Forefield Forum

Free Online U

Lisa Sloate — Thu, 14 Jul 2011 14:46:20 +0000

Is this an idea whose time has finally come? University of the People (UoPeople) enrolled its first class of students in 2009, taking advantage of the growing body of free, open-access resources available online . To date, the tuition-free online institution has enrolled 1,000 students from over 100 countries, and it hopes to increase that number to 10,000 students in five years, which would make it financially sustainable according to its founder, Shai Reshef. UoPeople has just added some first rate college administrators and partners to its roster as it seeks American accreditation. Currently, it has two areas of study — business administration and computer science.

Interested applicants must have a high school diploma, be proficient in English, and pay an application fee of between $10 and $50. There is also a small fee for grading final exams, but otherwise UoPeople is totally free. And it doesn’t utilize the most sophisticated technology. Learning, for now, happens in text only. All students need is the ability to connect their laptops or mobile devices to a telecommunications network.

Stay tuned for the enrollment pattern for the new few years, as well as an update on whether UoPeople earns accreditation.

Rules on 1035 exchanges of annuities relaxed

Mary Frakes — Thu, 30 Jun 2011 13:52:19 +0000

Effective October 24, 2011, the IRS relaxes the rules governing Code Section 1035 tax-free partial exchanges of deferred annuities. A direct transfer of a portion of the cash surrender value of a deferred annuity to another annuity, regardless of whether the annuities are with the same or two different insurers, will be treated as a tax-free Section 1035 exchange if no distributions or surrenders are made from either annuity within 180 days of the transfer, except for amounts received as an annuity for a period certain of 10 years or longer, or for one or more lives. Also, subsequent transfers from either annuity intended to qualify as Section 1035 exchanges will not be considered distributions or surrenders for purposes of this ruling. Rev. Pro. 2011-38, 2011-30 IRB

IRS increases standard mileage rates for second half of 2011

Lisa Hartman — Thu, 23 Jun 2011 19:25:01 +0000

The IRS announced new standard mileage rates for July1 through December 31, 2011, as follows:

Business use of auto: 55.5 cents per mile may be deducted (up from 51 cents per mile for the first six months of 2011) if an auto is used for business purposes.

Charitable use of auto: 14 cents per mile may be deducted (remaining unchanged) if an auto is used to provide services to a charitable organization.

Medical use of auto: 23.5 cents per mile may be deducted (up from 19 cents per mile for the first six months of 2011) if an auto is used to obtain medical care (or for other deductible medical reasons).

Moving expense deduction: 23.5 cents per mile may be deducted (up from 19 cents per mile for the first six months of 2011) if an auto is used to effect a work-related move to a new home.

The College Bubble – an Update

Lisa Sloate — Wed, 06 Apr 2011 19:54:52 +0000

Almost two years ago on this blog, I posted an entry about whether the next bubble (after tech, housing, and stocks) would be in higher education. For years, I wrote, the financial sacrifices made by families to send their children to college seemed worth it. But I speculated that someday, when parents and students started questioning whether they were getting their money’s worth, the college bubble might just indeed be next.

Now, a recent book entitled Academically Adrift: Limited Learning on College Campuses has created a PR firestorm for colleges with the assertion that a huge swath of undergraduate students demonstrate “no improvement in critical thinking, complex reasoning, and writing skills” after four years of college. Make that four years of very expensive college. The book has the higher education world buzzing. An excellent analysis of the trends that have converged to create this reality can be found in this article from the Chronicle of Higher Education.

In the meantime, while the college bubble hasn’t exactly burst, there’s evidence that is has serious cracks. The college debt bubble may be ready to explode, with more and more students buried under unmanageable debt loads. In addition, more families are weighing the value of a pricey college diploma, as articles with titles like “Is a College Education Worth the Price?” seemingly springing up every week. Based on surveys, more students than ever are choosing colleges based on price, and parents seem to be realizing that their bright, motivated son or daughter can get a very high quality education even if they don’t attend one of the elite colleges that competes for status every year in the infamous U.S. News and World Report rankings.

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010

James Walsh — Tue, 21 Dec 2010 14:24:24 +0000

On December 17, 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 was signed into law. In addition to providing a 13-month extension of benefits for the long-term unemployed, the legislation includes a long-anticipated extension of the “Bush tax cuts” that were scheduled to expire on January 1, 2011. Other significant provisions include a new alternative minimum tax (AMT) “patch,” a major modification of the estate tax, and a new 1-year 2% employee Social Security payroll tax reduction.

For a summary of the legislation, see Forefield Update: The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (subscription or free-trial account required).

