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Miami

Cypen & Cypen
NEWSLETTER
for
OCTOBER 11, 2007

Stephen H. Cypen, Esq., Editor

Never Forget - September 11, 2001

1. MEDICARE COSTS AND RETIREMENT SECURITY:

A Brief from Center for Retirement Research at Boston College focuses on one component of retiree health care costs -- the Medicare program. Everyone knows that health care costs are rising rapidly. But it is stunning to compare future health care costs with future Social Security benefits. Under reasonable assumptions of future growth rates, Supplementary Medical Insurance premiums and cost sharing will eventually represent an unaffordable share of retirement income. At the same time, income tax rates to finance the shortfall in the SMI program will leave future retirees with less after-tax income to cover these costs. As much as people might value the benefits of health care spending, they simply will not have enough income left over to cover the other necessities of life. Moreover, the Medicare SMI program is only a portion -- albeit a significant portion -- of the health care costs faced by retirees. Under Medicare’s Hospital Insurance program, retirees who are hospitalized must pay a substantial deductible for each “spell of illness,” and, since HI does not have a cap on coinsurance, those with long and complicated illnesses incur very large bills. Finally, many will face the need for long-term care either at home or in a nursing home late in their life. The long-run solution is to control the cost not just of Medicare but of the entire health care system. The United States spends a much higher share of GDP on health care services than other countries, yet in many instances produces less favorable outcomes. But reform is unlikely to come quickly, so the message for those approaching retirement is to provide an extra cushion to cover costly health care expenditures.

2. IRS UPDATES PER DIEM BUSINESS TRAVEL EXPENSE REIMBURSEMENTS:

Internal Revenue Service issued Revenue Procedure 2007-63 on September 27, 2007, updating Business Travel Expense Rules for Employees. The revenue procedure provides rules under which the amount of ordinary and necessary business expenses of an employee for lodging, meal and incidental expenses or for meal and incidental expenses, incurred while traveling away from home, are deemed substantiated under the Income Tax Regulations when a payor (employer, its agent or a third party) provides a per diem allowance under a reimbursement or other expense allowance arrangement to pay for expenses. In addition, the revenue procedure provides an optional method for employees and self-employed individuals who are not reimbursed to use in computing deductible costs paid or incurred for business meal and incidental expenses, or for incidental expenses only if no meal costs are paid or incurred, while traveling away from home. Use of a method described in the revenue procedure is not mandatory, and a taxpayer may use actual allowable expenses if the taxpayer maintains adequate records or other sufficient evidence for proper substantiation. The revenue procedure does not provide rules under which the amount of an employee’s lodging expenses will be deemed substantiated when a payor provides an allowance to pay for those expenses but not meal and incidental expenses. Rev. Proc. 2007-63 can be accessed at www.irs.gov/pub/irs-drop/rp-07-63.pdf.

3. PROPOSED HEARING ON REGULATIONS UNDER HELPS:

Internal Revenue Service has issued Internal Revenue Bulletin 2007-39 (September 24, 2007). The Bulletin is a Notice of Proposed Rule Making and Notice of Public Hearing on Medical and Accident Insurance Benefits Under Qualified Plans. A public hearing is scheduled for December 6, 2007. Written or electronic comments must be received by November 19, 2007. The proposed regulations include those under IRC Section 402(l), the Healthcare Enhancement for Public Safety (HELPS) Retirees. Section 402(l), as added by Pension Protection Act of 2006, permits an exclusion from gross income, up to $3,000 annually, for distributions paid directly to an insurer to purchase accident or health insurance or qualified long-term care insurance for an eligible retired public safety officer and his or her spouse or dependents. The existence of narrow exceptions for retiree medical benefits under Section 401(h) and for distributions for the payment of premiums on behalf of the eligible retired public safety officers under 402(l) is consistent with a general rule for inclusion in gross income of the payments of premiums for accident and health insurance. The complete Bulletin is located at http://www.irs.gov/irb/2007-39_IRB/ar15.html.

4. FAST FACTS AND FIGURES ABOUT SOCIAL SECURITY:

The U.S. Social Security Administration, Office of Policy, has issued “Fast Facts & Figures About Social Security, 2007.” The publication answers the most frequently asked questions about the programs SSA administers. It highlights basic program data for the Social Security (Retirement, Survivors and Disability) and Supplemental Security Income programs. Did you know that:

  • SSA paid benefits to about 54 million people in 2006
  • About 16% of the total U.S. population and 90% of the population age 65 or older received Social Security benefits in 2005
  • Social Security provided at least half the income for 65% of the aged in 2005
  • Social Security benefits were awarded to about 4.6 million people in 2006
  • Women accounted for 56% of adult Social Security beneficiaries in 2006
  • The average age of disabled-worker beneficiaries was 52.1 years in 2006
  • Eighty-three percent of Supplemental Security Income recipients received payments because of disability or blindness in 2006


One other point: most people know that the age for full retirement benefits has gradually been extended. Here’s the scoop, all in one place:

Year of Birth Full Retirement Age

1937 and earlier 65
1938 65 and 2 months
1939 65 and 4 months
1940 65 and 6 months
1941 65 and 8 months
1942 65 and 10 months
1943-1954 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 and later 67

The entire very interesting report can be found online at
http://www.socialsecurity.gov/policy/docs/chartbooks/fast_facts/2007/index.html.

5. SOMETHING ELSE TO WORRY ABOUT WITH YOUR KIDS:

What happens in Vegas may stay in Vegas, but what happens in the privacy of your own home may very well be broadcast on your kid’s MySpace page. According to SmartMoney, parents are discovering that their children are spilling some fairly embarrassing information, running the gamut from unflattering portraits and pointed criticisms to intimate secrets, confidential business information and allegations of misdeeds. And true or not, the words can have consequences. Web postings offer everyone from your boss to the police an unauthorized window into your life. And it appears that few parents have a clue what’s being said or posted online. Gulp.

6. ERIE, PA, MUST RESTORE DROP:

According to the Erie (Pennsylvania) Times-News, an arbitrator has ruled that the City must restore its Deferred Retirement Option Program to Erie police officers. The DROP was implemented in 2004 for police officers and firefighters, but the City Council eliminated it for both groups in December of last year. The City has announced plans to appeal the ruling. The City had argued the DROP was not part of the Collective Bargaining Agreement, and therefore was not at issue for arbitration. The arbitrator, however, upheld the grievance. Meanwhile, the firefighters have a similar case pending before the Pennsylvania Labor Relations Board.

7. QUOTE OF THE WEEK:

“If I were two-faced, would I be wearing this one?” Abraham Lincoln


8. ONE OF LIFE’S RULES:

Everyday I beat my own previous record for number of consecutive days I've stayed alive.


Copyright, 1996-2007, all rights reserved.

Items in this Newsletter may be excerpts or summaries of original or secondary source material, and may have been reorganized for clarity and brevity. This Newsletter is general in nature and is not intended to provide specific legal or other advice.


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