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Posted on Friday, 14th January 2022 by

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Federal annuitants receive their updated Annuity Statement, with the COLA increase added, early January. Our 1099R Tax Forms typically aren’t available until the end of January by regular mail. Registered users of OPM’s Retirement Services Website can download their Annuity Statement and 1099R forms NOW!

IRS 1040 Form

CIVIL SERVICE ANNUITY STATEMENTS
OPM sends out updated annuity statements anytime there is a change that affects our annuity. Next month we will receive another statement showing FEHB healthcare and FEDVIP premium changes. New statements are sent out throughout the year whenever there are changes to checking/savings allotments, income tax withholding, and long-term care insurance, etc.

This document provides annuity and benefit information for you and your family. It includes the annuitant’s Claim number, the amount withheld for each item deducted from your annuity payment, and your gross and net payment. It specifies the monthly survivor annuity currently payable in the event of the annuitant’s death and includes an annual Notice of Survivor Annuity Election Rights. You will also find OPM contact information.

Instructions are included for making benefit elections such as how to apply for a survivor election for a spouse you marry after retirement, survivor annuity elections for a former spouse, and others.

I keep the most current Notice of Annuity Adjustment in my retirement folder and include a copy in our estate binder along with OPM’s annuity and FEGLI insurance verification forms that OPM sends out upon request. You can also download these forms from OPM’s site. This is an important document and should be readily available if you or your survivor need to contact OPM or require benefit clarifications.

Retirement Planning Report

 

1099R TAX STATEMENT OF ANNUITY PAID
Last year the 1099Rs weren’t available until January 19th. I downloaded my form this morning! A portion of our federal annuity isn’t taxable, this document includes your gross and taxable amounts in block 1 and 2a. The amount withheld for federal income tax is listed in block 4 and block 5 lists employee contributions including our FEHB health care premiums. One of the more interesting blocks is 9b (Total Employee Contributions). I’ve been retired 17 years and what I paid into the system was paid out to me within the first two years! We have exceptional retirement benefits.
OPM’s RETIREMENT SERVICES WEBSITE

You must be registered to use OPM’s Retirement Services Website. If you aren’t registered read the article titled “Connect to OPM’s Online Services” to understand the registration process and sign up. It doesn’t take long, however, you may have to wait for your password to be sent via regular US mail and that can take several weeks.

SUMMARY

Many banks and brokerage house’s 1099 and DIV reports are also available online for download early. Treasury Direct doesn’t send out print copies. You must download your Treasury’s OID and 1099 INT statements from your online account. They are typically available early January. If you have complex investments, your brokerage 1099 statements could be delayed until mid-March or later.

I’ve used TurboTax software for decades. It’s intuitive and walks you through the entire process, double checks your work, and they allow you to file online. This software can also download and integrate your brokerage account’s 1099 forms for your tax return, saving considerable data entry time.

There are a number of free online filing services available through the IRS and several of the tax preparation services. The IRS allows you to file online at no cost if your annual income is less than $72,000. You will have to file your State taxes separately.

Take advantage of OPM’s Online Services to download your 1099R early, obtain a lost 1099R, or find other important retirement forms and reports.

Helpful Retirement Planning Tools

Federal employees considering leaving for greener pastures should explore all options. Should you stay or should you go? Leaving federal service for the private sector.

Disclaimer: The information provided may not cover all aspect of unique or special circumstances, federal regulations, medical procedures, and benefit information are subject to change. To ensure the accuracy of this information, contact relevant parties for assistance including OPM’s retirement center. Over time, various dynamic economic factors relied upon as a basis for this article may change. The advice and strategies contained herein may not be suitable for your situation and this service is not affiliated with OPM or any federal entity. You should consult with a financial, medical or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

Posted in ANNUITIES / ELIGIBILITY, BENEFITS / INSURANCE, RETIREMENT CONCERNS, SURVIVOR INFORMATION

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Posted on Friday, 7th January 2022 by

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It’s been quite a year, COVID, life disrupted across the board, and so much more to distract us day to day. Thankfully, we are surviving and life is getting back to the new normal; whatever that might be. I’m still trying to figure that out.

All Americans are impacted by the Covid epidemic, lawlessness and gun violence, open borders, inflation, out of control government spending, and so much more. Hopefully, common sense will prevail and things will return to some semblance of normal soon.

The Inflation we are experiencing isn’t transitory. Yes, prices of goods change frequently due to supply and demand. However, certain fixed costs, once increased, rarely allow the end products to retreat to their former lows. Medicare Part B Premiums increased 14.7% this year; the average FEHB health care plan premium rose another 2.4% and wages have increased dramatically for many including entry level jobs.

If inflation was transitory, we wouldn’t be paying considerably more for the same goods we purchased years ago. A commonsense analysis, nothing more. We don’t need an economist to reveal the obvious, we see the impact firsthand every time we go out the door.

Enough of life’s challenges, all are aware of the chaos around us. No need to repeat it here

On a personal note, I sold my career and jobs websites, one that I launched in 1994! The new owners, Federal Media Network, LLC will be a good steward; I’ll remain involved as a consultant and editor for several years. I retained our federal employee’s retirement planning web properties and will continue writing this newsletter and blog, hopefully for years to come. It’s time to start turning the reins over to the younger generation.

I completed several major items on my bucket list, my memoir early last year, and garage remodeling project this past summer. The only other major item on my list is to visit England, Austria, and Ireland, Mary’s and my ancestral stomping grounds.

My father’s side came from England; mother’s family from Austria and Mary’s from County Cork Ireland, all migrating to America through Ellis Island in the very early 1900s! Our DNA tests confirmed all of the above with a little Scandinavian and western European mixed in.

The Early Years, A Road Less Traveled, my 28th book and more than likely my last, was something I had on the back burner for years. During these past 7 decades I kept most everything related to family history: check book registers and tax records back to the 1960s, family correspondence, tickets from many of the events my wife and I attended, military and work records, thousands of pictures, and much more.

