Frequently Asked Questions - Reynolds Financial Services
The 2 Most Frequently Asked ACA Questions
#1 Most Frequently Asked ACA Question: Why do the new health plans have High Deductibles/Max Out-of-pocket (i.e. $6,600)?
Answer: Deductibles/Max Out-of-pocket are relevant whenever there's an accident or major illness. $6,600 Deductible doesn't mean that you'll have to meet $6,600 before any coverage begins. All 5 levels (including Bronze & Catastrophic levels) provide for a once a year Preventative Services Exam at no cost or deductible. Also, by choosing the Silver level plan (and above) allows for Dr. visits (after the Preventative Services Exam) with a co-payment fee per visit, and without meeting the upfront deductible. The Annual Preventative Services Exam includes the following (check your policy for specifics):
All the new plans sold on all 5 levels provide the 10 Essential Health Benefits (listed below), which includes the once a year Preventative Services Exam. If an accident or illness occurs, having health coverage vs. not having coverage drastically reduces your Maximum Out-of-pocket expenses down to $6,600 (from i.e. $50,000+ or even bankruptcy). Also, the Deductible/Max Out-of-pocket is reduced for those who qualify for the CSR Subsidy. (Still concerned about the High Deductible/Max Out-of-pocket? Ask about our GAP plans that pay you cash in addition to other coverage; we have several GAP plans to choose from).
#2 Most Frequently Asked ACA Question: Why am I being forced to get health coverage? I like to choose whether I get coverage.
Answer: The Special Enrollment period ended April 30th, 2015...unless there's a qualifying life event. All U.S. citizens are required to have health insurance and anyone choosing not to obtain coverage will pay The Annual Penalty in 2015. Preventative Services is the key to early detection from life threatening situations that can lead to bankruptcy or death. Example: With health coverage, you can get any health concern checked out right away, but without coverage, there's tendency to wait. Not having health insurance is the leading cause of bankruptcy. This new law prevents bankruptcies and saves lives.
We believe the good outweighs the bad with the ACA...
Life Insurance - what's the best choice for you? ^Back Top^
TERM LIFE, UNIVERSAL LIFE (UL), WHOLE LIFE, or EQUITY INDEXED UNIVERSAL LIFE (EIUL/IUL) INSURANCE (Home, Income, Debt, Family).
Term Life insurance can be used to protect your family for specific reasons during limited time periods (i.e. 5yrs, 10yrs, 15yrs, 20yrs, 25yrs, 30yrs); a Term Life policy is usually renewable up to age 65 or 70 and it will end at some point if not converted into a permanent life policy. If death happens during the period of a Term Life policy "in force", it protects your home, salary, debt, or it leaves money with your loved ones. Term Life premiums can either rise with time, or coverage is reduced (or cancelled) at certain ages and/or with health problems. A Term Life policy does not accumulate any cash value where the Whole Life, UL, and EIUL/IUL each have the ability to accumulate cash value. A Term Life policy is the lowest price policy, so it can offer the highest face amounts.
The UL policy is not a guaranteed for life policy unless it has a no lapse rider included or it's a "GUL"(Guaranteed UL) policy. A no lapse rider guarantees your coverage will last for a certain time period (i.e. 10yrs, 20yrs, 30yrs) or up to a certain age (i.e. up to age 90, 95, 100). A GUL policy guarantees that the death benefit remains as long as the target premiums are paid, even if the policy has no cash value. Without a no lapse rider, a UL policy lasts only as long as the cash value in the policy.
The Whole Life policy is a guaranteed for life policy. Once a Whole Life policy begins, your coverage cannot be reduced (or cancelled) and the premiums remain the same throughout the life of the policy.
The EIUL policy is a Life Insurance product with investment qualities that offers an alternative to fixed and low-yielding savings vehicles like a CD (CD's today only offer about .25% interest) or Savings Account (Banks today only offer about 1% interest).
--Click Here for your Term Life/UL Quote--
WHOLE LIFE INSURANCE (Burial/Final Expense Insurance)
Term Life and UL policies each serves their own purposes as does Whole Life. A Whole Life policy for Burial/Final Expense serves the primary purpose of protecting families by providing a basic death benefit for Funeral Expenses, although it can also serve the same purposes as mentioned above with Term Life and UL. The cash value in Whole Life is essentially a savings feature where money can be borrowed out of the policy in the future for part or all of it's cash. Whenever premiums are paid into a Whole Life policy, a portion goes into the death benefit and another portion goes into the cash value account. As the name implies, "Whole Life" remains in effect for the entire lifetime until death (coverage lasting up to age i.e. 100 or 121), assuming all premiums are paid. Whole Life for Burial/Final Expense claims are paid immediately upon death to the family usually within 48 hours without providing a death certificate, Tax Free to the primary beneficiary (or beneficiaries).
What are the advantages of a Whole Life for Burial/Final Expense Policy (Contract with an Insurance Company) vs. a Pre-need (Contract with a Funeral Home)?
