Skipping the 401(k) RMD Without Penalty For Those Continuing to Work After Age 70

More than ever, workers are continuing to work into their 70s and beyond.  The general rules governing retirement accounts require nearly every individual account owner to begin taking Required Minimum Distributions (RMDs) by April 1 of the year following the year in which the owner turns 70½.  There exists a notable exception for employer-sponsored 401(k) accounts owned by employees who continue working past age 70½.

If the plan allows, an owner who leaves funds in the 401(k) can avoid RMDs if s/he remains employed with the employer who sponsors the plan.  Moreover, the owner can also continue to make contributions to the 401(k)! 

This exception has some significant requirements, though.  The current employer must sponsor the 401(k);  an owner cannot change employers and defer RMDs beyond age 70½.  In other words, if a former employer sponsors the relevant 401(k), the owner must take RMDs even if continuing to work for another employer that also sponsors a 401(k).  If the owner has more than one 401(k) and the plans allow for rollovers, however, it may be possible to roll all 401(k) funds into the 401(k) of a current employer and delay RMDs on all of the funds if the still working exception applies. Combining accounts will also simplify RMD planning once the owner stops working, because the RMD on each account would have to be determined separately.

The plan, too, must permit the exception.  Because not all 401(k) plans permit the exception, even though permitted by law, an account owner must ensure that his/her plan actually does allow the funds to remain in the plan to avoid a steep 50 percent penalty that apply to missed RMDs.

The exception does not apply if the plan is an IRA (whether a traditional, SEP or SIMPLE IRA).  As an aside, remember that RMDs do not apply to Roth IRAs during the original account owner's lifetime.   

Despite these carefully prescribed and limited conditions, the last condition, that the owner continues to work for the employer, is without a concrete definition, and therefore, may permit flexibility.  Because the IRS does not provide a provides a concrete definition of what it means to continue working past age 70½, it may be possible for an owner to continue working on a reduced-hours or consulting basis and still defer his or her RMDs past the traditional required beginning date.Of course, if special arrangements are crafted by an employer and employee, it is advisable to consult an attorney to document the special relationship in order to ensure that it won't be deemed a sham or fraudulent  arrangement by the IRS.

While an account owner may generally avoid taking RMDs from his or her 401(k) as long as s/he continues working past age 70½, many small business owners are not permitted to take advantage of this exception, because the exception does not apply to participants who are five percent owners of the business sponsoring the retirement plan.  Plan participants  who own a portion of the business sponsoring the 401(k) must also be aware of the constructive ownership rules that apply when determining whether s/he is a five percent owner; interests held by certain members of the owner's family (e.g., spouse, children, parents, etc.) and by certain entities which the owner controls  will be added to the ownership interest of the participant/business owner in determining whether the 5 percent threshold has been crossed.

The above article is based upon an article  published by ThinkAdvisor, which in turn was drawn from Tax Facts Online, and originally published by The National Underwriter Company, a Division of ALM Media, LLC, as well as a sister division of ThinkAdvisor. 

May is Older Americans Month

May is  Older Americans month. The Administration for Community Living (ACL)  has a website dedicated to older Americans month.  The theme for 2017 is Age Out Loud.  Need ideas for events? ACL offers that here.  Helpful hints for using social media are offered as well.

The following comes from ACL:

Getting older doesn’t mean what it used to. For many aging Americans, it is a phase of life where interests, goals, and dreams can get a new or second start. Today, aging is about eliminating outdated perceptions and living the way that suits you best.

Take Barbara Hillary, for example. A nurse for 55 years who dreamed of travel, at age 75 Hillary became the first African American woman to set foot on the North Pole. In 2011, at age 79, she set another first when she stepped onto the South Pole. Former president George H.W. Bush celebrated his 90th birthday by skydiving. Actress Betty White, now 95 years old, became the oldest person to host Saturday Night Live in 2010, coincidentally during May—the same month recognized as Older Americans Month (OAM).

Since 1963, OAM has been a time to celebrate older Americans, their stories, and their contributions. Led by the Administration for Community Living (ACL), the annual observance offers a special opportunity to learn about, support, and recognize our nation’s older citizens. This year’s theme, “Age Out Loud,” emphasizes the ways older adults are living their lives with boldness, confidence, and passion while serving as an inspiration to people of all ages.

Our firm will use OAM 2017 to focus on how older adults in our community are redefining aging—through work or family interests, by taking charge of their health and staying independent for as long as possible, and through their community and advocacy efforts. We can also use this opportunity to learn how we can best support and learn from our community’s older members.

