Cypen & Cypen
OCTOBER 11, 2007
Stephen H. Cypen, Esq., Editor
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.
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.
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.
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:
The entire very interesting report
can be found online at
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.
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.
“If I were two-faced, would I be wearing this one?” Abraham Lincoln
Everyday I beat my own previous record for number of consecutive days I've stayed alive.
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