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SERVICES

The material presented on our web site may contain concepts that have legal, accounting and tax implications. It is not intended to provide legal, accounting or tax advice, you may wish to consult a competent attorney, tax advisor, or accountant.

Note: Any reference to the word guarantee is based on the claims paying ability of the underlying insurance company.

Mortgage Protection

MORTGAGE PROTECTION

Mortgage protection insurance, or MPI, is also called mortgage payment protection insurance, or MPPI. It's simply life insurance that pays your mortgage if a certain event, such as death, disability or job loss occurs.

Mortgage Protection is life insurance which protects a homeowner and family at a fixed rate of payments for a limited period of time, usually the length of the mortgage term. If the covered primary income earner dies during the mortgage term, a death benefit can be paid to the surviving family members, who can then use the funds to pay off the balance of the mortgage.

To obtain a Quote for Mortgage Protection Insurance Contact ERS.

Retirement

RETIREMENT PLANNING

In this day and age an individual is responsible for securing his own financial future. Therefore, it is vitally important that you have access to a wide variety of secure retirement income solutions.

As a business owner, there are several reasons you might want to implement a qualified retirement plan for you and your employees. Not the least of which is that qualified plans provide numerous tax advantages.

  • Contributions for all participants are 100% tax-deductible to the business up to certain limits.
  • Annual contributions by the business are not considered taxable income to the plan participants.
  • Capital gains and interest earned are deferred from taxation during the accumulation years. Income taxes are payable upon withdrawal.
  • At retirement, favorable tax treatments may apply such as spreading payments over the participant's lifetime and special averaging formulas.

Non-Tax Advantages In addition to the obvious tax advantages, there are many other, equally important, reasons to implement a qualified plan.

A qualified plan can aid in the recruiting and retention of key employees. A formal plan provides an extra incentive for a prospective employee to sign on with the company. Further, through the proper use of vesting schedules, a qualified plan can be an important employee retention tool.

Plan assets are also creditor-proof. The assets of the plan are not subject to malpractice lawsuits or bankruptcy rulings. These and other advantages combine to help improve morale as the participants realize that their company provides the mechanism to help secure their retirement.

Types of Plans The two most common types of qualified retirement plans are pension and profit-sharing plans. A business can also sponsor an IRA or SEP (simplified employee pension plan). Pension Plans

There are three major types of pension plans -- defined benefit, money purchase, and target benefit. A defined benefit plan is one where the retirement benefit is determined by a plan formula - usually based on years of service. A money purchase pension plan is one where the plan formula specifies the percentage of each participant's compensation that will be contributed each year. A target benefit plan is a hybrid. It starts out as a defined benefit which determines the benefit. Once the benefit is calculated, the plan converts to a defined contribution or money purchase plan. Profit-Sharing Plans The most popular type of profit-sharing plans are 401(k) plans. Elective deferrals to these plans are limited to $17,000 in 2012 and $17,500 in 2013.

Contributions to a profit-sharing plan are not generally required, they can be discretionary each year.

To find out more about individual and business Retirement Plans Contact ERS.

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DISABILITY INSURANCE

U.S. Census Bureau figures show that nearly one in five Americans will become disabled for a year or more before age 65. Long-term disability insurance replaces lost wages due to illness or injury.

Disability insurance pays cash benefits to the policyholder in the event the insured is unable to work due to sickness or injury. That cash benefit ranges from 50% to 70% of income. The insurance company will not pay more than 70% of income because there must be an incentive to return to work.

If you pay the premium the benefits are normally received free from income tax, if the premiums are paid by an employer, the benefits are taxable as ordinary income.

Types of Coverage:

  • Social Security:  Social Security does not just provide for retirement income but disability income as well
    • In 2009, the average monthly payment for a disabled worker was $1064; the average monthly payment for a family of a male disabled worker, young spouse and 2 or more children was $1670. See SSI Fact Sheet
    • Eligibility is based on being unable to perform any gainful employment.See SSDI Disability Planner • You are eligible for benefits after you have been disabled for 5 months and if the disability is expected to last 12 months. See Waiting Period Question
    • Social Security disability payments are subject to federal income tax if your income exceeds $25,000 individually or $32,000 jointly. See Tax Question Workers Compensation Most employers are required to provide this coverage. The amount and duration varies by state.
  • Workers Compensation only pays if the disability occurs on the job, and usually lasts for only a few years and the payments are low. Individual Policies For individual policies, the applicant needs to qualify and go through an underwriting process, similar to the process required for life insurance. The applicant could be subject to a higher premium or even be declined based on his or her occupation, medical history, or lifestyle.
  • Individual policies are usually purchased by high income professionals because of the cost.
  • Group Policies Some states require employers to carry group disability insurance anywhere from 26 to 52 weeks.
  • Group Long Term Disability (LTD) Group LTD is carried by almost half of mid-size to large employers and provides long term benefits for at least 5 years covering about 60% of salary. The premium is usually very low, does not require proof of insurability, and often is fully paid by the employer.

If you would like to get a Disability Insurance Quote click here.

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ANNUITIES

An Annuity is a contract issued by an insurance company. It is a unique financial product that provides tax deferral of interest and capital gains and the option (if funds are annuitized) of a guaranteed monthly income for life. Although annuities can serve various needs, the primary purpose of an annuity is that of a retirement vehicle for the annuitant, the person who will usually receive the annuity benefits.

The annuity is an attractive retirement vehicle because the money accumulating in an annuity, grows on a tax deferred basis. There are two parts to an annuity: the accumulation phase and the distribution phase. After accumulating money in an annuity it is not mandatory that the annuitant exercise the annuitization option and relinquish control of his or her cash value and enter into the annuity distribution phase, the annuitant can simply cash out of his or her annuity.

There are three types of annuities: fixed annuities, variable annuities and indexed annuities.

During the accumulation phase, the fund grows tax deferred, it does not grow tax free. If the annuity was not purchased as part of a qualified retirement program such as an IRA, 401(k), TSA, or 457 plan, income taxes are paid on the earnings when money is ultimately paid out. If the annuity is part of a qualified plan the entire fund is subject to income taxes as it is withdrawn.

Annuities can vary by payment mode and are available as “single premium” (purchased with one-time payment) or “flexible premium” (purchased with recurring periodic payments). They also vary by timing of the annuity income and may be available as a“deferred annuity” (which means that annuity income payments are deferred until later) or as an “immediate annuity” (which means that annuity income starts immediately).

To find out more about annuities and which type is right for you please contact ERS today.