The Early Years, A Road Less Traveled

This was a reflective and enjoyable two-year journey. The most satisfying aspect of writing a memoir is that our children, grandchildren and future generations will have a glimpse into their family’s past. Hopefully, a journey worth remembering. The Preface, Table of Contents, and Chapter One are available online for anyone to read.

I mention my memoir here not to promote this title but to encourage others to capture their story while you still have the time and energy to do so. This is a limited production; by publishing and copyrighting the work it now resides in the Library of Congress. I consider this the culmination of my 36-year publishing career and I’ve given away far more than were sold.

You don’t have to write a formal book to preserve your story. Start a handwritten journal or use a word processor to capture your earliest recollections and proceed on from there. Interview your relatives while you still have the opportunity. Knowing what transpired in the past helps us understand the why and wherefore of a singular life interrupted by time and circumstance. A life story reveals the rhyme and reason for our existence and how we ended up where we are today.

My daughter wrote the following on her Facebook page after reading my book:

“My Dad wrote this beautiful memoir of his life and I absolutely loved it! I felt like I lived those times with him. I’ve gotten to know family members I never met such as his beautiful mother. I am in awe how my Dad is such a beautiful writer!  This book shows you how you can do anything if you work for it! He lived with perseverance rather than focusing on misfortunes… Dad, you are amazing! I love you! “

This is payment in full, I need nothing more.

Garage Remodeling Project

My wife cringed when I started the garage remodeling project several years ago and completed it this past July. I always wanted a pristine garage to work in and simply enjoy.

I painted the three-car garage walls light gray from the floor to the one-foot-wide blue racing stripe; the area above is a bright white. The wall cabinets and a work bench were added several years before. The blue racing stripe is the same color as our first car, a light blue 4 door 1963 Chevy Impala that has a story of and in itself. I upgraded the lighting to daylight LEDs; when turned on it’s as bright as a sunny midsummer day. I keep everything off the floor either in cabinets, on shelves or wall organizers. I have mostly reproductions of auto memorabilia on the walls while I search for originals on forays to local flea markets and garage sales next spring and summer.

The floor and baseboards were the last tasks. A local contractor applied a flaked multi colored polyaspartic floor coating. The flooring application was completed in 7 hours and I was able to walk on it 2 hours after they left. Regular epoxy applications take up to three days to apply and cure and the fumes are more pervasive.

Any garage floor application gases out fumes; it took 3 months of airing out with fans going 24/7 to eliminate the odor. If you have respiratory health issues, proceed with caution before applying any floor coating. Thoroughly seal your garage to keep the fumes from entering your home. I spent a week sealing every crack and crevice and installed the baseboards myself after the floor cured. Several contractors quoted over $700 to install just 80 linear feet of baseboard! The materials only cost $120 at Lowes. Also, floor coatings are slippery when wet, even with a slip retardant applied (fine sand to the final coat).

The project took its toll on my back and arthritic joints. Before it was completed, for several weeks I could barely straighten up when standing. In hindsight, I should have contracted the work out, I’m not a spring chicken anymore. However, I still enjoy working in and around the house. In my youth I worked sunup to sunset tackling every remodeling job possible plus car repairs and maintenance, not anymore!

The Past Lives On

I often listened to “60s on 6” during trips, the XM radio station that played the popular songs of the 1960s, my generation. The other day I discovered that it was gone!  Did XM radio cancel my generation?  After mentioning this on the Wilkinsburg High School Alumni (1940-1977) Facebook page, I discovered it was moved to channel 73 and retitled 60s Gold. What a relief, I enjoy this interlude that resurrects fond memoirs of my youth.

When I tuned in the new channel, they were playing “The Rain, the Park and Other Things” by the Cowsills. My girlfriend and I listened to this on my car radio on many of our dates. Love songs back then, when times were not as complicated, were simple and sweet compared to today’s venues. This song keeps playing in my head as I write this.

I saw her sitting in the rain
Raindrops falling on her
She didn’t seem to care
She sat there and smiled at me

Then I knew (I knew, I knew, I knew, I knew)
She could make me happy (happy, happy, she could make me very happy)
Flowers in her hair
Flowers everywhere (everywhere)

(I love the flower girl)
Oh I don’t know just why, she simply caught my eye
(I love the flower girl)
She seemed so sweet and kind, she crept into my mind
(To my mind, to my mind)

Here is an excerpt from my memoir describing when I first met Mary, my girlfriend back then. We’ve been married 52 years!

“Once I met Mary, little else mattered. I was head over heels for her and devoted most of my time and energy getting to know her. This was the fall of 1966; I was seventeen and Mary sixteen. She was a tomboy growing up and flowered into this radiant Irish lass with a fair complexion, long red hair, bright-blue eyes, and a smile that could melt any man’s heart. She was athletic and shy, and I loved being around her.”

Conclusion

Reflections are just that, a fleeting glimpse into the past. Reality unavoidably rose to the surface just for a short while towards the beginning of this piece.

I sincerely want to thank my site visitors, newsletter subscribers, and blog followers again this year. I appreciate your patronage and thank you for following me all of these years, some for several decades.

My best to you and yours always and may you have a healthy, safe and prosperous New Year.

Helpful Retirement Planning Tools

Request a 27 page Federal Retirement Report™ today. A one-hour session with a Certified Financial Planner is included.

Disclaimer: The information provided may not cover all aspect of unique or special circumstances, federal regulations, medical procedures, and benefit information are subject to change. To ensure the accuracy of this information, contact relevant parties for assistance including OPM’s retirement center. Over time, various dynamic economic factors relied upon as a basis for this article may change. The advice and strategies contained herein may not be suitable for your situation and this service is not affiliated with OPM or any federal entity. You should consult with a financial, medical or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

Posted in LIFESTYLE / TRAVEL, RETIREMENT CONCERNS

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Posted on Friday, 17th December 2021 by

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My previous article, Required Minimum Distributions (RMDS) – Are Your Ready,” received considerable interest. I stated, “Many are confused by the Required Minimum Distribution (RDM) requirement for ROTH accounts and how this works. According to the Thrift Savings Plan (TSP), the entire account balance, Traditional and ROTH, on December 31st of each year is used to determine your RMD for the following year.  You will receive a proportional amount from each account and receive a taxable and nontaxable distribution as specified on your end of year 1099R.”

