Coronavirus Affects Federal, State, and Local Deadlines

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Coronavirus Affects Federal, State, and Local Deadlines

Federal, state, and local governments have extended a number of deadlines amid the coronavirus pandemic.  Here are just a few of the deadlines that have been affected.

Federal and state income taxes

The IRS has postponed the due date for filing federal income tax returns and making tax payments from April 15, 2020, to July 15, 2020. No interest, penalties, or additions to tax will be incurred by taxpayers during this 90-day period for any return or payment postponed under this relief provision.

The relief  is automatically given to all taxpayers (they do not need to file any additional forms to qualify) and applies to federal income tax payments (for taxable year 2019) and estimated tax payments (for taxable year 2020) due on April 15, 2020, including payments of tax on self-employment income. There is no limit on the amount of tax that can be deferred.

Many state income tax deadlines have also been postponed. You can find more information  on your state government’s website.


The REAL ID Act, passed by Congress in 2005 set minimum security standards for state-issued driver’s licenses and identification cards. Under the Act, residents of every state and territory are required to have a REAL ID-compliant license/identification card, or another acceptable form of identification (such as a passport), in order to access federal facilities, enter nuclear power plants, and board commercial aircraft.1

The initial deadline for REAL ID compliance was October 1, 2020. As a result of the pandemic, the U.S. Department of Homeland Security has extended the deadline  to October 1, 2021.   For more information, visit

Driver’s license and vehicle registrations

Many state departments of motor vehicles have temporarily closed or limited in-person transactions due to  the pandemic.  As a result, they are giving extensions/waiving deadlines for driver’s license and vehicle registration renewals —  in some cases up to 90 days.  Some states have even waived road test requirements for teenagers who have completed all their driver’s education requirements.

Visit your state’s department of motor vehicles website for more information on the various deadlines/extensions and to find out which types of transactions can be completed online; many states have expanded their online services during the pandemic.



Local property taxes

Many    municipalities  are offering economic relief to homeowners during the pandemic by extending property tax deadlines or waiving penalties/fees  for late property tax payments.  This type of tax relief usually applies only  to individuals who pay their property taxes directly and not those whose property


taxes are collected in an escrow account by their loan servicer. You can contact your local government’s tax office to check whether property tax deadlines have been postponed.

1Department of Homeland Security, March 2020

Paycheck Protection Program – CPAs & Business Partners

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Paycheck Protection Program – CPAs & Business Partners

We have put together some helpful information regarding the Paycheck Protection Program as part of the Cares-Act.  There are many great features for small businesses (those with under 500 employees).  We understand that each business is different in scope, ability see revenue (any) over the coming months as we deal with this Covid-19 storm.   We will continue to send updates on the ever changing environment and would love to hear from you.


What to Know About the Paycheck Protection Program

The Paycheck Protection Program (PPP) was created under the Coronavirus Aid, Relief, and Economic Support Act, signed into law on March 27th.

The PPP prioritizes millions of Americans employed by small businesses by authorizing up to $349 billion toward job retention and certain other expenses.

Small businesses and organizations, as well as individuals who are self-employed or are independent contractors, are eligible if they also meet program standards.

Three Helpful links included (Place into your web browser)

  1. FACT sheet for the Paycheck Protection Program
  2. Application –  Don’t apply yet—keep reading for timelines, eligibility requirements, and other details of the program.
  3. Additional Article on the Paycheck Protection Program –


When to Apply:

Starting April 3, 2020, small businesses and sole proprietorships can apply for loans under the Paycheck Protection Program.

Starting April 10, 2020, independent contractors and self-employed individuals can apply.

Once the application process opens, we encourage you to move quickly, as there is a funding cap under the legislation and loan applications will be processed as received.

There are eligibility, use, and loan forgiveness requirements. 

Is there any penalty to apply for the PP Loan if you later determined to be ineligible?

No, there is no penalty for applying if the business is later determined by the SBA to be ineligible to apply. Keep in mind, the applicant is required to make a good faith certification that, among other things, it is necessary to obtain the loan to support ongoing operations of the business and the funds will be used to retain workers and maintain payroll, or make a mortgage, lease or utility payments.



Who is eligible for a “Paycheck Protection” (PP) loan under § 1102 of CARES?



Generally, businesses with less than 500 employees are eligible for PP loans. Businesses include any business concern, nonprofit organization, veterans organization or Tribal business concern.



Additionally, any business that qualifies as a small business under the criteria and size standards in 13 CFR 121.

Which employees are counted for purposes of the 500-employee threshold?

Employees for this purpose include full-time, part-time or employed on another basis.

Do employees of affiliates count towards the 500-employee threshold?

The general rule is that employees of affiliates are generally counted towards the 500-employee threshold under the SBA affiliation rules (13 CFR § 121.103.)

Are there exceptions?

Two exceptions make it much easier for businesses in the accommodations and restaurant industries to qualify for PP loans:

  • For businesses with more than one physical location, any business concern that employs not more than 500 employees per physical location and that is assigned a North American Industry Classification System code beginning with 72 (see Exhibit A for a complete list) at the time of disbursal is eligible to receive a covered loan (NOTE: These include businesses in Subsector 721 (Accommodation) such as hotels and casino hotels and Subsector 722 (Food Services and Drinking Places) such as bars and restaurants.)
  • There is also a general waiver of the affiliation rules (See Q&A 2, above) for any business concern described in the preceding paragraph with not more than 500 employees

What is the amount of a PP loan that is available to an eligible recipient?

