastic. The other thing that crossed my mind while you were speaking, Luke, is the fact that for an employer, for a small business, a well-designed plan might also help them attract and retain good employees as well, wouldn’t it?

Lucas Benson:
Right. It’s always a fun conversation to have when the employer says, “Okay, I don’t know if this sits right with me. I’ve had this plan, and like you said, it’s going to be 90% efficient. I want to reward my employees too.” Well, the IRS has all sorts of rules, like I attributed to early in this interview and all sorts of mathematical tests that we have to do. So for example, if you were to have a 401(k) plan with just a basic 3% match, that means that in the retirement plan, your employees are going to get 3% of compensation towards their retirement. If you were to go with that 95% efficient cash balance plan, all of a sudden now, they’re going to get a cash balance accrual, meaning a defined benefit accrual of say, $1,000 a year on a cash basis. And they’re also going to get something like 6% or 7% in the 401(k) plan towards their retirement.

So it ends up being that while you are putting away large chunks in a very efficient manner, you’re also doing way better for your employees. And so, if your employees one day decide to shop around and say, “Okay, I’ll go to a competitor, what do you offer?” “Well, we have a 3% match.” “Oh, I’m getting 7.5% at my current job. That’s pretty good.” so you’re going to see increased employee retention with a better plan. So at the end of the day, the only person losing this whole arrangement is the IRS, and I don’t think anybody’s going to shed a tear about that one.

Bill Rainaldi:
I know I won’t, that’s for sure. Well, Luke, listen, I think this has been a great topic to discuss, and I’m so happy you were able to join us today, so thanks for coming.

Lucas Benson:
Well, thanks for having me on, Bill. I really appreciate it.

Bill Rainaldi:
All right, Take care. Bye-bye.

Lucas Benson:
You too. Bye.

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