Throughout the month, I and my paralegals will conduct activities and share information designed to highlight changes in care giving and long-term care than empower aging Americans to age in place.  We encourage you to get involved by sharing this post and other articles from this blog, referring a client to suitable social, financial, or legal services that s/he might protect themselves from medical, legal, and financial threats.  Later this month, we will post a video regarding Aging in Place, and its importance in medical, legal, and financial planning. 

Join us and ACL as we speak up for #OAM17 and #AgeOutLoud this May!

Health Care Ageism And Senior Profiling

Those of us who regularly work with and for the elderly are painfully aware of pervasive latent ageism that often adversely impacts decision-making  concerning them.   Dr. Val Jones has penned an excellent article in the blog, better health warning of ageism in the health care industry.  Dr. Jones is  board certified in Physical Medicine and Rehabilitation,  and serves as a traveling physician to hospitals in 14 states.  She is a graduate of Columbia University College of Physicians and Surgeons and an award-winning writer.  She writes:

 Over the years I’ve become more and more aware of ageism in healthcare – a bias against full treatment options for older patients. Assumptions about lower capabilities, cognitive status and sedentary lifestyle are all too common. There is a kind of “senior profiling” that occurs among hospital staff, and this regularly leads to inappropriate medical care.

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Hospitalized patients are often very different than their usual selves. As we age, we become more vulnerable to medication side-effects, infections, and delirium. And so, the chance of an elderly hospitalized patient being acutely impaired is much higher than the general population. Unfortunately, many hospital-based physicians and surgeons — and certainly nurses and therapists — have little or no prior knowledge of the patient in their care. The patient’s “normal baseline” must often be reconstructed with the help of family members and friends. This takes precious time, and often goes undone.

Years ago, a patient’s family doctor would admit them to the hospital and care for them there. Now that the breadth and depth of our treatments have given birth to an army of sub-specialists, we have increased access to life-saving interventions at the expense of knowing those who need them. This presents a peculiar problem – one in which we spend enormous amounts of resources on diagnostic rabbit holes, because we aren’t certain if our patients’ symptoms are new or old. Was Mrs. Smith born with a lazy eye, or is she having a brain bleed? We could ask a family member, but we usually order an MRI.

My plea is for healthcare staff to be very mindful of the tendency to profile seniors. Just because Mr. Johnson has behavioral disturbances in his hospital room doesn’t mean that he is like that at home. Be especially suspicious of reversible causes of mental status changes in the elderly, and presume that patients are normally functional and bright until proven otherwise.

Dr. Jones gives examples of ageism impacting elderly care.  She describes the plight of an elderly woman admitted to a local hospital where it was presumed, due to her age, that she had advanced dementia. Hospice care was recommended for the woman at discharge. The woman had been leading an active life in retirement, serving  as the chairman of the board at a prestigious company, and caring for her disabled adult son.  She was physically fit , and an "avid Pilates participant."   It turns out that a new physician at her practice recommended a higher dose of diuretic, which she dutifully accepted, and several days later she became delirious from dehydration.  Dr. Jones concludes, "All she needed was IV fluids." 

Dr. Jones explains her recent treatment of an attorney in her 70’s who had a slow growing brain tumor that was causing speech difficulties. The attorney was written off as having dementia until an MRI performed to explore the reason for new left-eye blindness revealed the tumor.  The patient's tumor was removed successfully, but she was denied brain rehabilitation services because of her “history of dementia.”

Another patient, an 80-year-old male, was presumed to be an alcoholic when he showed up to his local hospital.  The patient, had, in fact, suffered a stroke.

These cases, and the countless cases like them, underscore the importance of good health care planning as part of a comprehensive estate plan.   I recommend that every client select and appoint a  trusted primary care physician, by name, in his or her estate planning documents.  I recommend that this person be given the authority to render decisions regarding competency and capacity.  I urge clients to develop a healthy on-going relationship with this physician, so that the physician will be aware of the client's lifestyle, speech patterns, comportment, and the like.  I urge clients to nurture this relationship even during periods during which the client is healthy, and without need for acute care.  Too often, the first time that a medical professional is evaluating a patient is immediately after an acute event or occurrence, inviting erroneous presumptions and judgements.  

Particularly for my clients hoping to Age in Place, this lifetime planning is vitally important. Inviting or acquiescing to a set of circumstances that result in health care decisions being made by professionals without knowledge or experience about you, only increases the possibility that institutional  long term care is your outcome.  Most of my clients work with legal counsel, their families, and their health care professionals to prevent unnecessary and avoidable long term institutional care.  

