Obamacare and the Cadillac tax

The Cadillac tax is already proving to be a pressing concern for employers although it does not come into effect until 2018.

The Affordable Care Act, more commonly referred to as Obamacare, has been controversial since it was signed into law in March of 2010. The controversy has not stopped since its major provisions took effect last January, with criticism coming from both political parties, as well as businesses whose health insurance and benefits coverage were affected. 

The latest worry about Obamacare is the "Cadillac tax" that is to take effect in 2018. The point of the Cadillac tax is to generate revenue to fund the federal government's expansion of health care to all American citizens. This tax on health benefits is the first of its kind and is estimated to impact one in four employers when the tax begins in 2018, and that number will steadily grow with time. A big concern with this tax is about flexible spending accounts, which allow people to save their money for certain out-of-pocket health care costs completely tax free and their use has been encouraged by many employers because of the cost effectiveness. However, FSAs will most likely be one of the first benefits cut as companies scramble to avoid the 40% excise tax applied to benefits worth more than $10,200 for individuals and $27,500 for families. Besides the possible cut of FSAs, employees might also be hit with other cost-saving strategies by their employers such as a decrease in the number of available health plans, an increase in deductible limits, and a narrower selection of doctors and hospitals offered...an overall cutback in benefits.

Although the tax is not going to take effect until 2018, pressure to change it is already coming from both politicians and business owners. A coalition of public and private employers called "Alliance to fight the 40" has come together to urge the members of Congress to repeal the Cadillac tax. Even though the tax faces a good amount of opposition from Democrats, and is universally opposed by Republicans, changes will most likely have to wait until President Obama leaves the White House. 

Read more here!

For more information on Obamacare taxes

Why should I buy life insurance?

Many financial experts consider life insurance to be the cornerstone of sound financial planning. It can be an important tool in the following situations:

1. Replace income for dependents
   If people depend on your income, life insurance can replace that income for them if you die. The most commonly recognized case of this is parents with young children. However, it can also apply to couples in which the survivor would be financially stricken by the income lost through the death of a partner, and to dependent adults, such as parents, siblings or adult children who continue to rely on you financially. Insurance to replace your income can be especially useful if the government- or employer-sponsored benefits of your surviving spouse or domestic partner will be reduced after your death.
2. Pay final expenses
   Life insurance can pay your funeral and burial costs, probate and other estate administration costs, debts and medical expenses not covered by health insurance.
3. Create an inheritance for your heirs
   Even if you have no other assets to pass to your heirs, you can create an inheritance by buying a life insurance policy and naming them as beneficiaries.
4. Pay federal “death” taxes and state “death” taxes
   Life insurance benefits can pay estate taxes so that your heirs will not have to liquidate other assets or take a smaller inheritance. Changes in the federal “death” tax rules between now and January 1, 2011 will likely lessen the impact of this tax on some people, but some states are offsetting those federal decreases with increases in their state-level “death” taxes.
5. Make significant charitable contributions
   By making a charity the beneficiary of your life insurance, you can make a much larger contribution than if you donated the cash equivalent of the policy’s premiums.
6. Create a source of savings
   Some types of life insurance create a cash value that, if not paid out as a death benefit, can be borrowed or withdrawn on the owner’s request. Since most people make paying their life insurance policy premiums a high priority, buying a cash-value type policy can create a kind of “forced” savings plan. Furthermore, the interest credited is tax deferred (and tax exempt if the money is paid as a death claim).