Please forward this article to others that are required to take TSP RMDs.

The TSP stipulates that it is not an IRA, and Roth TSP contributions should not be reported as Roth IRA contributions. In addition, the TSP isn’t a 401(k) plan, it is an eligible employer plan governed under Internal Revenue Code (IRC) § 401(a). Therefore, rules and regulations associated with satisfying RMDs for IRAs and 401 (k) plans don’t apply to the TSP. Unlike with IRAs and 401(k) plans, IRC requirements for RMDs apply to 401(a) plans like the TSP with no exceptions; therefore, RMDs will apply to Roth money in your TSP account, even though they may not apply to Roth money in your IRAs and/or 401(k) plans.

Roth contributions and earnings are tax-free provided certain IRC rules are met. The Roth TSP contributions you make to your TSP account have already been taxed; therefore, you will not owe taxes on those contributions when a distribution is made from your TSP account. Earnings on Roth balances become tax-free when the following conditions are met: 5 years have passed since January 1 of the calendar year in which you made your first Roth contribution and you have reached age 59½ or older, become permanently disabled, or deceased.

With the traditional TSP, your contributions go into the TSP before tax withholding. However, when you take money from your traditional TSP, you’ll pay taxes on both your contributions and earnings at the income tax rate of the year you make the withdrawal.

Although traditional and Roth money must be kept separate in your account for tax purposes, the two “pots” of money together make one TSP account balance. Any transactions you make-such as interfund transfers (IFTs), contribution allocations (CAs), and beneficiary designations-will apply in equal proportions to the traditional and Roth balances. Additional information is available at https://www.tsp.gov/roth.

If you wish to keep your ROTH account invested and don’t need the money, TSP Participants may transfer their accounts to a qualified trust or an eligible retirement plan (as defined in IRC § 402(c)(8)). An eligible retirement plan can be either an IRA or an eligible employer plan. The transferred account will continue to grow tax free. Your beneficiaries —other than a surviving spouse—will be required to take RMDs.

Before leaving the TSP review the article, The TSP Advantage (Should I Stay or Go). There is a lot to consider, the TSP offers the lowest fund management fees in the business and the G Fund is guaranteed never to decrease in value, something no other fund can match.

When transferring a ROTH and/or traditional SEP accounts to another financial firm, call the new firm to coordinate the transfer and set up new accounts. Complete the TSP-99 form and submit it to the TSP. Contact the TSP at (877) 968-3778 if you require assistance.

I would like to thank Anita W, one of our newsletter subscribers. She forwarded me a reply that she received from the TSP about this subject, it was very helpful.

Helpful Retirement Planning Tools

Disclaimer: The information provided may not cover all aspect of unique or special circumstances, federal regulations, medical procedures, and benefit information are subject to change. To ensure the accuracy of this information, contact relevant parties for assistance including OPM’s retirement center. Over time, various dynamic economic factors relied upon as a basis for this article may change. The advice and strategies contained herein may not be suitable for your situation and this service is not affiliated with OPM or any federal entity. You should consult with a financial, medical or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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Posted in BENEFITS / INSURANCE, ESTATE PLANNING, FINANCE / TIP, LIFESTYLE / TRAVEL, RETIREMENT CONCERNS, SURVIVOR INFORMATION

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Posted on Friday, 10th December 2021 by

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The Internal Revenue Code (IRC) requires that you begin receiving distributions from your account in the calendar year you become age 72 and are separated from federal service. Your entire TSP account—both traditional and Roth—is subject to these required minimum distributions (RMDs). The TSP calculates RMDs using your age, your prior year-end account balance, and the IRS Uniform Lifetime Table.

 

RMD Puzzel
 

Many are confused by the RMD requirement for ROTH accounts and how this works. According to the TSP, the entire account balance, Traditional and ROTH, on December 31st of each year is used to determine your RMD for the following year.  You will receive a proportional amount from each account and receive a taxable and nontaxable distribution as specified on your end of year 1099R.

The first year you are 72 or older and separated from service is called your first distribution calendar year. If you do not withdraw enough to meet the requirement during your first distribution calendar year, the TSP is required to disburse your first RMD to you by April 1 of the following year. That date is called your required beginning date, and it happens during your second distribution calendar year. For administrative purposes, the TSP will issue this RMD on March 1 or the last business day before March 1 of your second distribution calendar year. Your RMD deadline for your second distribution calendar year is December 31 of that same year, so they will send your RMD in December. In the years that follow, you’ll have just one RMD, due December 31.

The IRS rule changes in 2019 allow TSP participants to keep their funds in the TSP when they reach age 72. You can leave your entire account balance in the TSP when you leave federal service if the balance is $200 or more. You will no longer be able to make employee contributions. However, you can transfer money into your TSP account from IRAs (although not from Roth IRAs) and eligible employer plans. Your account will continue to accrue earnings, and you can continue to change the way your money is invested in the TSP investment funds by making interfund transfers.

For those just turning 72 this year and receiving their first RMD, if you don’t request it by December 31st of this year, you will receive two RMDs next year. The TSP automatically issues your first RMD on March 1st of your second year if you don’t request it in the previous year; all RMDs from then on will be issued in December.  Those on Medicare should look at this closely, receiving two RMDs in one year could increase your Medicare Part B premiums due to their Income Adjusted feature.

You will fully or partly satisfy your RMD with any withdrawals you choose to make. If you don’t make any withdrawals or if your withdrawals fall short of the required amount, The TSP will automatically send you the amount that’s still required.

If you withdraw an insufficient amount from a retirement account the penalties are severe, 50% of the shortfall plus the income tax owed. Fortunately, the TSP will send your distribution automatically if you don’t request a withdrawal as long as they have your correct address. TSP participants must update their mailing address if they move. Otherwise, they will not send out your RMD check, but they will still report the amount to the IRS as taxable income. Log into your TSP account at www.tsp.gov to verify they have your correct address.