For more information regarding Aging in Place planning, go here.  For more information regarding LegalVault®, a system through which health care and legal documents are stored, protected and made available to health professionals upon demand, twenty-four hours a day, seven days a week, 365 days a years, go here.  

Aging In Place- Pre-hospice Care Helps Patients Stay Home

Among the growing number of tools and resources aiding consumers to "age in place" is "pre-hospice." Kaiser Health News recently published an encouraging article, Pre-Hospice" Saves Money By Keeping People At Home Near The End Of Life, that well explains the concept and its promise. 

The article first discusses the practical impediments consumers face in an effort to age in place:

"Most aging people would choose to stay home in their last years of life. But for many, it doesn’t work out: They go in and out of hospitals, getting treated for flare-ups of various chronic illnesses. It’s a massive problem that costs the health care system billions of dollars and has galvanized health providers, hospital administrators and policymakers to search for solutions."

According to the article, Sharp HealthCare, a San Diego health system, devised the pre-hospice program called Transitions as a way to fulfill patients' desire to stay home, keep them out of the hospital, provide necessary care in their home, and reduce the costs of care. Social workers and nurses from Sharp regularly visit patients in their homes to explain what they can expect in their final years, help them make end-of-life plans, and teach them how to better manage their conditions, illnesses, and diseases. Physicians track their health, and eliminate unnecessary medications and treatments.  Unlike hospice care, patients don’t need to have a prognosis of six months or less to live, and they receiving curative treatment for their illnesses - not just relief from symptoms.

Transitions was among the first of its kind, but now there are several such "home-based palliative care" programs around the country. They are part of a broader push to improve people’s health and reduce spending through better coordination of care and more treatment outside of hospitals. Palliative care focuses on relieving patients’ stress and pain as their health declines, and aims to maintain quality of life. For people with serious illnesses, such as cancer, dementia, and pulmonary and heart failure, the plan is to provide patients palliative care and then transition naturally to hospice care when necessary.  The 2014 report “Dying in America,” by the Institute of Medicine, recommended that all people with serious advanced illness have access to palliative care. 

Transitions is one of the many good ideas that has come from Kaiser Permanente. Nearly 20 years ago, Kaiser created a home-based palliative care program in California and later in Hawaii and Colorado. Studies by Kaiser and others found that participants were far more likely to be satisfied with their care and more likely to die at home than those not in the program. One of the studies found that 36 percent of people receiving palliative care at home were hospitalized in their final months of life, compared with 59 percent of those getting standard care. The overall cost of care for those who participated in the program was a third less than for those who didn’t. A more recent study confirms these conclusions. 

The article also discusses that although the need for such services is increasing, "not enough trained providers are available. And some doctors are unfamiliar with the approach, and patients may be reluctant, especially those who haven’t clearly been told they have a terminal diagnosis." 

Of course hanging over ever the entire health care industry is what becomes of the Affordable Care Act.  The Affordable Care Act  established new rules and pilot programs that reward the quality rather than the quantity of care, such as “accountable care organizations,” networks of doctors and hospitals that share responsibility for providing care to patients. These organizations also share the savings when they rein in unnecessary spending by keeping people healthier. Innovations such as these are helping to make pre-hospice and home-based palliative care a more viable option.

Can Aging be Stopped and/or Reversed?

An intriguing article, "Purging the body of 'retired' cells could reverse ageing," published in the Guardian, reconsiders the question: "Can aging be stopped and or reversed?  The articles suggest that recent scientific advances suggest that purging retired cells from the body can reverse the ravages of old age.  New research raises the prospects of new life-extending treatments, and preventative therapies resulting from sweeping away dormant cells, :senescent cells" that  fail to divide genetically due to age, but create mischievous and malicious health impacts as they persis and build-up in an aging body.

The article reads as follows: 

When mice were treated with a substance designed to sweep away cells that have entered a dormant state due to DNA damage their fur regrew, kidney function improved and they were able to run twice as far as untreated elderly animals.

The team are now assessing whether the mice also live longer and are planning a series of safety studies in humans with the ultimate goal of testing whether getting rid of so-called senescent cells could help reverse a range of age-related disorders.

The discovery adds to a wave of new findings hinting at the possibility of a future in which doctors can treat ageing itself, rather than trying to combat the host of diseases that come along with it.

Such a scenario is now supported by science, according to Peter de Keizer, the 36-year-old scientist who led the latest work at Erasmus University Medical Center in the Netherlands. “Maybe when you get to 65 you’ll go every five years for your anti-senescence shot in the clinic. You’ll go for your rejuvenation shot,” he said. “That I can envision when we reach that age.”

Go here to read the rest of the article.