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Vol. 79, No. 3, May 2025

FEATURED ARTICLES

Autoenrollment, Autoescalation, and the SECURE Act 2.0
Patrick Ryle, JD, LLM, CPA, CMA, CIPP/US
Caleb S. Watkins, PhD
Beginning in 2025, businesses and other organizations will face certain new compliance obligations installed by the SECURE Act 2.0 of 2022. Employers issuing new plans must, by default, autoenroll new employees in a firm's retirement plan and then annually autoescalate retirement contribution percentages up to a designated maximum. Understanding these requirements will be critical for firms to meet their statutory obligations, come into compliance with the law, and avail themselves of safe harbor liability protection associated with default investment choices. This article examines the autoenrollment and autoescalation provisions of the SECURE Act 2.0 with an eye on preparing businesses and those who advise them to meet the requirements of the newly mandated retirement practices.

The Health Care Benefit Crisis, Twenty Years Later: Part 2
Eric Parmenter, PhD, MBA, CEBS, SPHR, REBC, RHU, CLU, ChFC, LUTCF
Amer Haffar, MBA
Irena Kaplan
Caitlin Hohman, PharmD
Twenty years have passed since the article, "Health Care Benefit Crisis: Cost Drivers and Strategic Solutions,” appeared in this Journal (Parmenter, Journal of Financial Service Professionals 58, no. 4 (2004): 63-78). And nearly 10 years have passed since Part 1 and Part 2 of "The Health Care Benefit Crisis, Ten Years Later,” were published in 2015 (Parmenter, Journal of Financial Service Professionals 69, no. 2 and no. 3 (2015): 67-83; 83-91), evaluating the state of employer-sponsored self-funded health benefits in the decade from 2004 to 2014. This article, the second in a series, summarizes the viewpoints of employers, employees, and consultants from survey data, along with contemporary employer actions addressing various health care issues. Part 1 examined how the drivers of cost have evolved over the past two decades since those original articles were published. Part 3 will propose a new set of legislative initiatives that align incentives to improve the cost and quality of health care for key stakeholders.

Modeling the Potential Impact of Life Settlements on Federal Tax Revenue
David F. Smith, PhD, MSM, MSFS, CLU, ChFC, CFP
A life settlement is a contract to purchase a life insurance policy that would otherwise likely be surrendered for cash value, if any. Life settlement activity is a growing industry, accounting for over $4 billion in face amount purchased in 2021. This purchase results in taxable income to the seller greater than the tax on the surrender value. The transaction also results in taxable income in the future as the death benefits are paid. This article describes the potential increase in taxable income and posits that this should increase tax revenue to the U.S. Treasury. Financial planners should be aware of the tax implications of these transactions. Being able to discuss life settlements objectively is valuable to clients.

Sunrise in America: Estate Planning Opportunities for UK Residents in the United States
Thomas F. Commito, JD, LLM, CLU, ChFC, AEP (Distinguished)
The United States and the United Kingdom are both anticipating major changes to their respective estate tax laws. The UK will be increasing estate taxes, while it is anticipated that the US will be extending permanently its tax cuts established in the 2017 Tax Cuts and Jobs Act. This article compares the estate tax laws of the two countries. It examines the rules and processes whereby a UK citizen may want to retain being a UK citizen, but subject their assets to the more generous US estate tax.

DEPARTMENTS

Editor’s View
Testing Your Knowledge of the SECURE Act 2.0
Kenn Beam Tacchino, JD, LLM
The SECURE Act 2.0 (Public Law 117-328) was passed on December 29, 2022. Some changes were effective immediately; other changes had enactment dates of 1, 2, and in some cases, 3 or more years in the future. Some of the SECURE 2.0 provisions provided optional plan design and administration choices for plan sponsors. In other words, plan sponsors were given some new bells and whistles to adopt if they decided to make voluntary modifications to their plan. Other provisions changed the individual financial planning landscape. Now that the dust has settled on some of these issues (including, in some cases, receiving IRS or Department of Labor guidance concerning the finer points of the legislation), it is time to gauge the financial planner's grasp of the new possibilities. To this end, we present an 18-question test. Pay close attention to the answers provided to gain insight into the nuances of the new environment.

Accounting & Taxation
Proposed Regulations Issued for Treatment of Certain Catch-up Contributions
Bill Harden, CPA, ChFC, PhD
Clients should be made aware that if they are between the ages of 60 and 63 inclusively they have the ability to make additional elective catch-up contributions. Often clients in this age range are at a relatively high level of career earnings and thus are able to make larger contributions to their retirement plan accounts. At the same time, all clients need to be aware that for any catch-up contributions, if their income is above the threshold in the prior year, the catch-up amounts will be given Roth treatment once that new rule becomes effective.

Executive Compensation
Proposed Regulations Clarify the 2021 Amendments to Section 162(m)
Paul J. Schneider, JD, LLM
In 2021, Section 162(m) was amended to change the definition of "covered employee" by adding Section 162(m)(3)(C), which encompasses any employee who ranks among the five highest compensated employees for the taxable year. This amendment takes effect for taxable years beginning after December 31, 2026. The proposed regulations provide guidance on who qualifies as an employee under Section 162(m) and how compensation should be calculated to determine whether an employee will qualify as a covered employee. They also explain how Section 162(m) applies to compensation paid by foreign affiliates and other unrelated third parties.

Financial Gerontology
Where Are You on the Age-Friendly Spectrum?
John N. Migliaccio, PhD, RFG, FGSA, MEd
Age-friendly awareness initiatives are emerging on a global basis but can reach down into a financial professional's own client "book of business.” As population aging also reaches across generations, it demands an evolution of the awareness of and responses to the economic, social, and financial changes that accompany it. Thankfully, there are many successful approaches to creating an age-friendly environment, employment, company, and community already in operation which can make getting on the "age-friendly bandwagon" an easy transition.

In the Client’s Best Interest
Which Life Insurance Policy Is Best for Me?
Richard M. Weber, MBA, CLU, AEP (Distinguished)
Life insurance buyers face many choices: search for the lowest premium, find the highest death benefit, or consider the risk fully transferred or fully retained—among a myriad of policy styles that can, at best, be confusing to the consumer. Today’s professional life insurance agent or insurance-licensed financial advisor has the opportunity to turn what may look like an "easy sale" into an opportunity to determine the insurance buyer’s suitability in a collaborative process that allows the buyer to declare: "Now that you've helped me clarify my risk tolerance and in turn understand life insurance policy variations, I think the second one you explained is in my best interest."

Long-Term Care Insurance
The Front and Back of Long-Term Care Insurance
Ronald R. Hagelman Jr., CLTC, CSA, LTCP
The need for protecting against the cost of one's final period of life is not always front and center in your practices. In order to protect the result of the concerted efforts to create wealth, we must not neglect to address the potential emotional and financial conflagration that is the reality of custodial care. We examine the potential problems and challenges we face in the long-term care insurance industry.

Practice Management
Rights and Responsibilities of Trust Beneficiaries: A Primer in Trust Language
Douglas B. Richards, JD, MBA, CLU, CFP
Financial service professionals occasionally encounter opportunities to help their clients understand their trusts. The meaning of trust terms and phrases, and the importance of trusts in a well-conceived, faithfully followed financial plan, is examined in this column.