NOTE: TSP accounts no longer use a participant’s account number for the login ID. Significant TSP account access and security changes were implemented earlier this year. You must establish a new log in ID when you first sign on.  Review these changes if you haven’t visited the site since the changes were implemented.

Typically, the TSP will send you a letter at the beginning of each year that you are eligible for an RMD. My letter was dated 01/05/2021 and it listed the full amount that I am required to withdraw. If you misplaced this letter sign into your TSP account and look under Account Information on the left side of the screen; click on “Correspondence from the TSP.”  All of the letters and notices they send out are available for you to view and download.

To request your RMD prior to December when they are sent out automatically, sign into your account and select “Withdrawal Requests for Separated and Beneficiary Participants.” This should be highlighted on your screen.  Use their TSP-99 (WEB) form to request your withdrawal online. It only takes a few minutes to complete and you can print out the form for your records.  I also received an email from them shortly after, copy below:

The Thrift Savings Plan (TSP) received your request for a financial transaction or installment change.

If you did not make this request, please call the ThriftLine toll-free at 1-877-968-3778 and select option 3 to speak to a Participant Service Representative. If you are outside of the U.S. and Canada, call 404-233-4400. Hearing-impaired participants may call our TDD number at 1-877-847-4385.

Thank you for being a valued TSP participant.

They must withhold a minimum of 10% for federal taxes however you can request withholdings up to 99% of the distribution for federal tax. There is no minimum required for state tax, you can elect a withholding if desired.

The TSP sends out a 1099 R in January of the following year for your withdrawal; your traditional account RMD distribution is taxed as ordinary income.

The rules are slightly different for inherited RMD withdrawals for a spouse’s Beneficiary Participant Account (BPA). A spouse can retain the account for their lifetime. The Internal Revenue Code (IRC) requires that you begin receiving annual distributions from your beneficiary participant account within certain deadlines. These rules are complex; you may also wish to consult a tax advisor. Depending on the deceased date of birth the rules vary. Review the TSP’s brochure titled, Tax Information About TSP Withdrawals and Required Minimum Distributions for Beneficiary Participants for additional information.

When the beneficiary participant dies, the funds in the BPA cannot remain in the TSP. The account will be distributed directly to the BPA participant’s beneficiary(ies) indicated on Form TSP-3. If no valid Form TSP-3 is on file, the account will be distributed according to the order of precedence. These payments are subject to certain tax restrictions and cannot be transferred or rolled over into an IRA or eligible employer plan in accordance with page 9 of the TSP Beneficiary Guide. In addition, these payments will be fully taxable in the year the beneficiary(ies) receives them. Any payments from tax-exempt money are not subject to taxes when distributed.

Cautionary Note: For annuitants and beneficiary participants with large TSP accounts, it may make sense to transfer their TSP account to an IRA at another financial institution. According to TSP’s Withdrawal Guide, “You can transfer part or all of your single withdrawal or eligible installment payments to an IRA or an eligible employer plan (for example, the 401(k) plan of a new employer).” Inherited IRAs permit non spousal beneficiaries to spread the tax burden over a ten-year period in most cases.

There are exceptions to this IRA rule, Fidelity Investments states the following requirements for non-spouses, “If the original account owner died on or after January 1, 2020, in most cases you will need to fully distribute your account within 10 years following the death of the original owner.  However, there are exceptions if you are considered an eligible designated beneficiary. Eligible designated beneficiaries include a minor child of the original account owner, a disabled or chronically ill individual, or any other person who is not more than 10 years younger than the deceased account holder.”

Beneficiaries of a beneficiary participant TSP account must take an immediate withdrawal upon the account owner’s death as noted above. Discuss this with your accountant, financial advisor, or estate planning attorney.

Update Your Beneficairy Designations

It’s a good idea to review your beneficiary designations, especially if you remarry or wish to change beneficiaries. I submitted an updated TSP-3 Designation of Beneficiary form this week; the addresses changed and my daughter married six years ago. It was time for an update. You can fill out the TSP-3 form online, just click on Beneficiaries under “Personal Information” that is listed under My Account.

If changes are needed, click on “Change Beneficiaries.” There isn’t an option to edit the beneficiary listings. After you complete a TSP-3 form, you may upload, mail, or fax it to the TSP for processing. To upload the form, click on “Upload Form” on the account menu. The form requires witness signatures, anyone 21 or older and they can’t be a primary or contingent beneficiary. If you wish to complete the form off line, download the TSP-3 form and complete it at home.

Here is a list of resources that you may find helpful.

Helpful Retirement Planning Tools

Disclaimer: The information provided may not cover all aspect of unique or special circumstances, federal regulations, medical procedures, and benefit information are subject to change. To ensure the accuracy of this information, contact relevant parties for assistance including OPM’s retirement center. Over time, various dynamic economic factors relied upon as a basis for this article may change. The advice and strategies contained herein may not be suitable for your situation and this service is not affiliated with OPM or any federal entity. You should consult with a financial, medical or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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Posted in BENEFITS / INSURANCE, FINANCE / TIP, LIFESTYLE / TRAVEL, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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Posted on Friday, 3rd December 2021 by

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I’ve written a number of articles over the years on conservative investment strategies and often mentioned just how attractive I Savings Bonds are. A great overall investment; anyone purchasing I bonds between last November though next April will earn an astonishing 7.12% on their investment the first 6 months they own them. The rate changes every 6 months thereafter. I’ve purchased I Bonds since their inception in 1999 and started purchasing EE Bonds monthly through payroll deduction back in 1973.

The last article I wrote on this subject, “Earn 3.54% with Series I Savings Bonds – Tax Deferred Income” earlier this year shows how to buy them, how they accrue interest, and their many advantages. When I wrote the article in May they were paying 3.54%, still a great rate considering my current savings account bank statement shows interest earned of just .05%! An I bond that I purchased in November of 1999, a $200 bond, is now worth $687 today and yielding 10.6%! The early I Bonds had a 3% fixed rate plus the inflation rate.

