Albany Financial Group

80 Wolf Road

Suite 301
Albany, NY 12205

Recent Legislation

Relief for Insurance Policyholders

A recent Executive Order issued by Governor Andrew Cuomo, together with recent amendments to the insurance and banking regulations issued by the New York State Department of Financial Services, extend grace periods and give  other rights under life insurance policies or annuity contracts for those who can demonstrate financial hardship as a result of the novel coronavirus  pandemic.

These grace periods and rights are currently in effect but are temporary, though they may be extended further.  Please check the Department’s website at  https://www.dfs.ny.gov/consumers/coronavirus for updates.

A copy of the Executive Order and regulations can be found at https://www.governor.ny.gov/news/no-20213-continuing-temporary-suspension-and-modification-laws-relating-disaster-emergency  and https://www.dfs.ny.gov/system/files/documents/2020/03/re_consolidated_amend_pt_405_27a_27c_new_216_text.pdf, respectively.

 Insurance Payments - Grace Period

If you can demonstrate financial hardship as a result of the COVID-19 pandemic, your insurer must extend to 90 days the applicable grace period for the payment of premiums and fees under your life insurance policy or annuity contract.  If you do not make a timely premium payment and can demonstrate financial hardship as a result of the COVID-19 pandemic, your insurer may not impose any late fees relating to the premium payment or report you to a credit reporting agency or a debt collection agency regarding such premium payment.

 Catching up on Overdue Insurance Payments

The regulations also require your insurer to permit you to pay the overdue premium over a 12-month period if you did not make a timely premium payment due to financial hardship as a result of the COVID-19 pandemic and can still demonstrate financial hardship as a result of the COVID-19 pandemic.  This also applies if the insurer sent you a nonpayment cancellation notice prior to March 29, 2020.

 Policies Financed by Premium Finance Agencies – Grace Period

If your life insurance policy or annuity contract has been financed through a premium finance agency, and you do not make an installment payment, the premium finance agency may not cancel your life insurance policy or annuity contract for a period of at least 90 days, including any contractual grace period, if you can demonstrate financial hardship as a result of the COVID-19 pandemic, and subject to the safety and soundness of the premium finance agency.  In addition, if you do not make a timely installment payment to the premium finance agency and can demonstrate financial hardship as a result of the COVID-19 pandemic, the premium finance agency must extend the due date for the installment payment by at least 90 days, may not impose any late fees relating to that installment payment, and may not report you to a credit reporting agency or a debt collection agency regarding that installment payment.

 Catching up on Overdue Payments to Premium Finance Agencies

If you do not make a timely installment payment to the premium finance agency due to financial hardship as a result of the COVID-19 pandemic, the premium finance agency must permit you to pay the installment payment over a 12-month period if you can still demonstrate financial hardship as a result of the COVID-19 pandemic, subject to the safety and soundness of the premium finance agency. This also applies if the premium finance agency issued a non-payment cancellation notice prior to March 29, 2020.

 How to Demonstrate Financial Hardship

If you are unable to make a timely premium payment due to financial hardship as a result of the COVID-19 pandemic, you may submit to your insurer or premium finance agency, as applicable, a statement that you swear or affirm in writing under penalty of perjury that you are experiencing financial hardship as a result of the COVID-19 pandemic, which the insurer or premium finance agency, as applicable, shall accept as satisfactory proof.  Such statement is not required to be notarized.

 Questions

If you have any questions regarding your rights under the Executive Order or regulations, please contact your insurer, broker, or premium finance agency.

 

The Coronavirus Aid, Relief and Economics Security (CARES) Act

This historic and sweeping legislation, signed into law on March 27, 2020 was created to help keep workers paid and employed, allows businesses to remain operational and makes necessary health care system enhancements to stabilize the economy. Below are a few highlights of this $2 trillion package:

Assistance for American Workers, Families, and Businesses 

All U.S. residents with adjusted gross income up to $75,000 ($150,000 married), who are not a dependent of another taxpayer and have a work eligible social security number, are eligible for a full $1,200 “rebate,” $2,400 married. In addition, they are eligible for an additional $500 per child. This is true even for those who have no income, as well as those whose income comes entirely from non-taxable means-tested benefit programs, such as SSI benefits. Estates and trusts are not eligible for this rebate. The rebates are being treated as advance refunds of a 2020 tax credit and taxpayers will reduce the amount of the credit available on their 2020 tax return by the amount of the advance refund payment they receive. 

For the vast majority of Americans, no action on their part will be required in order to receive a rebate check as the IRS will use a taxpayer’s 2019 tax return if filed, or in the alternative their 2018 return. This includes many low-income individuals who file a tax return in order to take advantage of the refundable Earned Income Tax Credit and Child Tax Credit. 