An eligible recipient of a PP loan is eligible to receive a loan in the amount of 250% of the average total monthly payments by the applicant for payroll costs incurred 1 year before the date on which the loan is made. There is also an overall limit of $10 million dollars.

The Act provides that during the covered period, the requirement that a small business concern is unable to obtain credit elsewhere does NOT apply to a covered loan.

Are PP Loans available to dispensaries and other marijuana-related businesses?

 No, because federal law currently prohibits the distribution and sale of marijuana, financial transactions involving a marijuana-related business would generally involve funds derived from illegal activity. Therefore, many businesses that derive revenue from marijuana-related activities or that support the end-use of marijuana may be ineligible for SBA financial assistance.

 CFR § 120.110 (h).

Under the SBA’s Policy Notice dated April 3, 2018, the following businesses are ineligible:

(a) “Direct Marijuana Business” — a business that grows, produces, processes, distributes, or sells marijuana or marijuana products, edibles, or derivatives, regardless of the amount of such activity. This applies to personal use and medical use even if the business is legal under local or state law where the applicant business is or will be located.

(b) “Indirect Marijuana Business” — a business that derived any of its gross revenue for the previous year (or, if a start-up, projects to derive any of its gross revenue for the next year) from sales to Direct Marijuana Businesses of products or services that could reasonably be determined to support the use, growth, enhancement or other development of marijuana.

Examples include businesses that provide testing services, or sell grow lights or hydroponic equipment, to one or more Direct Marijuana Businesses. Additionally, businesses that sell smoking devices, pipes, bongs, inhalants, or other products that may be used in connection with marijuana are ineligible if the products are primarily intended or designed for such use or if the business markets the products for such use.

Certain “Hemp-Related Businesses” are ineligible unless the business can demonstrate that its business activities and products are legal under federal and state law. Examples of legal hemp products include paper, clothing, and rope.

The PP loan program is based upon the SBA loan program. Absent a specific override in the CARES Act of the illegal activity limitation, marijuana-related businesses would continue to be ineligible.

Loan Use:

What Can the Paycheck Protection Loan Be Used For?

(i) Payroll costs and (ii) interest payments on mortgage obligations, rent, utilities, and interest on other debt obligations incurred before February 15, 2020.

What is included in “payroll costs” for this purpose?

 Payroll costs are defined as the sum of payments of any compensation for employees that is a —

  • salary, wage, commission, or similar compensation (capped at $100,000 prorated for the covered period or $8,333 per month)
  • payment of cash tip or equivalent
  • payment for vacation, parental, family, medical, or sick leave
  • allowance for dismissal or separation
  • payment required for the provisions of group health care benefits, including insurance premiums
  • payment of any retirement benefit
  • payment of State or local tax assessed on the compensation of employees and the sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in 1 year, as prorated for the covered period

What is excluded from “payroll costs” for this purpose?

Specifically excluded from the definition of payroll costs are —

  • the compensation of an individual employee above an annual salary of $100,000, as prorated for the covered period
  • FICA (Social Security and Medicare) taxes imposed on the employer, FICA (Social Security and Medicare) taxes withheld from employees’ wages, federal income taxes withheld from employees’ wages withholding during the covered period
  • any compensation of nonresident alien employees
  • qualified sick leave wages for which a credit is allowed under FFCRA
  • qualified family leave wages for which a credit is allowed under FFCRA

Is the business required to sign a guarantee or provide collateral for the loan?

No, normal requirements for SBA loans have been waived.

Loan Forgiveness:

Is any portion of a PP loan forgiven?

An eligible recipient shall be eligible for forgiveness of indebtedness on a covered loan in an amount equal to the sum of the following costs incurred and payments made during the covered period:

  • Payroll costs (as defined above)
  • Any payment of interest on any covered mortgage obligation (not including prepayment of or payment on principal)
  • Any payment on any covered rent obligation
  • Any covered utility payments
  • Additional wages are considered for employers with tipped employees

NOTE: This amount (the “Base Loan Forgiveness Amount”) is potentially subject to further reductions.

What is the covered period for purposes of the loan forgiveness provisions?

 “Covered period” means the 8-week period beginning on the date of the origination of a covered loan.

Are there further potential reductions to the Base Loan Forgiveness Amount?

Yes, there are potential reductions for reductions in employees and reductions in salaries.

Reductions in Employees:

The Base Loan Forgiveness Amount is reduced by multiplying it by the following fraction:

  • The numerator of which is the average number of full-timeequivalent employees per month employed by the eligible recipient during the covered period
  • The denominator of which is, at the election of the eligible recipient, either the average number of full-time equivalent employees per month employed by the eligible recipient during the period beginning on February 15, 2019, and ending on June 30, 2019, or the average number of full-time equivalent employees per month employed by the eligible recipient during the period beginning on January 1, 2020, and ending on February 29, 2020.

For example, if the company employs 50 employees during the covered period and employed 100 employees during the period between January 1, 2020, and February 29, 2020, the Base Loan Forgiveness Amount would be multiplied by 50/100 or one-half.

