Ins and Outs of the New 529-ABLE Savings Accounts

Tax and Financial News for September 2016

Ins and Outs of the New 529-ABLE Savings Accounts  

New 529-ABLE programs are currently available offering tax-free saving options for families with special needs individuals. With what promises to be the first of many, current offerings include Ohio’s STABLE, Tennessee’s ABLE TN, Nebraska’s Enable and Florida’s The ABLE United account. Some such as Florida’s version are only available to residents of the state, while others are open to nonresidents as well.

Pre-ABLEs

Prior to ABLE accounts, special needs trusts were the only way for families to save for a disabled child without losing access to crucial benefits such as Social Security insurance and Medicaid benefits. The downside to special needs trusts is that they involve lawyer’s fees, tax-sensitive investment management and a variety of maintenance and compliance costs. Often, the complexity and costs associated with setting up a special needs trust put them out of the reach of many families. ABLE accounts now offer a simple way to save for families that cannot manage a special needs trust, or can serve as a supplement to those who have them. Now let’s look at how 529-ABLE accounts technically work.

Rules, Rules, Rules

Generally, 529-ABLE accounts work similarly to 529 college savings accounts. 529-ABLE accounts all share the following features:

  • Tax Savings: Withdrawals and earnings for qualified expenses are tax free. Qualifying expenses for 529-ABLEs include things such as medical and educational needs, job training and housing.
  • Medicaid Benefit Protection: 100 percent of the assets inside an ABLE account are disregarded for purposes of Medicaid benefits qualification calculations.
  • Social Security Benefits Shielding: Accounts with balances greater than $100,000 can reduce SSI benefits or even cause them to be suspended, but anything less than that is of no concern.

The benefits shield effect of 529-ABLE plans are truly a game changer for families that could not afford a special needs trust. Prior to ABLE accounts, disabled persons could only have $2,000 in savings before being cut off from Medicaid, effectively resigning them to live their lives in poverty.

Beware – Not all Rules are Created Equally

Here is where things can get tricky. Congress sets the basic rules of ABLE accounts, but the details vary by plan. For example, the following apply to all ABLE accounts, regardless of type:

  • Only available for individuals disabled before they turned 26 years old
  • An individual can open only one account
  • The maximum annual contribution is linked directly to the federal gift tax exclusion ($14,000 per year currently)

So what is different? A lot of things, including investment choices, fees and in-state resident benefits.

State by State

Every state does things a little differently. The complexity and nuances of the different rules and attributes will only expand as more states begin to offer their versions of ABLE plans. Here are some highlights of differences between the current offerings:

  • State Tax Deductions: Nebraska offers residents a state income tax deduction of up to $10,000 for contributions, while Ohio, Tennessee and Florida offer no deduction.
  • Fees: Every state’s investment options have different fee structures and some, such as Ohio’s STABLE program, charges a $2.50/month administrative fee ($5/month for out-of-state residents) in addition to the asset-based fees.
  • Lifetime Maximums: Lifetime maximums for accounts range from a low of $350,000 in Tennessee up to $426,000 in Ohio.

In the End

ABLE accounts promise to help an entire new class of disabled persons live with more independence and freedom. Keep in mind that ABLE accounts are not designed to be a substitute for a special needs trust – but they are a good option to help improve the life of someone with a disability and save taxes at the same time.

 

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General Business News for September 2016

Reviewing the Pros and Cons of Virtual Offices  

As the name implies, a virtual office exists primarily, if not exclusively, through the use of the Internet, a web of computers and software that workers use to do their jobs.

As Fortune magazine reports, two-thirds of major U.S. companies allow workers to telecommute infrequently and only one in three major American businesses permit workers to telecommute on a regular basis. With virtual offices used by employees and independent contractors alike, what are the advantages and disadvantages of a virtual office?

Advantages

With virtual offices having no physical constraints, they provide business organizations many financial and human resource benefits.

Since virtual offices, for the most part, are run over the Internet, there is little need for commercial real estate expenses. At most, there might be a need to rent temporary meeting space for a client for a few hours or days. Temporary office space with on-demand scanning, printing and administrative help might be available to augment an otherwise virtual office space. Depending on the savings of dynamic office space rental, real estate savings could provide businesses with more competitive quotes for clients.  