The rebate amount is reduced by $5 for each $100 that a taxpayer’s income exceeds the phase-out threshold. The amount is completely phased-out for single filers with incomes exceeding $99,000, $146,500 for head of household filers with one child, and $198,000 for joint filers with no children. 

Retirement Assistance

Required minimum distributions (“RMDs”): RMDs for 2020 are waived for all plans including 401(k), 403(b), and governmental 457(b) plans and IRAs. This also applies to RMDs due in 2020, but attributable to 2019. It is a true waiver and will not need to be made up next year.

IRA Contribution Deadline: The deadline for filing an individual’s 2019 income tax return is extended to July 15, 2020, and the deadline for making contributions to your IRA for 2019 is also extended to July 15, 2020.” 

Plan withdrawals and loan relief: The proposal would provide tax relief for retirement plan and IRA “coronavirus-related distributions” taken this year. For any such distribution, the proposal:

  • permits in-service distributions;
  • provides an exception to the 10% early distribution penalty;
  • exempts the distribution from the mandatory 20% withholding applicable to eligible rollover distributions;
  • permits the individual to include income attributable to the distribution over the three-year period beginning with the year the distribution would otherwise be taxable; and
  • permits recontribution of the distribution to a plan or IRA within three years, in which case the recontribution is generally treated as a direct trustee-to-trustee transfer within 60 days of the distribution.

Definition of “coronavirus-related distribution: To be a coronavirus-related distribution, a distribution must be made to an individual:

  • who is diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention,
  • whose spouse or dependent is diagnosed with such virus or disease by such a test, or
  • who, due to the virus or disease, experiences adverse financial consequences as a result of being quarantined, being furloughed, laid off or having work hours reduced, being unable to work due to lack of child care or closing or reducing hours of a business owned or operated by the individual.

Plan loans: First, the proposal would increase the maximum loan limit for qualified individuals to the lesser of:

  1. $100,000 (from $50,000); or
  2. the greater of $10,000 or 100% (from 50%) of the present value of the participant’s vested benefit.

Unemployment Insurance Provisions 

The Act creates a temporary Pandemic Unemployment Assistance program through December 31, 2020 to provide payment to “covered individuals” who are not traditionally eligible for unemployment benefits, such as self-employed individuals, independent contractors, and those who have limited work history because they were unable to work as a direct result of the coronavirus public health emergency. 

“Covered individuals” do not include individuals who have the ability to telework with pay (i.e., work from home) or who are receiving paid sick leave or other paid leave benefits. A person may receive benefits under the Pandemic Unemployment Assistance program for up to 39 weeks, which includes any week the person received regular pay or extended benefits under any federal or state program. 

The Act also provides an additional $600 per week to each recipient of unemployment insurance or Pandemic Unemployment Assistance for up to four months. There will also be an additional 13 weeks of unemployment benefits through December 31, 2020 to help those who remain unemployed after state unemployment benefits are no longer available. 

Individual Charity-Related Provisions 

The CARES Act allows for an above-the-line deduction up to $300 for cash contributions to certain charities for those who do not itemize deductions. Also, the Act increases the limitations on deductions for “qualified contributions” by individuals who itemize by suspending the 50% of Adjusted Gross Income limitation, meaning up to 100% of AGI may be claimed as a charitable itemized income tax deduction. 

Student Loan Provisions 

The Act suspends student loan payments (principal and interest) through September 30, 2020 without penalty to the borrower for federal student loans. No interest will accrue on these loans during this suspension period. 

In addition, employers may provide a student loan repayment benefit to employees on a tax-free basis. Under the provision, an employer may contribute up to $5,250 annually toward an employee’s student loans, and such payment would be excluded from the employee’s income. The $5,250 cap applies to both the new student loan repayment benefit as well as other educational assistance (e.g., tuition, fees, books) provided by the employer under current law. The provision applies to any student loan payments made by an employer on behalf of an employee after date of enactment and before January 1, 2021. 

Small Business Assistance

Paycheck Protection Program: The measure would establish a new Paycheck Protection Program to let small businesses, nonprofits, and individuals seek loans through the Small Business Administration’s (SBA) 7(a) loan program. The measure would authorize $349 billion in total 7(a) lending from February 15, 2020 through June 30, 2020. It would also provide $349 billion for the SBA to fully guarantee loans under the new program.

Eligibility for Loan Assistance: Loans would be available during the covered period for:

  • Any business, nonprofit, veterans group, or tribal business with 500 or fewer employees, or a number set by the Small Business Administration (SBA) for the relevant industry.
  • Sole proprietors, independent contractors, and eligible self-employed workers.
  • Hotel and food service chains with 500 or fewer employees per location.

