Answers That Count - Hosted By Charles Musgrove

On this episode, Charles Musgrove and guest Taylor Hodges from Southern Capital discuss a variety of topics including:

• The 529 College Savings Plan and how the 2019 SECURE Act has expanded the use of the plan assets
• The Safe Harbor provision
• Non-ERISA plans or the Golden Handcuff and practical examples
• Distributions from inherited retirement plans
• Balance of tax deferred vs after tax savings

1. 2019 SECURE Act:
   • Small business owners will receive a tax credit for establishing a retirement plan
     • Additional tax credit for adopting auto enrollment
   • New provisions to allow part-time employees with less than $1,000-hours to join 401K
   • Elimination of stretch provisions for beneficiaries
     • With a few exceptions, most non-spouse beneficiaries will have 10 years to withdrawal 100% from the inherited IRA – No RMDs during 10-year window
       • Will count as income to beneficiary – Shift assets to tax-free?
     • RMD age pushed back to age 72
       • Only for people who turn 70 ½ after January 1, 2020
     • Everyone should check to make sure their beneficiaries are updated
       • If beneficiary is a Trust, understand how it may effect beneficiary amounts and taxes on distributions

2. Executive Benefits
   • Goal for business owners is to attract, retain and reward good employees
     • ERISA – 401K, SEP, ESOP
     • Non-ERISA – NQDC, Phantom Stock, Golden Handcuff
   • Different for 8(a) companies due to program restrictions on income and net worth
     • Specialize in 8(a) – Unique planning process

3. Articles
   • The Hierarchy Of Tax-Preferenced Savings Vehicles For High-Income Earners:
     • https://www.kitces.com/blog/hierarchy-tax-preference-savings-vehicle-roth-high-income/
   • Tax Brackets Resource:
     • https://www.nerdwallet.com/blog/taxes/federal-income-tax-brackets/
   • 2019 SECURE Act:
     • https://www.kitces.com/blog/secure-act-2019-stretch-ira-rmd-effective-date-mep-auto-enrollment/
   • Don't Die Yet: New U.S. Law Will Muddle Estate Plans:

https://www.kitces.com/blog/tax-rate-equilibrium-for-retirement-taxable-income-liquidations-rothconversions/

In this episode, Charles Musgrove and guest Taylor Hodges with Southern Capital discuss the different types of retirement plans. From the simple to the complex, the plans offer a variety of options relating to participation, amount of contributions, access to the cash prior to retirement and many more. The 2019 SECURE Act is also discussed about how it impacts the Retirement Plans. 

Highlights of the types of Retirement Plans:

• Solo 401K - $19,500 / $6,500 catchup + up to 25% of business income for matching
  • Max is $57,000 total contribution + $6,500 for employee catchup
  • Can be used for spouse in business to double contribution amounts
  • Roth option available, solo 401K usually more expensive to setup and maintain
• SEP IRA – 25% of income up to $57,000/yr.
  • Matching contribution for all employees – very important
  • LLC is based on net income / S-Corp is based on salary
  • Usually inexpensive to setup and contributions are made by the employer only
• SIMPLE IRA (Saving Incentive Match Plan for Employees) - $13,500 / $3,000
  • Usually requires employer contribution or match
  • Usually two-year hold on the account for rollover and higher penalty for early withdrawal (25% instead of 10%)
  • Less expensive to setup and maintain than 401K
• 401K - $19,500 / $6,500 for 2020
  • Multiple features and contribution structures
  • Must understand plan testing – cannot discriminate
    • Owners and key employees cannot own 60% of plan assets
      • Owns 5%/ owns 1% and makes $150k +/ officer making $175k +
      • Must be fixed in calendar year
    • Safe Harbor Provision – employer matching for employees and allows employer to avoid plan testing
      • 3 matching options:
        • Non-elective – 3% flat
        • Basic Match – 100% of first 3% / 50% of next 2%
        • Enhanced Match – 100% of first 4%
      • 2020 IRA and Roth IRA contribution limits: $6k / $1K catchup
        • Income phase out for IRA deduction: single $65k-$75k / $196k-$206k MFJ
        • Income phase out for Roth IRA: single $124k-$139k / $196k-$206k MFJ

1. Articles
   • The Hierarchy Of Tax-Preferenced Savings Vehicles For High-Income Earners:
     • https://www.kitces.com/blog/hierarchy-tax-preference-savings-vehicle-roth-high-income/
   • Tax Brackets Resource:
     • https://www.nerdwallet.com/blog/taxes/federal-income-tax-brackets/
   • 2019 SECURE Act:
     • https://www.kitces.com/blog/secure-act-2019-stretch-ira-rmd-effective-date-mep-auto-enrollment/
   • Don't Die Yet: New U.S. Law Will Muddle Estate Plans:
     • https://www.kitces.com/blog/tax-rate-equilibrium-for-retirement-taxable-income-liquidations-rothconversions/

In this episode, host Charles Musgrove discusses the $15 minimum wage ballot initiative with the Samantha Padgett, General Council with the Florida Restaurant and Lodging Association. We talk about the status of this option being included on the November 2020 ballot, the potential impact to the hospitality industry in Florida if it passes and many more factors around this topic that will surely become more hotly debated as the November election date approaches. 

To provide some context to the subject, below is a recent article published by the Wall Street Journal.

Small Business and the Fight for $15

A new study shows how a rising minimum wage hurts little companies.

By 

The Editorial Board

Dec. 15, 2019 4:17 pm ET

Here’s another volley in the debate over the “Fight for $15”: As the federal minimum wage rose from 1989-2013, small businesses in affected states suffered “lower bank credit, higher loan defaults, lower employment, a lower entry and a higher exit rate.”