Virtual offices provide two related advantages, especially when it comes to recruiting and staff retention benefits. When a worker, contract or employee, cannot arrange transportation or it is not possible to travel on a daily basis due to geographical or personal reasons, virtual offices provide businesses with greater access to more candidates.

Similarly, virtual offices can provide businesses an option to find qualified candidates, if nearby talent lacks desired skills or experience. If a business is located in a sparsely populated area, a virtual office’s Internet-capable reach may make up for a skills-gap.  

Disadvantages

While virtual offices are advantageous for reasons already discussed, they do present some challenges. One disadvantage of a virtual office is that communication amongst workers is challenging due to its inherent design.

Unlike traditional or open space offices where colleagues can face or turn to each other to clarify assignments, task coordination is more difficult in virtual offices. This is due to the lack of face-to-face communication that using technology almost exclusively creates. This may make task coordination less efficient through overlapping emails, redundant phone calls and different file versions that could present work-flow confusion.

Virtual communication, such as chat or email, can lack the verbal cues face-to-face communication naturally possesses. This can lead to misinterpretation of cultural norms or an employee taking offense to an otherwise well-intended comment or emoticon.

Worker culture also is impacted in virtual offices by the difference in the inherent work environment. Challenges include some workers lacking a high level of discipline and motivation to stay organized and maintain deadline accountability. If reference checks are not taken to evaluate a potential candidate’s work ethic, especially in the contract economy, worker results may vary. Internal and external team-building exercises may be accomplished, but can similarly lack the verbal cues in-person team building exercises do.

While virtual workplaces have the potential to attract and find the right talent, it’s prudent to properly vet candidates for work performance and ethics before hiring.

 

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Tip of the Month for September 2016

Tip: Marketing Audit Is a Key Element to Business Success

The word audit has a bad reputation. The mere mention of an audit often makes employers and business owners quake. There are lots of types of audits performed in the workplace, and of all these, a marketing audit might be one of the most helpful tools a business owner has. Without regular, honest inventory-taking, you can’t measure the effectiveness of your marketing efforts and can’t see where you are getting the biggest bang for your buck.

Marketing audits don’t have to be complicated to be effective, but thoroughness is a prerequisite. Here’s how to start:

Internal Review

  1. Collect year-to-date current sales and marketing reports. Make sure they include goals/objectives, budgets and timetables and see how your most recent results line up against these parameters. Where are you meeting sales targets, missing sales targets or exceeding earlier forecasts?
  2. Look at developments in your industry/business. Have there been major developments in technology – or in the economy – that have affected your marketing efforts and your sales? Are you using up-to-date (and affordable) marketing and sales tools? Does your sales/marketing team have the technology needed to work effectively together and to reach and influence potential customers? If not, what is preventing you from doing so? Cost of new technology? Employee skill sets?
  3. Ask your employees how optimistic they feel about sales for the next few quarters. Get specific feedback regarding their assessments of:
    • Your company’s strengths
    • Weaknesses
    • Untapped opportunities
    • Challenges/Threats
  4. How does your use and adaptation of new communications and marketing technology stack up against your peers? Are you keeping up with new developments in your industry sector or are you lagging behind your competitors?

Outside Opinions

  1. Talk to your oldest and newest clients. Get their assessment of your marketing efforts. Find out how satisfied they are with recent goods or services provided by your firm. Based on what they heard/read/were told before making a purchase, were their expectations met? If not, what was responsible for the gap between expectations and reality?
  2. Ask vendors, suppliers and business partners for their opinions of your company and the efficacy of marketing efforts. Determine how you stack up against your competitors.

Audit Report

Look at what you’ve discovered about:

  • The reputation/image of your company (brand)
  • Effectiveness of your marketing messages
  • The perceived quality of the products/services you offer
  • Results of sales/marketing efforts (against objectives and goals set earlier)
  • Which tools yield the best sales leads and which yield the best conversion rates
  • Efficiency, effectiveness and cost efficiency of your major marketing tools:
    • Website
    • Webstie SEO
    • Online marketing campaigns
    • Database management
    • Social media
    • Advertising (traditional and Internet)
    • Publicity/PR
    • Promotional events
    • Others

Armed with the information on how your business is doing right now, you can see where you’re meeting your objectives, which marketing tools are contributing cost-effectively to these objectives and which need changing or omitting.