Archives for November 2013

Congress Delaying Dodd-Frank Legislation

Congress has been busy over the last month, busy delaying important legislation that may prevent the next financial crisis. The financial system collapsed five years ago under the weight of risky debt, and the Dodd-Frank regulations presented a sweeping reform that would put in place measure to prevent a future financial collapse. Currently Congress has implemented less than half of the regulation of Dodd-Frank. Some of the provisions that have seen delays are rules to regulate investment advice, and another to restrict banks’ trading in certain derivatives.

According to some critics, Congress has failed Americans again. Federal regulators, multiple corners of the financial industry have slowed efforts to create more than 400 rules. Some critics has stated that this is what has impeded the growth of the economy and business expansion. What many could be worse is the rules yet to be written by not even stop the next bank collapse.

Even through all of this there has been a lot of good come from the sweeping legislation. Many of the bad mortgages have been cleaned out, trading in financial derivatives has been brought into the open and trader are required to put up a cash cushion incase their investments go bad, and the financial system has become somewhat safer in the global market aspect.

People, banks, and other financial intuitions that are still operating under the old regulations are being more cautious about the type of investments they make in businesses, etc., but the fact remains that there is still much to do. Legislation need to continue, and reform needs to be made. Congress will get there, but no one know how long that will take.


IRS Modify Flexible Spending Accounts

Millions of Americans use flexible spending accounts (FSA) to pay for their healthcare. Flexible spending accounts have been around for over thirty years, and the ‘use it or lose it’ rule has left users scrambling at the end of the year to spend all the left over money remaining in their account. At the end of October, the IRS announced that they are going to be more flexible with the FSAs. The modification allows employees to carry over up to $500 in unused account balances. This will have many Americans breathing a sigh of relief in the last few months of this year.

The IRS and the Department of the Treasury made the decision to allow rollover for FSA accounts to cut back on wasteful spending. This decision came more than a year after the Treasury and IRS announced plans to change the 29-year-old rule that forces participants to use their balance or forfeit the unused balance. The current rule also offers the employer the choice to extend a 2½-month grace period. At the end of the grace period the participant would then lose the unused portion of the savings.

With the modified rule, the employers will have two options, the $500 rollover or the 2½-month grace period. Both are intended to reduce the amount of wasteful spending incurred with the end of the year. The only stipulations, the employer must choose either the rollover option or the grace period. Millions welcome the great news of the change to the ‘use it or lose it’ rule. The Treasury Department estimated that 14 million families will now participate in health care FSA given the changes in policy.


A Guide to Rollovers as Business Startups

Since the economic downturn, more than 10,000 new businesses were started with rollovers as business startups (ROBS). They have been able to use their retirement funds without triggering early distribution penalties, to establish their new business venture. How is this possible? Are there any cautions to look out for? The following outline the basic process of ROBS, and warns about some of the pitfalls associated with using the process to establish a new business.

This complicated process is under extreme scrutiny from the IRS. The following are the five basic steps to ROBS transactions:

  • The first step is for the entrepreneur to establish a new corporation, usually a C corporation.
  • Once the new corporations is established, the corporation adopts a prototype 401(k) that permits the plan participants to direct their investments into a selection of investments options, including employer stock. This plan usually allow the employee to roll over from an existing account or execute a direct transfer from an existing retirement account in to the plan and use it to buy the employer’s capital stock. There are no employees at this time, and the corporation does not have any assets, business operations, or even capital received to create shareholder equity.
  • When the entrepreneur becomes the corporation’s only employee, they elect to participate in the newly formed 401(k). They then direct the rollover or transfer of funds from the original retirement account to the new 401(K) account.
  • Once the funds have been transfer or rolled over, the entrepreneur direct to purchase newly issued corporate stock. This stock usually represents the amount of assets the entrepreneur wishes to invest in the new business.
  • The final step is to direct the corporation uses the funds from the sale of the stock to purchase a franchise, existing business, or begin a new business venture.

There are several pitfalls to watch out for when attempting this transaction. The IRS take each ROBS on a case-by-case basis to ensure that the arrangements are not being abused.


Preventing Job Burn Out

Many people have been in a job that could have been their ideal position, but after some time, the job began to feel mundane and a burden. It all starts at the beginning. The starting of a new job can bring mixed emotions, anticipation for what is ahead, fear about fitting in, and even excitement to begin something new. Employers should make it their priority to welcome the new staff members to the team. The more welcome the new employee is to the company, the more they will invest into their work. The following are tips on what employers can do to help prevent employee burn out.

  • Make the employee feel welcome. Remember to make a good first impression. Bad impressions are extremely hard to overcome. Throw a welcoming party for the new employees. Celebrate having them on your team.
  • Spend one-on-one time together. You have hired this person because you saw an asset to your team, so spend time with them to help them understand what an asset they are to the team. Have them spend time with other leaders so everyone get to know each other. Foster a relationship with the new hire.
  • Introduce them to formal and informal culture of the company. This allow the new employee to see both sides of the business. They will meet new friends and learn the expected behaviors for each situation they are thrown into. Consider CEO meetings, lunch-and-learns, or the buddy system until they are comfortable on their own.
  • Carefully chose a buddy or mentor. Assign someone to answer questions, show them the ins and outs of the workplace, and guide through their first few days. Choose the person wisely, making sure they are patient and willing to help the new hire.
  • Make resources available. It is important to provide special resources to the new employees, such as company specific acronym dictionaries, process diagrams, phone lists, community information for those who relocated, etc. If your company provided community forums, auto-enroll them into the ones that will help them the most.
  • Give feedback and guidance on job performance. Give new hires a clear view of what their first 90 days will look like, so they do not spend them wondering and with regrets. Give feedback as needed to guide them to the results you want.

It is important to create a friendly environment for works. If you take care of your workers, they will take care of your company.