That’s according to a study last week from the National Bureau of Economic Research. The analysis by three professors at the Georgia Institute of Technology exploits the fact that many states—now more than half—set their own minimum wages higher than the federal standard. This provides a natural control group. When the nationwide minimum goes up, how do the states where it applies fare in comparison?

Start with data on one million loans, averaging around $100,000, made through the Small Business Administration. For each $1 increase in the minimum wage, the authors estimate that loan amounts dropped 9% more in the affected states. The risk of default was 12% higher. The average credit score for small companies in those states showed “a sharp decline.” Business entries fell 4% in the year the minimum wage went up. A year later, business exits rose 5%.

These results, the authors say, hold throughout various statistical analyses, such as while controlling for local economic conditions. The effects are stronger in businesses like restaurants and retail, which rely on low-skilled labor. Smaller and younger companies are more severely affected as well. In short, the authors conclude: “We find that increases in the federal minimum wage worsen the financial health of small businesses in the affected states.”

By now some readers are probably thinking: Well, duh. It does not take a University of Chicago Ph.D. to suspect that raising the price of labor will make it harder to sustain a small, labor-intensive business. Don’t forget that there’s no cost-of-living adjustment: A $15-an-hour federal minimum wage would apply equally to a French bistro in Manhattan and a pizza joint outside Manhattan, Kan.

Many progressives still insist this is a free lunch, and most of the Democratic presidential candidates support raising the federal minimum wage to $15. That includes the so-called moderates, like Amy Klobuchar and Mike Bloomberg. They ignore the millions of small businesses that are trying to make payroll and grow.

The churn of companies with fewer than 10 employees, this study says, accounts for “more than 70% of job gains and losses in 2018.” No matter what politicians say, inhibiting that dynamism hurts the smallest businesses and the least-skilled workers the most.

In this episode of Business Matters, host Charles Musgrove discusses the Top 10 List for Starting Your New Business with Jon Jopling, entrepreneur and business operator. From selection of your business name to setting up your accounting system, this episode is full of valuable information that is helpful to many business managers and owners. Here is the list of topics in this episode:

The Top 10 List for Starting and Running a Business

1. Business Name
2. Select Entity Type
3. Register with SunBiz
4. Register with IRS
5. Register with DOR for unemployment and sales tax
6. Purchase domain
7. Set up bank account
8. Order checks that will work for accounting system
9. Obtain credit card to use exclusively for business
10. Set up accounting system and processes
11. Set up payroll
12. Purchase insurance
13. Monitor and reconcile cash and credit card activity

This is Part 2 of our podcast with insurance industry expert Craig Mugglin. In this episode, we talk about workers compensation coverage, exemptions for owners, the different requirements for coverage for construction businesses and other types of businesses. Find out if owners should exempt themselves from coverage, the minimum number of employees that require workers comp coverage and many other important factoids about workers comp insurance. 

Also, we take a closer look at business interruption coverage and tips on how to maximize coverage and minimize the cost of insurance coverage. This coverage could be the difference in business continuation or total closure. With the hurricanes and storms that are prevalent in the State of Florida, this is coverage that is a must for many businesses. 

In this episode, Charles Musgrove talks with insurance industry expert Craig Mugglin about coverage that often gets overlooked or risk that is under-insured. One of the newer insurance 'types' is Cyber Insurance. The number and magnitude of cyber attacks are ever increasing along with the cost to recover from the hacks. Costs suffered by the company to replace, recover and rebuild can be very high and the costs to restore the company's clients and other victims of the attack can be even greater. We talk about what is covered and what is not along with the  cost for cyber coverage. Should the Cyber coverage be included with another common policy issued or should you have a separate policy? Check it out.

In this episode we also discuss business interruption coverage, including cost of coverage, exclusions and whether this insurance is included in the 'package' policy or a separate, stand-alone policy. 

Check out this episode for important information about protecting and insuring your business assets.

In this episode Charles Musgrove talks with attorney Kris Dunn about the lessons to learn from the Jeff and MacKenzie Bezos divorce. Yes, most people don't have the net worth of Bezos' $180 billion to settle in a divorce, but there are still many tips that we can apply in our situation. Check out this episode for a lively and entertaining discussion with many nuggets of knowledge.

In this episode host Charles Musgrove talks with attorney Kris Dunn about how to best prepare for the effects of a divorce on business continuation or valuation in determining marital assets. How can a prenuptial and a post-nuptial be used to protect the business ownership and plan for a possible divorce by husband and wife that own and work in the business? How can divorce impact business continuation? Is your business ready for a divorce of an owner? Find out tips to help you avoid a bad situation. 

In this episode we talk with David Balmer from Dale Carnegie Training. Old School to New School ... tried and proven techniques that have been around a long time are still the key to success. We talk about management training and how to improve success through improved communications. Find out tips on how to improve culture, morale and productivity and reduce employee turnover. Does your business have the right leadership approach? Find out valuable tips in this episode.

In the follow-up episode with Bill Wilson about how to improve business outcomes, we look closely at the 'why not' of making changes to achieve improved business outcomes. There are reasons why changes are not made, some valid, some not. We also talk about 'Who' needs to be the focus of making the changes to realize improvements. The 'Who' can be inside or outside the organization. Check out this episode featuring Bill Wilson the author of 'The Magic of What, Who, How & Why Not, the Four Keys to Improved Business Outcomes'. Bill will also talk about the starting point for the Farmers Insurance University and his involvement. Check out this episode for valuable business knowledge and an entertaining presentation, including a magic trick.