The government is ripping off those on fixed incomes, or for that matter anyone with a savings account. They are artificially keeping interest rates low to service the huge national debt this country has accrued over the years, though all administrations.

Explore this lucrative investment opportunity. You don’t hear much about savings bonds these days because the Treasury unfortunately stopped issuing paper bonds years ago. You have to purchase them online through Treasury Direct or you can elect to have a paper bond issued instead of receiving cash for your federal income tax refund. Individual can purchase up to $10,000 a year online and an additional $5,000 paper bond with your federal income tax refund. It’s easy to sign up and invest in Savings Bonds or for that matter any of the Treasury’s Notes, Bills and Bonds.

EE Bonds are currently yielding just .10%.  Regardless of the current E Bond rate, at 20 years the E Bond will be worth twice what you paid for it. The Treasury makes a one-time adjustment to the E Bond’s face value. This provides approximately a 3% yield if held for 20 years. A $500 EE Bond that I purchased for $250 in November of 2000, just over 20 years ago, is now worth $535. Still a good deal for those looking for long term gains. After 30 years they stop earning interest and you should cash them in. The earnings are tax deferred; when cashed in you will have to pay taxes on the interest.

 

 

This is an ideal time to start investing in I Savings Bonds. You can use your RMD distribution to purchase up to $10,000 this year before the end of the month and then next month purchase an additional $10,000. Invest whatever you can afford; it is also a good way to move cash from low interest savings accounts and CDs to an inflation indexed investment that is guaranteed by the full faith of the U.S. Government.

You can track the current interest rate, earnings and total value of all of your Savings Bonds with their Savings Bond Calculator.  Savings bonds can’t be cashed in during the first year of ownership, they can be redeemed after 12 months. if you redeem an I bond within the first 5 years, you’ll lose your last 3 months interest. For example, if you redeem an I bond after 18 months, you’ll receive the first 15 months of interest. Review the previous article I wrote on this subject for additional details.

Helpful Retirement Planning Tools

Disclaimer: The information provided may not cover all aspect of unique or special circumstances, federal regulations, medical procedures, and benefit information are subject to change. To ensure the accuracy of this information, contact relevant parties for assistance including OPM’s retirement center. Over time, various dynamic economic factors relied upon as a basis for this article may change. The advice and strategies contained herein may not be suitable for your situation and this service is not affiliated with OPM or any federal entity. You should consult with a financial, medical or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

Posted in ANNUITIES / ELIGIBILITY, BENEFITS / INSURANCE, ESTATE PLANNING, FINANCE / TIP, LIFESTYLE / TRAVEL, RETIREMENT CONCERNS, SURVIVOR INFORMATION

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Posted on Saturday, 27th November 2021 by

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“Yes, Virginia, there is a Santa Clause.” Prescription drug copays under Aetna’s Medicare Plans remain the same regardless of whether or not you enter the Part D prescription drug gap. This includes all three of their plans: Self Only (Z24), Self + 1 (Z26), Self and Family (Z25).

I talked to a number of Aetna customer service reps while researching my previous article about Aetna’s Medicare Advantage plans. I received conflicting information on how drugs were reimbursed in this plan. Their pharmacy specialist assured me that the Gap coverage I outlined in the original article was correct! I was referred to the Medicare site for clarification and the information I relayed reflected that guidance.

Susan Allgood, Aetna’s relationship manager for federal plans stated, “the member continues to pay the same co-payment through the entire year.” She referenced Aetna’s Medicare Plan Summary of Benefits and I excerpted the following coverage gap clarification from this document.

Coverage Gap

The Coverage Gap starts once covered Medicare prescription drug expenses have reached the Initial Coverage Limit. Here’s your cost-sharing for covered Part D drugs after the Initial Coverage Limit and until you reach $6,550 in prescription drug expenses:

Your former employer/union/trust provides additional coverage during the Coverage Gap stage for covered drugs. This means that you will generally continue to pay the same amount for covered drugs throughout the Coverage Gap stage of the plan as you paid in the Initial Coverage stage. Coinsurance-based cost-sharing is applied against the overall cost of the drug, prior to the application of any discounts or benefits.

Most insurers have numerous Medicare Part C Plans and many of those plans, not associated with the FEHB, are subject to the Medicare prescription drug Gap. If you are considering a Medicare Part C plan that isn’t associated with the FEHB program, be aware that the prescription drug gap rules outlined in my original article may apply.

Fortunately, Tammy Flanagan forwarded Susan Allgood’s message to me yesterday. Tammy is an exceptional federal benefits consultant and I consider her a good friend. The original article, posted on our blog, has been updated to reflect these changes.

There was also some concern expressed about the increased premiums for higher earner members. The section in the original article about Part D increased costs for higher earners is correct as stated.  According to page 98 of the Aetna Plan Brochure, “You may also see an additional charge if you qualify for the Income-Related Monthly Adjustment Amount (IRMAA). It is an extra amount that you pay for your monthly Medicare Part D prescription drug plan premiums and your monthly Medicare Part B premiums. Social Security makes this determination based on your income.”

According to Medicare, “If your income is above a certain limit ($91,000 if you file individually or $182,000 if you’re married and file jointly), you’ll pay an extra amount in addition to your plan premium (sometimes called “Part D-IRMAA”). You’ll also have to pay this extra amount if you’re in a Medicare Advantage Plan that includes drug coverage. This doesn’t affect everyone, so most people won’t have to pay an extra amount.”

Overall, Aetna Medicare plan costs are reasonable; with the competitive prescription copays, low premiums, and Part B reimbursements it appears to be a viable option for many. If you are considering one of the FEHB MA plans confirm that your doctors and medical facilities accept the MA plan of interest. Higher income earners will have to weigh the increased cost of part D premiums and other factors to see if this plan makes sense for them.