VIDEO: Whole Life Insurance vs. Pre-need
i) In a Whole Life policy, you choose your primary beneficiary (a family member); alternatively, a Pre-need's beneficiary is the funeral home. At death, a Whole Life policy leaves money with your family vs. "putting it in the ground".
ii) Funeral homes make the claim that your coverage is "locked in" and "guaranteed for life", but a funeral home can change the parameters of a Pre-need contract in the future as funeral costs rise. On the other hand, a Whole Life policy is a "guaranteed for life" contract established with an insurance company. Once your Whole Life policy goes "in force", your premium cannot increase and your coverage amount cannot decrease, assuming all the premiums are paid.
iii) In many cases (depending on age and health), a person will pay less to have more coverage in a Whole Life policy vs. a Pre-need contract. Example Quote: a 60 year old person could be paying $50/month for 15,000 coverage in a Whole Life policy vs. paying $120/month for 7,000 coverage in a Pre-need contract.
--Contact Us for your Whole Life Quote--
The "EIUL" or "IUL" Policy
Today, the CD (Certificate of Deposit) only offers about .25% interest and the Banks (Savings Account) only offer about 1% interest; the IUL can help solve such low-yielding savings vehicles.
The IUL policy can be used as part of a Retirement Plan because it offers:
(i) Up to 17% interest Cap Rate & 100% Participation Rate tied to one or more indices; the opportunity to achieve a Tax Free Growth Investment.
(ii) No risk; No possibility of loss of principle during the downturns of the market.
(iii) Liquidity of funds; Easy access to your Tax Free Savings before and after retirement.
--Contact Us for your IUL Quote--
Healthcare Reform - the ACA "Obamacare" ^Back Top^
The Affordable Care Act has several broad objectives designed to:
expand health insurance coverage
prevent economic catastrophe and
increase protection to health care consumers.
The law focuses on disease prevention and on keeping people well.
It aims to improve the entire health care system.
It has several goals to make the health care system more efficient and cost effective.
Health Insurance Terms
Coinsurance - A percentage of your medical and drug costs that you pay out of pocket.
Copay - The fixed dollar amount you pay when you receive medical services or have a prescription refilled.
Deductible - The amount you pay for medical services or prescriptions before your plan pays for your benefits. ACA health plans include 100% Preventative Services without meeting an upfront deductible; deductibles become more relevant when there's an accident or illness.
Formulary - Also called a "drug list," the list the drugs your plan covers. It's often divided into sections - or tiers - based on the amount your plan will pay for the drugs in that group.
Network - A group of healthcare providers who are contracted to provide medical services at discounted rates. The providers include doctors, hospitals, and other healthcare professionals and facilities.
Maximum out-of-pocket (or Out-of-pocket Maximum) - The most you could pay toward covered expenses (during the 12 month period) including deductibles, copays, and coinsurance.
Premium - Your monthly bill or payment.
A QUALIFIED HEALTH PLAN (QHP) is a health plan that meets the requirements of the law and includes all the 10 Essential Health Benefits (EHB). Private health insurance companies who have cancelled some polices due to Limited Benefit Insurance (about 5%); the policy not having all the EHB's. attempting to replace these old policies with the new one's that cover the EHB's and avoid the annual tax penalty.
The 10 Essential Health Benefits (EHB) of a QHP:
1. Ambulatory patient services, 2. Emergency services, 3. Maternity and newborn care, 4. Pediatric services including dental and vision services, 5. Rehabilitative/habilitative services and devices, 6. Mental health/service use disorder services including behavioral health treatment, 7. Preventative/wellness services and chronic disease management, 8. Hospitalization, 9. Prescription drugs, 10. Lab services.
3 Types of coverage plans, HMO, EPO, PPO.
An HMO (Health Maintenance Organization) usually requires you to select a primary care physician (PCP) who will connect and refer you to other healthcare providers or specialists within the network; HMO plans normally require you to select a PCP and have the lowest out of pocket costs.
An EPO (Exclusive Provider Organization) gives you access to any in-network doctor, specialist or hospital so that you can manage your healthcare without a referral from your PCP.
A PPO (Preferred Provider Organization) offers you the freedom to receive care from the provider of your choice, whether in-or out-of-network. However, you will save more money by choosing healthcare providers within the network.
EPO vs PPO; see that an EPO has no coverage outside of the network....
The bottom line? HMO's help keep healthcare costs down by building a strong relationship with your PCP who will connect you to others when necessary. EPO's are an affordable option if you want direct access to healthcare providers within the network. PPO's may cost a little more, but allow you to use your preferred provider either in- or out- of network. You select the plan that's best for you and your family.
Healthcare options today: Platinum, Gold, Silver, Bronze, or Basic/Catastrophic (for those under age 30);
Bronze and Catastrophic plans are designed with the lowest monthly premium, but typically have the highest deductibles, coinsurance, and/or copays. Platinum plans generally have the highest monthly premium, but have the lowest out-of-pocket costs when healthcare services are received. To pick the right plan, consider copays, deductibles, coinsurance, and maximum out-of-pocket. The differences in these amounts determine the monthly premium you'll pay for the plan.