Reductions in Salaries:

Taking into account only employees who did NOT earn $100,000 (prorated for the applicable period of employment) for any pay period in 2019, the Base Loan Forgiveness Amount is further reduced by any reduction in such employees’ wages during the covered period that is over 25 percent of the total salary or wages of the employee during the most recent full quarter during which the employee was employed before the covered period.

What happens if I rehire employees or restore wages?

The reductions to the Base Loan Forgiveness Amount for reductions in employees or wages do not apply if the borrower eliminates these reductions no later than June 30, 2020.

How does a borrower claim loan forgiveness?

The borrower must submit to the lender an application that includes:

  • documentation verifying the number of full-time equivalent employees on payroll and pay rates for the applicable periods including, payroll tax filings reported to the Internal Revenue Service and State income, payroll, and unemployment insurance filings;
  • documentation verifying payments on covered mortgage obligations, lease obligations and utility payments
  • certifications that the documentation presented is true and correct

The amount for which forgiveness is requested was used to retain employees, make interest payments on a covered mortgage obligation, make payments on a covered rent obligation, or make covered utility payments, and any other documentation the Administrator determines necessary.

The statute makes clear that will be no loan forgiveness absent documentation.

Is the loan forgiveness considered taxable income to the borrower?


Federal Student Loan Borrowers Get Expanded Relief in CARES Act

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Federal Student Loan Borrowers Get Expanded Relief in CARES Act

On March 27, 2020, Congress passed the CARES Act, the largest economic stimulus bill in the history of the United States, in response to the coronavirus pandemic.1 Included in the legislation are new rules for student loan relief that supersede the rules that were announced only a week earlier by the Department of Education.For more information on both sets of rules, visit the federal student aid website.

What new relief is being offered?

The  new legislation provides a six-month automatic payment suspension (administrative forbearance) for any student loan held by the federal government. This six-month period ends on September 30, 2020.  Borrowers do not need to  contact their loan servicer to request a suspension; they will be automatically placed in administrative forbearance. Under the previous policy, the payment suspension was for two months and it was not automatic; borrowers had to contact their loan servicer to opt in.

The new stimulus legislation also provides a temporary incentive for employers to pay down their employees’ student  debt balances. Specifically, employers are able to contribute up to $5,250 toward an employee’s student debt through December 31, 2020 without any tax consequences for the employee.

What loans qualify for the suspension?

Only student loans held  by the federal government are eligible. This includes Direct Loans (which includes PLUS Loans), as well as Federal Perkins Loans and Federal Family Education Loan (FFEL) Program loans held by the Department of Education. Private student loans are not eligible.

Will interest continue to accrue during the suspension period?

No. Interest will not accrue during the six-month suspension period. The interest rate is being set at 0%. Also, due to the Department of Education’s earlier student loan relief rules, the interest rate on all eligible federal student loans is effectively set at 0% from March 13, 2020 through September 30, 2020.

What happens with auto-debit payments?

Auto-debit payments are suspended during the administrative forbearance period. Any auto-debit payments processed between March 13, 2020 and September 30, 2020 can be refunded. Borrowers should contact their loan servicer if they wish to request a  refund.

Can borrowers keep making their student loan payments?

Yes. Borrowers can choose to keep making their monthly student loan payments during the six-month suspension period if they wish. Borrowers should contact their loan servicer to opt out of the administrative forbearance period and continue their auto-debit payments. Borrowers also have the option to make manual (i.e., not auto-debit) payments during the administrative forbearance period.

During this period of 0% interest, the full amount of a borrower’s payment will be applied to principal (once all interest accrued prior to March 13, 2020, is paid). Borrowers can also choose to make partial payments during the suspension period.


How will the suspension period affect the Public Service Loan Forgiveness Program?

Under the Public Service Loan Forgiveness (PSLF) Program, borrowers who work in an eligible public service job and make 120 on-time student loan payments are eligible to have the remaining  balance on their federal Direct Loans forgiven.2 Under the new legislation, the six-month freeze on student loan payments will not affect the 120-month running period for purposes of the PSLF program. In other words, each month of the suspension period will still count toward a borrower’s 120-payment tally, even if the borrower does not make any payments during the six-month period.

How can borrowers contact their loan servicer?

A loan servicer is the company that handles a loan’s billing and provides related services. Borrowers who want to contact their loan servicer for any reason should try to do so online or by phone. For borrowers who do not know who their loan servicer is or how to contact them, they can visit or call 1-800-4-FED-AID for assistance.

1) Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted March 27, 2020

2) U.S. Department of Education, Office of Federal Student Aid, 2020

Coping with Market Volatility: Continuing to Invest May Help You Stay on Course

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Coping with Market Volatility: Continuing to Invest May Help You Stay on Course

In the current market environment, the value of your holdings may be fluctuating widely — and it’s natural to feel tentative about further investment. But regularly adding to an account that’s designed for a long-term goal may cushion the emotional impact of market swings. If losses are offset even in part by new savings, the bottom-line number on your statement might not be quite so discouraging. And a basic principle of investing is that buying during a down market may help your portfolio grow when the market turns upward again.

If you are investing a specific amount regularly regardless of fluctuating price levels (as in a typical workplace retirement plan), you are practicing dollar-cost averaging. Using this approach, you may be getting a bargain by continuing to buy when prices are down. However, you should consider your financial and psychological ability to continue purchases through periods of fluctuating price levels or economic distress; dollar-cost averaging loses much of its benefit if you stop just when prices are reduced. And it can’t guarantee a profit or protect against a loss.