Helpful Retirement Planning Tools

Disclaimer: The information provided may not cover all aspect of unique or special circumstances, federal regulations, medical procedures, and benefit information are subject to change. To ensure the accuracy of this information, contact relevant parties for assistance including OPM’s retirement center. Over time, various dynamic economic factors relied upon as a basis for this article may change. The advice and strategies contained herein may not be suitable for your situation and this service is not affiliated with OPM or any federal entity. You should consult with a financial, medical or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

Posted in BENEFITS / INSURANCE, ESTATE PLANNING, FINANCE / TIP, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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Posted on Saturday, 20th November 2021 by

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Updated 11/27/2021

My recent article titled “GEHA Standard to BCBS Basic Plan Comparison – 2022” stated that Federal Employees Health Benefits (FEHB) Medicare Advantage (MA) plans could possibly save you even more.

These plans were introduced as new options in the FEHB program over the past several year. Many federal employees and annuitants are curious about how they work, are they truly less costly, provide comparable benefits, and provide a viable option for what so many of us have been enrolled in for years?

I was pleasantly surprised with some reservations after several days of research and spending hours on the phone with the Aetna customer service representatives. I focused on the Aetna Medicare Advantage Z26 plan that offers national coverage and incidentally had the lowest premium cost for self + one enrollments among national plans offering this option. This plan’s monthly premium is $275 for their Self + One option and they reimburse your Medicare Part B monthly premium by $75 per enrollee.  Your Social Security check actually increases $75 a month!  Some plans reimburse even more of your Part B premiums.

Please Forward This Article to Others
That are Considering Medicare Advantage Plans.

The Basics

You can get your Medicare benefits through Original Medicare (parts A and B), or a Medicare Advantage Plan (Part C). If you have Original Medicare, the government becomes your primary health care provider and pays for most medical costs when you get hospital or physician services covered by Medicare. Your FEHB plan becomes your secondary provider and pays most of what Medicare doesn’t.

Medicare Advantage Plans, sometimes called “Part C” or “MA Plans,” are offered by private companies approved by Medicare. Medicare pays these companies to cover your Medicare benefits. Most importantly, MA plans provide a catastrophic expense protection, unlike traditional Medicare. In return for their additional benefits, most of these plans use preferred provider networks and only pay 100% of your medical expenses if you use one of these providers. But as discussed below, the Aetna Medicare Advantage MA plan contains no such limitation.

Most Medicare Advantage Plans also include Medicare prescription drug coverage (Part D). In many of these plans you pay nothing in addition to your Part B premium to get catastrophic expense protection, prescription drug benefits, and even more. In some of these plans, you pay a small additional premium, usually no more than the equivalent of a month or so of the Part B premium, to get these additional benefits. You usually pay one monthly premium for the plan’s medical and prescription drug coverage. This is how this Aetna plan covers prescriptions, more on this later.  For clarification, most federal annuitants aren’t enrolled in Medicare Part D drug coverage, and you don’t have to enroll in Part D to participate in these MA plans. The plans cover this.

To convert to one of the MA plans offered within the FEHB program you must be enrolled in Medicare Part A and B and a FEHB Plan that offers a Medicare Advantage option. In my case I could change my enrollment this open season to the Aetna Advantage Z26 Plan and shortly after, typically three days later, call Aetna to register for their Medicare Advantage option. The reason for the three-day delay is that it takes time for OPM to compile plan changes and post them.

Another revelation, Aetna doesn’t charge a fee for its FEHB MA option! You simply pay the $275 monthly premium for their Z26 plan! It costs nothing to convert. Aetna will initially issue you an Aetna Advantage card and shortly after completing their two-step enrollment, you will receive an Aetna Medicare Advantage Part C card. You must use the Medicare Part C card when visiting the doctor’s office. Keep your original Medicare card handy encase you switch back to Traditional Medicare at an upcoming open season or if you trigger a Qualifying Life Event that warrants a plan change. During open season you can move back to a FEHB plan or possibly elect to enroll in another more cost effective FEHB sponsored MA plan.

Caution

Don’t confuse the new FEHB MA options with private sector Medicare Supplement and MA plans being sold on TV ads and through the mail. If you decide to enroll in a private sector MA plan, one outside of our FEHB program, you should suspend your FEHB plan. If you cancel your FEHB plan, you can’t return to the FEHB program. With the FEHB MA offerings you MUST KEEP your FEHB plan; during the next open season, you can change to any of the FEHB plans available in your area if desired. If you sign up for a Medicare Supplement plan you can’t suspend your FEHB plan, you can only cancel your coverage! Read the following article on this subject if you are considering a Medicare Supplement plan:

FEHB Plans Offering MA Plans

Three of the FEHB’s Medicare Advantage plans are available nationally for all federal retirees with Medicare Parts A and B: Aetna Advantage, APWU High, and MHBP Standard MA plans. Many other MA plans from carriers including: UnitedHealthcare, Kaiser, and Humana are available in various parts of the country. For example, in the Washington DC area there are nine additional FEHB MA plans offered. (There are also two plans open nationally but only to annuitants with a prior work history in intelligence agencies or as rural carriers.)

How the Aetna Advantage MA Plan Works

Federal Retirees with Medicare continue paying Part B premiums with this plan. The coverage is the same as Traditional Medicare but includes additional benefits such as $0 deductibles and prescription benefits. There are other programs available to help members maintain and improve their health including fitness membership, hearing aid reimbursement of up to $2,500, and more. One of the major benefits is the reimbursement of $75/month (up to $900/year) of your Medicare Part B premiums with the Aetna plan. For a Self + One or Family enrollment, if both of the spouses are enrolled in Medicare A and B, they each receive $900 a year towards Part B premiums. This is slightly less than half of the Part B premium for 2022 ($170.10 a month or about $2,040 for the year).

Aetna MA Benefits

Certain procedures require pre-certification.
They are marked with an asterisk in their brochure.

It was somewhat confusing reading the plan brochure and differentiating between their Aetna Advantage Plan and the Aetna Medicare Advantage Plan. Their Medicare Advantage plan is summarized in Section 9 of the plan brochure; review Aetna’s Medicare Plan Summary of Benefits Pamphlet and visit their online Medicare and You Guide for additional guidance.