Where to Apply for a Loan: Lenders authorized to make loans under the SBA’s current Business Loan Program are automatically approved to make and approve loans under this new program, and they may opt to participate in the program under the terms and conditions established by the Department of Treasury. Lender Match on the Small Business Administration website is a free online referral tool that will connect you with already participating SBA-approved lenders.

Certain borrowers would be eligible for loan forgiveness equal to the amount spent during an eight-week period after the origination date of the loan on:

  • Payroll costs;
  • Interest payment on any mortgage incurred before Feb. 15, 2020;
  • Rent on any lease in force before Feb. 15, 2020; and
  • Utilities for which service began before Feb. 15, 2020.


Delay of payment of employer payroll taxes: The provision allows employers and self-employed individuals to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees. Employers generally are responsible for paying a 6.2% Social Security tax on employee wages. The provision requires that the deferred employment tax be paid over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022. The Social Security Trust Funds will be held harmless under this provision. Similar to the Employee Retention Credit, deferral is not provided to employers receiving assistance through the Paycheck Protection Program.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act

Barely half (51%) of the workforce is covered by a retirement savings plan through their employer, according to the United States Bureau of Labor Statistics. The December's passage of the SECURE Act, the biggest retirement-oriented legislation to pass in over a decade, is meant to address this issue, among other things.

Here are the top 10 Key Provisions:

1. Open Multiple Employer Plans / Pooled Employer
Plans

The SECURE Act allows unrelated small employers to band together in “open” 401(k) multiple-employer plans (MEPs; also referred to as pooled employer plans (PEPs)). This reduces the costs and administrative duties that each employer would otherwise bear alone. The Act also eliminates the “one-bad-apple” rule under which a violation by one employer participating in a MEP can trigger severe penalties for the compliant employers in the MEP.

2. Safe Harbor 401(k) Plans and Timing of Plan
Amendments and Adoptions

The SECURE Act very generally permits employers to add a safe harbor feature to their existing 401(k) plans during the year; such additions are even permitted very late in the year and after the endof the year if the employer contributes at least 4 percent of employees’ pay instead of the regular 3 percent. It also allows employers to adopt a plan for a taxable year as long as the plan is adopted by the due date for the employer’s tax return for that year (including extensions).


3. Startup Credit for Small Employer Plans and New
Credit for Small Employer Plans Adopting Automatic
Enrollment

The SECURE Act increases the business tax credit for plan startup costs to make setting up retirement plans more affordable for small businesses. The tax credit will increase from the current cap of $500 to up to $5,000 in certain circumstances. It also encourages small-business owners to adopt automatic enrollment by providing a further $500 tax credit for three years for plans that add auto-enrollment.


4. Post-70½ IRA Contributions

The prohibition on making deductible contributions to a traditional IRA after age 70½ is repealed.


5. Long-Term Part-Time Employees

The SECURE Act requires employers to include long-term part-time workers as participants in defined-contribution plans except in the case of collectively bargained plans. Eligible employees will have completed at least 500 hours of service each year for three consecutive years, and are age 21 or older. However, these participants can be excluded from employer contributions, nondiscrimination and top-heavy requirements. Previously, part-time workers could be excluded if they haven’t worked 1,000 hours in a 12-month eligibility period.


6. Plan Withdrawals for Birth or Adoption

The SECURE Act allows an exception to the 10 percent penalty for birth or adoption. New parents can now withdraw up to $5,000 from a retirement account within a year of a child’s birth or adoption without the 10 percent penalty those younger than 591/2 would normally owe. The distribution, which is still subject to tax, can be repaid to a retirement account.


7. Increased Required Beginning Date

The SECURE Act increases the age triggering the required beginning date for plans and IRAs to 72.


8. Consolidated Form 5500 Reporting for Similar Plans

The SECURE Act offers a consolidated Form 5500 for certain defined-contribution plans with a common plan administrator to reduce administrative costs, but also increases penalties for failure to file retirement plan returns, such as Forms 5500, required notifications of registration changes and required withholding notices.


9. Fiduciary Safe Harbor for Selecting Annuity Providers

The SECURE Act creates a safe harbor that employers can use when choosing an annuity provider to provide annuity distributions under a defined-contribution plan.


10. “Stretch” RMD

The SECURE Act imposes a 10-year distribution limit for most non-spouse beneficiaries to spend down inherited IRAs and defined-contribution plans. Before passage of the Act, withdrawals from inherited accounts could be stretched over the life of beneficiaries to mitigate taxes.


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