If you can’t bring yourself to invest during this period of uncertainty, try not to let the volatility derail your savings program completely. If necessary to help address your concerns, you could continue to save, but direct new savings into a cash-alternative investment until your comfort level rises. Though you might not be buying at a discount, you could be accumulating cash reserves that could be invested when you’re ready. The key is not to let short-term anxiety make you forget your long-term plan. We’re here to help and to answer any questions you may have.

All investing involves risk, including the possible loss of principal, and there is no guarantee that any investment strategy will be successful.

CARES Act Legislation Summary

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CARES Act Legislation Summary

On March 27, 2020, the Coronavirus, Aid, Relief, and Economic Security (CARES) Act (the “Act”) was signed into law. A portion of the Act is intended to loosen access to retirement plan funds for individuals impacted by the COVID-19 pandemic. The following is a summary of the retirement-related provisions of the Act:

  • $100,000 Withdrawal
    • Waiver of 10% penalty on early withdrawals for amounts up to $100,000 from a retirement plan or IRA taken between January 1, 2020 and December 31, 2020
    • This withdrawal is only available to a qualified individual (see “qualified individual” below)
    • Individuals are allowed pay the tax on withdrawal ratably over a three year period; and
    • Individuals are allowed to repay the withdrawal back to the plan, tax-free, over the three years from the date of the withdrawal (not limited by plan limits). May be repaid back into the plan making allowing the withdrawal, another qualified plan or an IRA that accepts rollovers.
    • Plan sponsor has discretion whether to offer this design in their qualified plan
  • Plan loans
    • Plan loan limits are increased for qualified individuals (see “qualified individual” below) to the lesser of:
      • $100,000; or
      • 100% of their vested account balance.
    • Qualified individuals (see “qualified individual” below) with existing outstanding loans with a repayment due from the date of enactment of the Act through December 31, 2020 may delay loan repayments for up to one year. The plan can choose to extend the term of the loan for up to a year as well. Doing so would allow participants to avoid a financial hardship when they do resume repayment by keeping their repayment amount the same as prior to the suspension of the repayment. These loans will continue to accrue interest during the period of the suspension of repayments.
    • Plan sponsor has discretion whether to offer these design elements in their qualified plan
  • Qualified individual
    • Eligibility for the penalty-free $100,000 withdrawal and the adjustment to the loan limits is conditioned upon an individual meeting one of the following criteria:
      • Is diagnosed with COVID-19;
      • Whose spouse is diagnosed with COVID-19;
      • Who experiences adverse financial consequences due to furlough, quarantine, layoff, reduction in hours, inability to work due to lack of child care due to COVID-19, or closing of business/reduction of hours by individual due to COVID-19; or
      • Factors determined by the Secretary of the Treasury
    • Importantly, the Act does not require the plan sponsor to verify whether an individual qualifies for the COVID-19 adjusted loan limits or the $100,000 withdrawal. The plan sponsor may rely upon a participant’s certification for eligibility.
  • Required minimum distributions
    • The Act waives RMD payments for 2020.
      • Includes RMD attributable to 2019 which was not paid by January 1, 2020;
      • Includes RMD if already made in 2020; but
      • Does not include RMD distributions that were made in 2019.
    • For RMDs that were already made in 2020 the participant may defer taxes and roll it back to the plan from which it was made or roll it to another qualified plan or IRA which accepts rollovers. Additional guidance regarding any potential impact to the 60 day rollover period is expected from the IRS.
  • Defined benefit and money purchase pension plans
    • The Act allows these plans to delay any contributions due in calendar year 2020 (including all quarterly contributions) until January 1, 2021. The new January 1, 2021 due date applies for all quarterly contributions (they would no longer be separately due).
    • Leveraging the delayed due date would subject the employer to interest on the delayed contributions from the original due date(s) at the effective rate for the plan year that includes the date of payment.
    • Plan sponsors should expect leveraging delay should lead to higher contributions in 2021.
  • Reporting and notices
    • The Act empowers the Department of Labor to extend certain deadlines for notices – more information expected in the coming weeks.

Plans can adopt the new rules immediately. The plan will eventually need to be amended on or before the last day of the first plan year beginning on or after January 1, 2022, or later if prescribed by the Secretary of the Treasury.

For any questions related to the CARES Act, your plan, or how it impacts your employees and participants, please do not hesitate to contact your Plan Advisor.


Securities offered though APW Capital, Inc., Member FINRA/SIPC.  100 Enterprise Drive, Suite 504, Rockaway, NJ 07866 (800) 637-3211. Advisory and financial planning services offered through EisnerAmper Wealth Management & Corporate Benefits, L.L.C. and APW Capital, Inc. are unaffiliated.

CARES Act Provides Relief to Individuals and Businesses

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CARES Act Provides Relief to Individuals and Businesses

On Friday, March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. This $2 trillion emergency relief package is intended to assist individuals and businesses during the ongoing coronavirus pandemic and accompanying economic crisis.  Major relief provisions are summarized here.