Must Act Now for GST Tax Savings Opportunity

Lisa Hartman — Mon, 20 Dec 2010 14:45:04 +0000

The new tax bill has created a generation-skipping transfer (GST) tax savings opportunity, but you must act quickly because it expires at midnight on December 31, 2010. The GST tax rate for 2010 is 0%. That’s both for outright gifts and money put in a trust for the sole benefit of grandchildren (or other skip persons). Such transfers will incur only gift tax at 35% (to the extent that the donor’s $1 million gift tax exemption has been used), but will not incur any GST tax. On the subsequently filed gift tax return, the donor should elect to “opt out” of the automatic allocation of the $5 million GST tax exemption.

A provision in the new law, referred to as the “step-down” rule, will prevent the GST tax from being imposed on distributions from a trust for which the GST tax was already imposed.

Advisors may want to let clients know about this fleeting opportunity.

Breaking the cost barrier

Lisa Sloate — Wed, 10 Nov 2010 14:55:47 +0000

What’s the significance of the number 100 in the 2010/2011 academic year? Any guesses? Here’s a hint: the number was 5 in 2008/2009 and 58 in 2009/2010.

According to the Chronicle of Higher Education, the number represents the number of colleges charging $50,000 or more for tuition, fees, room and board. And this year marks a milestone in that the first (and only) public college made the list — the University of California at Berkeley is charging out-of-state students $50,649 this year. The most expensive college on the list? Sarah Lawrence College in NY. It charges $57,384.

To see the full list, click here.

Social Security–No COLA Adjustment Doesn’t Tell the Whole Story

Bill Wagner — Tue, 09 Nov 2010 00:18:07 +0000

The Social Security Administration recently announced that there would be no cost-of-living adjustments (COLAs) for Social Security benefits for 2011. That means individuals currently receiving a Social Security benefit will not receive an increase for 2011. What you may not have realized is that Social Security benefits for those turning age 62 in 2011 will generally be less than for those who turned age 62 in 2010.

The national average wage index is used to index a worker’s lifetime earnings so that future Social Security benefits will reflect the general rise (or fall) in the standard of living that occurs over the worker’s lifetime. The indexed earnings are then used to calculate the worker’s average indexed monthly earnings (AIME). AIME is used with certain bend points to calculate the worker’s primary insurance amount (PIA), the basic benefit upon which all Social Security benefits are generally based. PIA is also used with certain other bend point to calculate the maximum benefit for a family.

The Social Security Administration has also announced the national average wage index and the bend points used to calculate Social Security benefits for persons turning age 62 in 2011. These amounts are lower than their levels for persons turning age 62 in 2010. As a result, for persons with comparable amounts of earnings over their lifetime, the level of benefits for persons turning age 62 in 2011 will be lower than the level of benefits for persons turning age 62 in 2010.

This is the first time that there has been a reduction in Social Security benefits due to indexing. Planning for retirement may have just gotten a little more complicated.

IRS announces retirement plan COLA adjustments for 2011

Rob Cardinale — Fri, 29 Oct 2010 12:22:53 +0000

And, essentially, there aren’t any.

Except for some adjustments to IRA and Saver’s Credit phase out ranges, the limits for 2011 are the same as 2010.

View IRS IR-2010-108 here.

401(k) and 403(b) in-plan Roth “conversions”

Rob Cardinale — Fri, 01 Oct 2010 17:51:56 +0000

The IRS has just released the following in its Employee Plan News for October 1, 2010:

New Law Allows In-Plan Rollovers to Designated Roth Accounts

The Small Business Jobs Act of 2010 permits employers to amend their §401(k) or §403(b) plans to allow participants to transfer an eligible rollover distribution (ERD) into their designated Roth account in the plan if the transfer is of an ERD:

1. made after September 27, 2010;
2. from a non-designated Roth account in the same plan;
3. because of an event that triggers an ERD from the plan; and
4. otherwise meets the rollover requirements.

The new law also permits sponsors of governmental §457(b) plans to add designated Roth accounts to their plans in taxable years beginning after 2010, and then these plans can be amended to allow in-plan ERD transfers to participants’ designated Roth accounts if the ERD meets conditions 2 through 4 above.

If a participant rolls over an ERD into a designated Roth account, he or she must include any previously untaxed portion of the ERD in gross income. However, the rolled over amount is not subject to the additional 10% early withdrawal tax.

For 2010 only, if a participant rolls over an ERD into a designated Roth account in a §401(k) or §403(b) plan, he or she can include:

1. half of the taxable amount of the rollover in 2011 gross income and half in 2012 gross income; or
2. the entire taxable amount of the rollover in 2010 gross income.

A participant that elects to include the rolled over amount in his or her 2010 gross income may not revoke that election after the due date, including extensions, of his or her 2010 federal income tax return. The participant may also owe estimated taxes on the taxable amount of the rollover for the year or years it is included in gross income or may incur an underpayment penalty.

Stay tuned for additional information in our newsletters and our website.