Lower deductibles with lower out-of-pocket maximums have a higher premium; Higher deductibles with higher out of pocket costs have a lower premium.
"On Exchange" vs. "Off Exchange"
If you don't qualify for financial help (or subsidy), you can choose the best plan for yourself "Off Exchange"
--Choose your ACA Health Plan--
Retirement Income Planning
Annuities are unique products. They are primarily savings and investment vehicles, designed to hold the owners funds for a certain time and to then convert those funds into a stream of income that can extend as long as the owner desires. This process is called annuitization. Annuities are defined in terms of when they are scheduled to annuitize (immediate or deferred) and how the products funds are invested and how they grow (fixed, indexed, or variable). As they have evolved over the years, today's annuity products have become sophisticated retirement planning products that can be used for long-term asset accumulation and lifelong asset distribution (for immediate income).
The purpose of an annuity is to accumulate funds on a tax deferred basis for the long-term and/or provide a source of income guaranteed payable for a specific period, typically lifetime. They are designed to provide for the tax-deferred accumulation of funds for use during and individuals life and secondly to provide benefits at death.
An Annuity can help make the most out of savings and create a secure financial future.
Individual Annuity vs. Qualified Plans.
Annuities can be used to fund a qualified plan such as a Traditional IRA, SEP, or 403(b) plan. If you don't need (i) a death benefit, (ii) a means to generate a guaranteed lifelong income stream, (iii) or a variety of options for income payout, there's no need to use an annuity to fund a qualified plan. You can purchase a mutual fund instead. The individual who owns an individual nonqualified annuity may make premium deposits of any amount he or she wishes while an individual who owns a qualified annuity is limited in the amount of premium deposits based on contribution limits that apply to the qualified plan the contract supports. Those who can participate in a 401(k) plan should maximize employer contributions before contributing to any individual qualified annuity.
Most annuities impose surrender charges (administrative charges, maintenance fees, tax penalties, etc) if withdrawals are taken or if the contract is terminated within a specified number of years after issue. For this reason, deferred annuities are fairly illiquid products for the first seven to ten years after purchase, though most contracts offer provisions for some free withdrawals during this period.
Penalties on Withdrawals before age 59 1/2
If a withdrawal is taken before the owner's age 59 1/2, it is subject to a 10% penalty in addition to taxation. Exceptions to the 10% penalty are death, disability, or Annuitization; the way to avoid the 10 percent penalty is to take the distribution in a series of substantially equal payments over the owner's life expectancy. Annuity principle is not subject to taxation, but interest earnings is subject to taxation. Amounts used to fund the annuity, the owners premium deposits, are the contract's principle.
Section 1035 provides that certain exchanges of these types of contracts are not taxable. They include the following:
The ability to make 1035 exchanges is one of the most important tax benefits that annuities offer. The U.S. Tax Court found in favor of partial exchanges, the IRS released Revenue Ruling 2003-51, stating that partial annuity exchanges would be considered tax-free exchanges. The IRS was slow to define how it would treat the issue of partial withdrawals following an exchange. After several interim announcements in the form of private letter rulings, the IRS set the record straight twice with the release of two Revenue Procedures: Rev. Proc. 2008-24 and Rev. Proc. 2011-38.
Rollovers and the Taxation of Qualified Annuities...
The movement of qualified money from one plan to another can be accomplished through a rollover. A qualified rollover enables funds to be transferred tax free from one qualified account to another qualified account, where they will retain their tax-deferred status and will continue to grow until they are withdrawn. The plan of choice for the rollover of most funds is an IRA and for many retirees, an annuity may be an appropriate vehicle to fund the rollover IRA assets.
Additional features have been added to annuities over the past few years that offer, through riders (Guaranteed Living Benefits), ways to enhance and guarantee the product's values or to provide additional benefits, such as funds for long-term care.
Roth IRA (vs. the Traditional IRA) earnings are not subject to taxation at all as long as the owner maintains the account for the required number of years. Roth IRA's can be funded with annuities.
Which one is more suitable for your Retirement Income Plan....an "Annuity" or the "EIUL" Policy?
Determination is based on your investment objectives and needs in light of your risk tolerance (low, moderate, aggressive), financial holdings, investment experience, income, and time horizon. A person who has substantial income and a high level of liquid assets relative to debts would be suitable for an Annuity. On the other hand, a person with limited income, modest assets, and substantial debt would be more suitable for an Equity Indexed Universal Life Policy (EIUL). The purchase of an Annuity or EIUL policy is often a complicated and confusing process for consumers of all ages. There's not yet been an Insurance Product (Annuity, EIUL, Life, Health, Dental, etc.) that can offer consumers only advantages without any disadvantages. Instead, each product provides a combination of advantages and disadvantages that can weigh more or less heavily on a consumer depending on his or her situation.
--Contact Us for your Annuity Quote--
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