Unemployment provisions

The legislation provides for:

  • An additional $600 weekly benefit to those collecting unemployment benefits, through July 31, 2020
  • An additional 13 weeks of federally funded unemployment benefits, through the end of 2020, for individuals who exhaust their state unemployment benefits
  • Targeted federal reimbursement of state unemployment compensation designed to eliminate state one-week delays in providing benefits
  • Unemployment benefits through 2020 for many who would not otherwise qualify, including independent contractors and part-time workers

Recovery rebates

Most individuals will receive a direct payment from the federal government. Technically a 2020 refundable income tax credit, the rebate amount will be calculated based on 2019 tax returns filed (2018 returns in cases where a 2019 return hasn’t been filed) and sent automatically via check or direct deposit to qualifying individuals. To qualify for a payment, individuals generally must have a Social Security number and must not qualify as the dependent of another individual.

The amount of the recovery rebate is $1,200 ($2,400 if married filing a joint return) plus $500 for each qualifying child under age 17. Recovery rebates are phased out for those with adjusted gross income (AGI) exceeding $75,000 ($150,000 if married filing a joint return, $112,500 for those filing as head of household). For those with AGI exceeding the threshold amount, the allowable rebate is reduced by $5 for every $100 in income over the threshold.

While details are still being worked out, the IRS will be coordinating with other federal agencies to facilitate payment determination and distribution. For example, eligible individuals collecting Social Security benefits may not need to file a tax return in order to receive a payment.

Retirement plan provisions

  • Required minimum distributions (RMDs) from employer-sponsored retirement plans and IRAs will not apply for the 2020 calendar year; this includes any 2019 RMDs that would otherwise have to be taken in 2020
  • The 10% early-distribution penalty tax that would normally apply to distributions made prior to age 59½ (unless an exception applies) is waived for retirement plan distributions of up to


  • $100,000 relating to the coronavirus; special re-contribution rules and income inclusion rules for tax purposes apply as well
  • Limits on loans from employer-sponsored retirement plans are expanded, with repayment delays provided

Student loans

  • The legislation provides a six-month automatic payment suspension for any student loan held by the federal government; this six-month period ends on September 30, 2020
  • Under already existing rules, up to $5,250 in payments made by an employer under an education assistance program could be excluded from an employee’s taxable income; this exclusion is expanded to include eligible student loan repayments an employer makes on an employee’s behalf before January 1, 2021

Business relief

  • An employee retention tax credit is now available to employers significantly impacted by the crisis and is applied to offset Social Security payroll taxes; the credit is equal to 50% of qualified wages up to a certain maximum
  • Employers may defer paying the employer portion of Social Security payroll taxes through the end of 2020 and may pay the deferred taxes over a two-year period of time; self-employed individuals are able to do the same
  • Net operating loss rules expanded
  • Deductibility of business interest expanded
  • Provisions relating to specified Small Business Administration (SBA) loans increase the federal government guarantee to 100% and allow small businesses to borrow up to $10 million and defer payments for six months to one year; self-employed individuals, independent contractors, and sole proprietors may qualify for loans

Prior legislative relief provisions

Signed into law roughly two weeks prior to the CARES Act, the Families First Coronavirus Response Act (FFCRA) also included relief provisions worth noting:

  • Requirement that health plans cover COVID-19 testing at no cost to the patient
  • Requirement that employers with fewer than 500 employees generally must provide paid sick leave to employees affected by COVID-19 who meet certain criteria, and paid emergency family and medical leave in other circumstances
  • Payroll tax credits allowed for required sick leave as well as family and medical leave paid

There is likely to be a steady stream of guidance forthcoming with details relating to many of these provisions, so stay tuned for more information. We’re here to help and to answer any questions you may have.

Investing Specialists A Checklist for Volatile Markets: Retirement Saver Edition

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Investing Specialists A Checklist for Volatile Markets: Retirement Saver Edition

Running through our six-step checklist can provide peace of mind with your portfolio and plan if volatility persists.

Christine Benz

Apr 9, 2020

Editor’s note: Read the latest on how the coronavirus is rattling the markets and what investors can do to navigate it

The standard “talking head” advice for volatile markets is to do nothing. And it’s true that when stocks are gyrating, a policy of benign neglect is invariably going to be better than running around making changes to your portfolio that you’ll regret once the dust settles. All too many investors have retreated to cash amid extreme market volatility, only to be left with an equally stressful question once the market begins to improve: Is it time to get back in, or could this be a short respite on the way back down? And if you’ve gone to the trouble of creating a long-term investment program that syncs up with your goals, that plan should build in the possibility that short-term market drops will happen.

But the advice to “don’t just do something, stand there” rests on a big assumption: that your plan was in a good shape at the start of the volatility. Before heeding the generally very sound guidance to tune out what’s going on with the markets, run through the following checklist to ensure that your plan is on solid footing.

1) Check your safety net.

A key aspect of crafting an investment plan that you can live with during volatile markets is knowing that a short-term financial bind isn’t going to force you to raid your long-term accounts when they’re down. And it’s a fact of life that market volatility often coincides with periods of economic weakness. That accentuates the importance of making sure that your financial plan includes enough buffer assets.

The standard rule of thumb for right-sizing emergency reserves is to stash three to six months’ worth of living expenses in cash: bank savings accounts (online account yields are often best), checking accounts, and so on. That three- to six-month threshold might seem daunting, but remember it is three to six months’ worth of essential living expenses, not income.

Gig economy workers, because their paydays can be lumpy and may be even lumpier in a period of economic weakness, will want to run with an even larger cash cushion amounting to one year’s worth (or more) of living expenses. Older workers and/or people with more specialized, higher-paying career paths should also build a larger emergency fund than three to six months’ worth, as it may take them longer to replace the jobs that they’ve lost. (Older workers experienced a lower rate of job loss during the last recession than the general population, but it took them longer to replace jobs they’d lost.)