It is my understanding, though not stated clearly in the brochure, that all the FEHB benefits of the FEHB-only Aetna Advantage plan (or MA plans of other carriers) remain in force. This means, for example, that a married annuitant with Parts A and B could enroll in Aetna Advantage’s MA plan, while his or her younger spouse without Medicare would get regular FEHB benefits provided by the Aetna Advantage plan.

Prescription Drugs 

I checked all of the prescriptions that my wife and I use and they are not only covered by this plan but the copays are significantly lower for my asthma medications and others. For example, I just paid a $200 copay for Advair through GEHA, the Aetna plan copay would have been $40! A huge savings. Their copays are quite reasonable except for Tier 5 specialty drugs (high-cost/unique generic and brand drugs) where the copay is 25%, but not more than $350. This is true even when you reach Medicare’s Initial Coverage Limit (ICL) of $4,430.

The Coverage Gap starts once covered Medicare (Part D) prescription drug expenses have reached the Initial Coverage Limit. However, according to Aetna’s Medicare Plan Summary, “Your former employer/union/trust provides additional coverage during the Coverage Gap stage for covered drugs. This means that you will generally continue to pay the same amount for covered drugs throughout the Coverage Gap stage of the plan as you paid in the Initial Coverage stage. Coinsurance-based cost-sharing is applied against the overall cost of the drug, prior to the application of any discounts or benefits.”

Those enrolled in an FEHB MA plan are not impacted by the Medicare Gap and ICL. Your prescription drug copays will remain the same throughout the year regardless of any costs.

The following Gap discussion is included here as reference for those who are considering purchasing a Medicare Advantage plan that is not affiliated with a FEHB plan. Prescription drug copays may increase when in the GAP for those individuals.

For those in plans where the employer, union or trusts doesn’t pick up the additional costs while in the gap, the coverage gap begins after you and your drug plan have spent $4,430 on covered drugs in 2022. The total cost of each prescription, which includes the member copay and what the provider paid for the drug, is used to determine when your reach the ICL limit! Once you reach the coverage gap, you’ll pay no more than 25% of the cost for your plan’s covered brand-name prescription drugs until catastrophic drug coverage starts at $7,050. You’ll pay this discounted rate if you buy your prescriptions at a pharmacy or order them through the mail.

Although you’ll pay no more than 25% of the price for the brand-name drug while in the gap, almost the full price of the drug will count as out-of-pocket costs to help you get out of the coverage gap. What you pay and what the manufacturer pays (95% of the cost of the drug) will count toward your out-out-pocket spending. What the drug plan pays toward the drug cost (5% of the cost) and dispensing fee (75% of the fee) aren’t counted toward your out-of-pocket spending.

Medicare will pay 75% of the price for generic drugs during the coverage gap. You’ll pay the remaining 25% of the price. The coverage for generic drugs works differently from the discount for brand-name drugs. For generic drugs, only the amount you pay will count toward getting you out of the coverage gap.

Part B & D – Income-Related Monthly Adjustment Amounts (IRMAA) Payments 

This doesn’t affect everyone, so most people won’t have to pay an extra amount. If you have Part B and you have a higher income, you may also have to pay an extra amount for your Part B premium, even if you don’t have drug coverage. This is a nationwide Medicare requirement, not specifically related to the Aetna Advantage or any other MA plan.

Higher income retirees are also required to pay income adjusted Part D premiums. According to Medicare, you have to pay this extra amount if you’re in a Medicare Advantage Plan that includes drug coverage and your total income exceeds $91,000 for those filing an individual tax return or $182,000 for those filing a joint return. The extra Part B Premiums range from $12.40 to as high as $77.90 monthly based on 5 income brackets.  Couples that are both on Medicare each pay this amount. Therefore, a couple’s overall Medicare cost will increase from $24.80 to $155,80 monthly! The income limits for the Part B premiums are identical to those for Part B. Something to be concerned about for sure.

Social Security will contact you if you have to pay Part B or D IRMAA, based on your income. The amount you pay can change each year. The extra amounts you have to pay aren’t part of your plan premium. You don’t pay the extra amounts to your plan. Most people have the extra amounts taken from their Social Security check. If the amount isn’t taken from your check, you’ll get a bill from Medicare or the Railroad Retirement Board. You must pay this amount to keep your Part B & D coverage. You’ll also have to pay both extra amounts if you’re in a Medicare Advantage Plan that includes drug coverage.

What Plans are Available in My Area?

To determine which plans are available in your area use the FEHB comparison tools or visit the plan websites listed in their brochures. Each of the comparison tools and company websites prompt you to enter your zip code and all offerings will show up and include national plans, HMOs, MA Options, and everything in between.

  • The OPM’s Plan Comparison Tool includes much of the information you would need to make an informed decision with some limitations.
  • the Consumers’ Checkbook 2022 Guide to Health calculates total healthcare cost for each plan option including your FEHB premium, your regular or income adjusted Medicare premium, any Part B reimbursements available, and likely cost-sharing, in addition to healthcare costs, it also calculates FEDVIP costs. This Guide is available in print and online formats and our site visitors can save 20% by entering promo code FEDRETIRE at checkout.

Find Aetna Advantage Medicare Health Care Professionals & Facilities in Your Area

Use their provider search service to determine if your medical providers are in their network. It is a little confusing to navigate. All of the doctors and the medical facilities we use are in their network. As a member of the Aetna Medicare Plan (PPO) with an Extended Service Area (ESA), you can receive services from any provider that is eligible to receive Medicare payment and is willing to treat you. This plan covers both in and out of network providers. (Not all FEHB MA plans cover out of network providers and this is a big plus for the Aetna plan.)

Enrollment Process for the Aetna Medicare Advantage Plans

You can see any provider that is licensed to receive Medicare payments. Selecting the Aetna Medicare Advantage plan does not change your FEHB premium or enrollment code. Retirees with Medicare Parts A and B may elect to join the Aetna Medicare Advantage plan by following the two-step enrollment process.

