On the Cusp of the great Annuity and Pension Buy Back Binge of 2013
I remember a good friend of ours that resides in Dallas, packing up the family and heading to Atlanta loaded down with a back seat full of Twinkies. Larry later had a triple bypass but the Wonder Bread and Ding Dong maker lived on in the hearts and stomachs of countrymen until organized labor decided to test the boundaries of wage and benefit givebacks forcing the maker of Twinkies to close its doors and seek Chapter 11 bankruptcy protection for the second filing this time costing 18,500 jobs.
The Affordable Care act of Obama care will lead to a plethora of Twinkies teetering’s into Chapter 11 and the forced reclassification of anyone who works 30 hours a week as full time under the Act. This means that we can fudge unemployment number the same way that many European nations do. Germany, as the envy of European and the third largest exporter in the World, has an unemployment number that hovers around 7% well below the rest of Europe, much of which is in its second recession in four years.
So what does the reclassification mean in view of increasing layoffs in the low wage service and manufacturing jobs like restaurant workers? Very little, although, as more higher paid jobs is reclassified, watch for business savings and investment budgets to be pinched by a tax bill rising $3500 for the average income earning family of $75,000, according to the Congressional Budget office in 2013.
For the Adviser, it means a huge opportunity for cash flow budget analysis as a door opener as well as a substantial uptick in rollover opportunities from 401-(k) and other retirement plans as employer’s trim back workers and workers leave who can’t afford to work upwards of 40 hours for 30 hours of pay. Planners should start aligning themselves with resources like Free ERISA.com, Pension King, and their local outsourcing head hunting team as soon as possible. m Also, keep an eye on another opportunity as Congressional hearings started discussing the elimination of certain defined contribution plans in America. After classifying the system as broken, many pundits at Treasury and the Department of Labor have been talking about government sponsored annuities that would ensure some investment election but a guaranteed lifetime payout as well. There has been some chatter about taxing Roth distributions as well.
The well- respected benefits consultant, Mercer Consulting said ‘we are becoming a nation of part-timers” thanks to the Affordable Care Act. These opportunities make us more like our European brethren across the Global Pond, much to the chagrin of those that will lose 25% of their pay, but also create some great planning opportunities to help affected workers be a true retirement savior and gain additional business. A great opportunity to use social media effectively in accessing these rollover opportunities is to join one of the many employee forums started online when a layoff is announced.