2) Assess next-line reserves.

In addition to checking up on your emergency reserves, think through where you would go for funds if your cash accounts were depleted and you still needed more funds–if a financial crunch like needing to buy a new car coincided with job loss, for example.

The recently enacted CARES Act includes provisions that will make it easier for retirement savers to access their funds if they’ve suffered economic hardship as a result of the coronavirus, but those accounts shouldn’t necessarily be a first–or even a second or third–stop. Long-term assets in taxable brokerage accounts or withdrawals of Roth IRA assets are apt to be preferable to raiding other retirement accounts if you find yourself in a financial bind. If you’re a homeowner, you may also want to line up a home equity line of credit that you could tap in a pinch; it’s easier to secure such a loan when you’re employed than when you’re not. If you’ve been using your health savings account as a long-term savings vehicle, paying healthcare expenses out of pocket, remember that those accounts can also be tapped later on.

3) Reach for a higher contribution rate.

Volatile markets can engender a feeling of helplessness; even if you aim to be hands-off, your investments are like an innocent bystander amid the chaos. One of the best ways to take back control in unsettling times is to increase your savings rate if you can. With so many of our activities constrained these days, conserving cash should be easier than ever, at least for the time being. And some workers will need to step up their own contributions to make up for the reduced employer-matching contributions that have popped up amid the current economic weakness.

Look back over the past year and calculate how much of your portfolio you were able to save or invest rather than spend. Many people anchor on saving 10% of their income. But that’s apt to be too low a target for many, especially if you’re saving for other goals, such as college for your kids, as well as retirement. Rather than relying on rules of thumb for something as crucial as your savings rate, I like the idea of creating a custom savings target based on your own situation.

4) Review the asset allocation of your long-term portfolio.

Taking a hands-off approach to your portfolio in falling markets is often best, but that’s only if your investment mix is reasonably positioned given your proximity to your goals. After you’ve revisited your savings rate, take a closer look at your allocations to the major asset classes: stocks, bonds, and cash. The X-Ray functionality in Morningstar’s Portfolio Manager or Instant X-Ray can help you see where your portfolio’s mix of stocks, bonds, and cash stands today.

There are a few ways to go about gauging the reasonableness of your stock/bond/cash mix. Of course, a financial advisor can help you customize your asset allocation and your portfolio plan based on your own situation. But if you’re just seeking a quick check on whether your asset allocation is sane, eyeballing the asset allocations of good-quality target-date funds (like those from Vanguard and the BlackRock LifePath Index series) can be a start. I also refer frequently to the Morningstar Lifetime Allocation Indexes for a professional take on asset allocation for various life stages and risk tolerances. My model portfolios for retirement savers can also provide some guidance, and I like the idea of customizing your allocation based on your human capital characteristics as well as risk tolerance.

If it turns out changes are in order, be sure to bear tax considerations in mind. Making changes in your tax-sheltered accounts won’t trigger a tax bill, so it usually makes sense to focus any repositioning efforts there.

5) Check asset allocation of funds earmarked for short- and intermediate-term goals.

If you’re like many investors, you’re not just investing for retirement; you may also be investing for short- and intermediate-term goals–a larger home, college for children and grandchildren, and so forth. Any funds for those nearer-term goals should be more conservative than your retirement accounts. Of course, today’s very low yields suggest that the return prospects from bonds and cash are meager, but they’re also much less likely to encounter big swings to the downside. My model portfolios feature guidance for investors with short- and intermediate-term goals.

6) Stay alert to tax-saving opportunities.

Finally, market volatility may present some opportunities to improve your tax situation. Tax-loss selling can help you lower your tax bill, this year and in the years ahead. It can be particularly effective if you’re using the specific share identification method for tracking your cost basis or if you have narrowly focused investments in your portfolio. With some creative swaps (opting for a value exchange-traded fund in lieu of an actively managed value fund, for example), you can even maintain economic exposure to the very market segments that you’ve taken a loss on.

Another tax-saving strategy that’s getting a lot of buzz these days is converting traditional IRA assets to Roth. Not only are account balances down, but investors may also find themselves in a lower tax bracket in 2020’s weak economic environment. Finally, if taxes head higher in the future, it will be better to pay taxes at today’s lower tax rates to pave the way for tax-free withdrawals in retirement.

Good Markets Conceal Risk, Bad Markets Expose Risk

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Good Markets Conceal Risk, Bad Markets Expose Risk

Many business owners, while welcoming the current prosperous economy, are also aware that it may not last much longer. The Great Recession of not so long ago is still fresh in our minds. As the saying goes, ‘we must learn the lessons of the past’.

Just like the tides that come and go, so do market cycles. When the tide is in and water levels are high, what lies at the bottom of the waters is concealed.  Similarly, a good market conceals the risks in a business. When the tide goes out, however, the troubles at the bottom can be seen and then need to be addressed.

This newsletter, then, is meant to be a reminder to owners who are feeling good about their businesses today: In good markets, risk is concealed and sometimes ignored, perhaps to our peril. Let’s not allow the lessons of the past recession to be forgotten so quickly.