NOTE: You must complete this two-step process to avoid high deductibles required for the Aetna Advantage plan. This action changes your enrollment from their traditional FEHB offering to a Medicare Advantage Part C option.

Step 1:

Enroll as you normally would through the OPM Retirement website https://retireefehb.opm.gov/ or you can call 1-888-767-6738 (TTY: 1-800-878-5707).

Enroll using enrollment code Z24 for Self Only, Z26 for Self + 1, or Z25 for Family.

Step 2:

Provide Aetna with your Medicare information. Once you are enrolled through the OPM site, your basic information will be transferred to Aetna. (Please allow 7–10 business days.)

In addition, they will need the following to complete your enrollment in Aetna Medicare Advantage:

Your original Medicare effective date for Parts A & B

Your Medicare Beneficiary ID

You may go to www.aetnaretireehealth.com/FEHBP or call us at 1-866-241-0262 and give them this information. If you are over age 65, they will send you a reminder postcard.

For more information call Aetna Retiree Solutions at 1-866-241-0262 (TTY:711) or connect live with their team at www.aetnafedslive.com.

Summary

Overall, Aetna Medicare plan costs are reasonable; with the competitive prescription copays, low premiums, and Part B reimbursements it appears to be a viable option for many. If you are considering one of the FEHB MA plans confirm that your doctors and medical facilities accept the MA plan of interest. Higher income earners will have to weigh the increased cost of part D premiums and other factors to see if this plan makes sense for them.

Another low cost FEHB option is the Aetna Direct Plan N63. It isn’t a Medicare Advantage plan and includes an $1800 Medicare reimbursement. The reimbursement is handled differently, instead of your Social Security check increasing, you apply for reimbursement and they send you a check.

For those still working in federal service take advantage of the Flexible Spending Accounts offered under the FSAFEDS program during this open season or consider switching to one of the High Deductible plans with Health Savings Accounts for far larger tax savings, plus lifetime investment returns. You can save pre-tax dollars and spend them on health care, child care, dental, vision, and other expenses.

Aetna Contact and General Information

You have several options:

Editing Credits: I was fortunate to have Walton Francis, an expert in analysis and evaluation of public programs including Medicare and the Medicare Advantage program, review and edit this article. Francis along with Kevin Moss are associated with the Center for the Study of Services (CSS), a nonprofit organization, and the publisher of Consumers’ Checkbook and the Guide to Health Plans for Federal Employees.

Helpful Retirement Planning Tools

Disclaimer: The information provided may not cover all aspect of unique or special circumstances, federal regulations, medical procedures, and benefit information are subject to change. To ensure the accuracy of this information, contact relevant parties for assistance including OPM’s retirement center. Over time, various dynamic economic factors relied upon as a basis for this article may change. The advice and strategies contained herein may not be suitable for your situation and this service is not affiliated with OPM or any federal entity. You should consult with a financial, medical or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

Posted in BENEFITS / INSURANCE, ESTATE PLANNING, FINANCE / TIP, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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Posted on Friday, 19th November 2021 by

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Transitory inflation is a myth that is unsustainable. Yes, the COLA this year was 5.9%; since it was announced, the Bureau of Labor Statistics reported prices climbed 6.2% year-over-year, the largest increase since November 1990. Everything we buy or the services we use with few exceptions are increasing at an alarming rate. Medicare premiums were announced last Friday and are increasing 14.5%; the largest dollar increase in Medicare’s history! The Social Security wage base for taxes is increasing approximately 3% for 2022 and wage earners must pay taxes on incomes up to $147, 000 a year up from $142,800 in 2021.

Government reports claim that wages increased, sometimes dramatically, over the past year or so. However, real wages are actually down over 2% when you factor in inflation! Many mixed messages across the board.

I was disappointed to hear of the Medicare increase when you consider that the average Federal Employees Health Benefits (FEHB) premiums increased only 2.4% for 2022. A 14.5% increase is huge and wipes out much of the COLA increase for those on fixed incomes. I highlighted the increase in red on the following chart.

Couples earning less than $182,000 a year will pay $4,082.40 ($170.10 each per month times 12) a year for Part B coverage while a couple in the highest income group pays $13,879.20 a year for the same Medicare Part B Coverage! Most people pay the standard Part B premium amount.

2022 Medicare Part B Premiums

Part B premiums are determined annually from income statistics that the IRS provides to Medicare. If your 2020 Modified Adjusted Gross Income (MAGI) is above a certain amount as indicated above, you will pay a higher Part B premium.  Review tax returns to determine what your adjusted gross income was and then add in any tax-free interest you earned to determine (MAGI) and what your monthly premium will be.

Modified Adjusted Gross Income includes capital gains, taxable interest, tax-exempt interest, dividends, annuity income, wages, business income, and IRA distributions.  When you start drawing from your THRIFT account, take a one-time lump sum withdrawal, cash in stocks or bonds that have appreciated in value, or convert to a ROTH you may end up with a higher part B premium payment the following year.

Those in the lowest income bracket may end up with a Medicare Part B premium increase the following year when taking a Required Minimum Distribution (RMD) from your TSP and other retirement accounts, realize capital gains from taxable accounts or cash in those long held Savings Bonds that many federal employees accumulated over the year.

For those still working take advantage of the Flexible Spending Accounts offered under the FSAFEDS program. You can save pre-tax dollars and spend them on health care, child care, dental, vision and other expenses. Review Shawn McCoys 2022 FSA article that provides guidance for this open season selections.

Helpful Retirement Planning Tools

Disclaimer: The information provided may not cover all aspect of unique or special circumstances, federal regulations, medical procedures, and benefit information are subject to change. To ensure the accuracy of this information, contact relevant parties for assistance including OPM’s retirement center. Over time, various dynamic economic factors relied upon as a basis for this article may change. The advice and strategies contained herein may not be suitable for your situation and this service is not affiliated with OPM or any federal entity. You should consult with a financial, medical or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

Posted in BENEFITS / INSURANCE, ESTATE PLANNING, FINANCE / TIP, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION

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