Let’s Bgin with Market Timing – Ten-Year Transfer Cycle 

Market conditions can dictate how much of the risk in our businesses we can see at any given time. Markets run in cycles and timing reveals and conceals risks. Businesses perform well because of favorable economies. During good times, valuations are high, employees are engaged, and, often times, buyers and investors have a high degree of interest and activity.

As the chart below indicates, the last three (3) decades have followed a common market cycle and this decade is following suit.

Today we are in a good market and, perhaps, we are nearing the end of this current cycle. Some prognosticate that this current market may last beyond 2020, perhaps reflecting more of the trend seen at the end of the 90’s. Regardless of the exact timing, most owners agree on two (2) important points – First, that another recession will appear and, second, that the drop in the economy often happens a lot faster than the build-up of growth.

What Does a Good Market Concealing Risk Look Like?

When markets are growing, businesses are strong and we see less of the risks that exist in our businesses.

For example, regarding your employees in a good market, B and C players on your teams are not critically reviewed because work is so busy you need bodies just to complete the jobs. Since good markets make it difficult to attract top talent, this also helps to conceal the risk that poor performers place on your business.

Banks are another example. Today, banks are lending and looking to deploy their capital at historically low rates. This leads to a sense of comfort with leverage and, perhaps, some forgetfulness about challenges with repaying debt during a recession.


Owner-Dependence Adds to the Risk / Fragility of Any Privately-Held Business

An ongoing, national survey of business owners takes a measurement of the dependence that a company has on the owner. The average overall score is 54%. This means that business owners largely add to the risks that are concealed in a good market, by having their businesses be highly dependent upon them. These owners:

  • Are very involved in the day-to-day running of the business
  • Do a majority of the hiring, managing and firing of employees
  • Plan for the company’s strategic direction by themselves, with little to no input from others
  • Do not share their company results with anyone except their accountant (and what they choose to tell the IRS)
  • They are involved in writing checks, running payroll, paying bills, handling accounting
  • Are personally liable for the debts of the business
  • Oversee the business performance with little delegation or empowerment to managers


If you are doing many of these activities in your business, the good market today is further concealing the risks that exist in making your business more transferable to someone else because it is highly dependent upon your individual efforts. Again, good markets can conceal this, while poor markets may reveal it. (click below for a free evaluation report on your “Owner- Dependence”

What to do Next?

Are you a business owners who is sitting on risk that you just don’t acknowledge?  Is the current economy aiding to this easy-to-fall-into trap for you and your business?  And, if this is the case, what might be your motivation to take action?

This newsletter recommends that you remain objective, try to see the bigger picture, critically examine how much of your wealth is tied to your illiquid business, and give some consideration to the idea that there is more risk in your business than you can currently see. When you think and act in this manner, there is a higher probability that you will not allow the current strong market to conceal the risk that is in your business, rather you will be pro-active in addressing it, and perhaps working to protect your overall wealth.

Take Action Today

Get a professional review of your risks and opportunities for your business and your personal finances.  Seek to learn about the different ways that planning can serve as a catalyst and disciplined approach to advancing your plans for a future.  You worked a lifetime to build what you have.  Just as you were responsible for the success of your enterprise, you are equally responsible for seeing its succession and/or transfer, including your exit which will have to happen at some point.  Be sure to remember to insure your future exit.  In doing so, you will advance further towards the peace of mind that comes as a result of proper planning.

Marc Scudillo, CPA, CFP®, MS, MBA, CBEC®, AIFA® Managing Officer EisnerAmper Wealth Management & Corporate Benefits, LLC,  Specializing in helping business owners integrate personal planning with their business planning to maximize and protect what they have worked so hard for; benefiting themselves, their families, and their employees/community.

Insuring Your Future Exit as a Business Owner

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Business owners are risk-takers by nature. Interestingly, however, is the fact that these same owners are often-times not risk averse. What this means is that owners will assume risks in one area of their lives, but not necessarily work to mitigate risks in other areas. The primary issue in not mitigating risks lies in the fact that there are a lot of people in your world who rely on you and the decisions that you make. This article challenges the use of insurance in the singular manner of addressing a loss of life. In fact, insurance products are useful tools throughout the spectrum of advanced planning for a future exit. This newsletter is written with the intention of discussing risk mitigation and broadening owner’s views on how and where insurance can ground and solidify your plans for a future exit, i.e. while you are still alive.

An Aleatory Business Contract

Let’s begin by taking a look at insurance by starting with the concept of an ‘aleatory contract’. Insurance policies are known as aleatory contracts. An aleatory contract is defined as “an agreement concerned with an uncertain event that provides for unequal transfer of value between the parties. Insurance policies are aleatory contracts because an insured can pay premiums for many years without sustaining a covered loss. Conversely, insureds sometimes pay relatively small premiums for a short period and then receive coverage for a substantial loss.”

So the financial industry provides a marketplace to understand your business risks and allow you an opportunity to share those risks with another institution. In a limited sense it is a forecast of the future – in the case of insuring the loss of life, if the event / death that you are insuring occurs, you “win” and the insurance company pays. If the event does not occur, you don’t necessarily lose because you have some peace of mind.

Insurance as an Asset Class

Insuring for the loss of life is only a small part of utilizing insurance in an exit plan.   However many business owners fail to see the benefits of certain other forms of insurance. Insurance can serve as an asset class and a tool to harvest savings, share benefits and leave assets on your company balance sheet, as well as sharing an asset with key people to more easily retain them at your company. Most business owners, when thinking about planning for their exit, fail to see insurance as a tool for many facets of a transition plan.

Insurance as an Accumulation Asset for a Future Exit

Some typical goals of business owners who are thinking about a future exit, include:

  • Having enough retirement income to sustain your lifestyle.
  • Retaining key people and aligning incentives to grow the business
  • Having a tax efficient transfer of wealth as the business changes hands.
  • Avoiding complex tax code provisions inside of your key person incentive plan
  • Providing a path for key people to potentially purchase the business interests from you, the owner.
  • Having access to cash that is needed to run and grow the business.

Insurance contracts can serve as a ‘funding solution’ for the issues listed above. The primary goal of this newsletter is not to provide complex details of how this can work, but rather to help to re-conceptualize the role that insurance can play in your future plans.

Remember that insurance is a unique asset in many respects, not the least of which is the ability to harvest tax benefits, provide disciplined savings with your planning, and to customize an agreement that retains your key people.

Solving or Not Solving for Death

As mentioned, business owners too often view the purchase of insurance only as a vehicle to deliver needed cash in the event of a death. The use of funds is often to replace business income or to fund family needs and / or estate taxes. Many business owners hold contracts that are set to address these contingencies.

However, there is another way to look at insurance: as a tax-efficient, forced savings plan for you, your company, and your key people. In this case, the purpose of insurance is not necessarily to anticipate a death and for cash to be provided at the time of death. Rather, this form of insurance is for cash accumulation, either within the company or held outside of the business.

Overcoming Immortality

One of the reasons that insurance is looked down upon as an effective tool for exit planning is because many owners have survived against insurmountable odds to grow their business. Also, there is the uncomfortable issue of dealing with death. However, when insurance is viewed in more broad terms as a tool to accomplish many goals while you continue to grow your business and make plans for a future exit, the options and alternative uses begin to grow.

Concluding Thoughts

For better or for worse, it is often said that insurance is something that is sold, not purchased. In other words, the use of insurance in an exit plan has historically required a sales process in which a purchaser of insurance needs to see a vision of what could happen to their lives without insurance. This was written with the intention of moving business owners in a direction where a desire to learn about and utilize certain forms of insurance is something that is ‘purchased’ for the benefit of you and your company, and not something that needs to be ‘sold’.

Take Action Today

Get a professional review of your existing policies for your business and your personal lines. Seek to learn about the different ways that insurance can serve as a catalyst and disciplined approach to advancing your plans for a future exit. You worked a lifetime to build what you have. Just as you were responsible for the success of your enterprise, you are equally responsible for seeing its succession and/or transfer, including your exit. Be sure to remember to insure your future exit. In doing so, you will advance further towards the peace of mind that comes as a result of proper planning.


Marc Scudillo, CPA, CFP®, MS, MBA, CBEC®, AIFA® Managing Officer EisnerAmper Wealth Management & Corporate Benefits, LLC, Specializing in helping business owners integrating their personal planning with their business planning to maximize and protect what they have worked so hard for; benefiting themselves, their families, and their employees/community.

Four Ways to Increase Employee Retirement Contributions

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May, 2019 Newsletter – Retirement Times

Four Ways to Increase Employee Retirement Contributions

Michael Viljak, Manager, Advisor Development

As a retirement plan sponsor, you want your employees to save the most they can in order to reach their maximum retirement potential. A significant amount of research says that you can improve both employee participation and their saving rates. Here are four ways you can help your employees start building a confident retirement:

1. Boost employee participation with automatic enrollment. Choosing to automatically enroll all new employees in your retirement plan can dramatically improve your participation rates. According to the Center for Retirement Research (CRR) at Boston College, in one study of automatic enrollment, participation increased by 50 percent, with the largest gains among younger and lower-paid employees.1 While auto enrolled employees are allowed to opt out of the retirement plan, most generally stay enrolled.

2. Set the initial default contribution rate higher. Many companies who use auto enrollment set their default contribution rate relatively low at 3 percent, according to the CRR, which is lower than the typical employer match rate of 6 percent. Workers who might have contributed more to their savings passively accept the lower default rate, which means they’re sacrificing employer matching funds along with saving less of their own pay.


3. Adopt auto escalation. Plans that use auto escalation automatically increase their participants’ contribution rate every year, typically by 1 percent. Over time, that can significantly improve savings rates among workers. The CRR cites a 2013 study of Danish workers where the majority of workers who experienced automatic increases simply accepted them, and savings rates dramatically increased.

4. Automate investment decisions with target date investment products. Investing is complicated, and many employees don’t want to take the time to learn how to manage their portfolios. Target date strategies automatically adjust an employee’s investment allocations over time, shifting them to a more conservative asset mix as the target date (typically retirement) approaches. The ease of use of target date funds means their popularity is increasing. The CRR notes that in 2014, nearly 20 percent of all 401(k) assets were in target date funds, and about half of plan participants used target date funds.2





About the Author, Michael Viljak

Michael joined RPAG in 2002 and has over 30 years of experience in the retirement plan industry, on both the wholesale and retail levels, focusing on retirement plans ever since their inception in 1981. Michael has an interest in fiduciary-related topics and was part of the team that created RPAG’s proprietary Fiduciary Fitness Program. He also authors many of the firm’s newsletter articles, communication pieces and training modules.