Merriman’s Take on Recent Tax Legislation

Merriman’s Take on Recent Tax Legislation

In December, Congress passed sweeping tax changes, and the President signed them into law. This legislation will impact many tax planning strategies going forward.

This document summarizes some of the major provisions most likely to impact the families we work with. As always, your advisor can answer questions and provide guidance specific to you.

Most of the individual provisions will remain until 2025, after which they are scheduled to expire and revert to current law. Here are some key highlights of the legislation: (more…)

Ask Merriman: SIPC Coverage

Q: Brokerage houses have additional insurance that covers certain events relative to my deposit. Should I be concerned when the funds on deposit at a major brokerage exceed the insurance limits?

Let’s assume this refers to SIPC coverage brokerage firms use. While loosely similar to the more familiar FDIC insurance to cover bank deposits, SIPC insurance is much more limited in scope.

Essentially, SIPC insurance provides coverage from loss due to the brokerage firm going out of business. It provides up to $500,000 of protection on securities and up to $250,000 in cash in excess of what is recovered. It does not provide coverage from a decline in the value of investments.

To help visualize an example of when SIPC would come into play, let’s use an example of a $5 million client account:

· Assume the brokerage firm fails, resulting in $5 billion of client claims on assets.

· Assume 90% of clients’ assets ($4.5 billion) are recovered. The actual historical recovery rate is 98.7% according to SIPC.

· The client in this example holding $5 million in SIPC eligible assets would receive $4.5 million from recovered assets and $500,000 from SIPC. The loss to the $5 million client account would be zero.

It’s exceedingly rare for a client to be entitled to recover damages under SIPC and not be made whole because of the $500,000 limit.

Also, most large brokerage firms purchase “excess of SIPC” insurance, which insures clients for any losses above the $500,000 limit.

Ultimately, clients do not need to be concerned when funds at a brokerage exceed the coverage limits.

More detailed information about SIPC coverage can be found here.


Do you have a question about investments, taxes, retirement or insurance? Send it to “Ask Merriman” and one of our financial advisors will help you find an answer.

Ask Merriman: Required Minimum Distribution (RMD)

Q: I turned 70 ½ in 2016, but waited until March 2017 to take my first required minimum distribution (RMD). I planned to wait until 2018 to take my next distribution. Am I understanding correctly that I must take the second RMD in 2017, too?

You are only allowed to delay your RMD the first year you take it. You can delay as late at April 1 of the year after you turn 70 ½.

In every subsequent year, the RMD must be completed by December 31 of that year. If you delay taking your RMD the first year, it means you will have to take two RMDs in your second year.


Q: Are Roth accounts subject to an annual required minimum distribution (RMD)? I thought only traditional retirement accounts were, but I’ve been hearing differently.

Roth IRAs are not subject to an annual RMD. However, if your employer offers a Roth 401(k), that is subject to annual RMDs upon reaching age 70 ½.

Fortunately, if you want to avoid taking distributions, it’s possible to complete a rollover from the Roth 401(k) to the Roth IRA. This should allow you to avoid having to take an annual RMD from your Roth money.


Q: Do the required minimum distributions (RMDs) from IRAs that become effective in the year I turn  70 ½ apply only to IRAs, or do they also apply to 401(k)s? More specifically, if I am still working full time, does the RMD requirement apply to my 401(k)?

If you’re still working when you turn 70 ½, you may not need to take an RMD from the 401(k) at your current employer if the following conditions are met:

  • You’re employed throughout the entire year
  • You own no more than 5% of the company
  • You participate in a plan that allows you to delay RMDs

You must take your first RMD from the 401(k) the year you retire. In that year, you have until April 1 of the following year to take the distribution. However, if you delay, you‘ll end up taking two RMDs the second year.

The RMDs that become effective the year you turn 70 ½ still apply to all traditional IRAs, and all other 401(k)s and Roth 401(k)s.


Q: If I decide to give my RMD to my church, do I need to give the entire withdrawal amount required by the IRS, or can I just give a portion and keep the rest for other living expenses?

You don’t need to give the entire RMD amount to your church (or any charity) to complete a Qualified Charitable Distribution (QCD). The QCD can be less than or more than the RMD, up to a $100,000 limit per taxpayer per year.

A taxpayer with a $19,480 RMD in 2017 could certainly make a $5,000 QCD, and take the rest as a regular distribution for living expenses.

The key points to remember when completing the qualified charitable distribution from an IRA to a charity are that the IRA owner must:

  • Already be age 70 ½ on the date of distribution.
  • Submit a distribution form to the IRA custodian requesting that the check be made payable directly to the charity.
  • Ensure that no tax withholding is being made from the QCD to the charity.
  • Send the check directly to the charity, or to the IRA owner to be forwarded along to the charity.


Do you have a question about investments, taxes, retirement or insurance? Send it to “Ask Merriman” and one of our financial advisors will help you find an answer.


Due to the recent presidential election, parts of the Affordable Care Act described below may change. The current rules will likely stay in place through 2017. We’ll provide updates as they occur.

When you leave a job, a key decision you need to make is what to do about health insurance when your current coverage ends. If you’re under age 65 and not yet eligible for Medicare, then your two major options are either COBRA, or policies on health insurance exchanges set up under the Affordable Care Act (ACA).

istock_000018475056xsmallConsider the following factors to help you decide.


A big difference is cost. If you continue your existing coverage under COBRA, you pay 100% of the cost of coverage, plus an additional 2% in administrative costs. COBRA coverage is not eligible for any sort of subsidies to reduce the cost.

Policies sold through health insurance marketplaces generally cost less, especially some of the more “stripped down” policies. Also, as discussed in a previous post, low- and middle-income households may be eligible for a subsidy to further reduce the cost. The amount is based on household size and income. A family of four with less than $97,200 of household income may qualify for a significant subsidy.


One benefit of COBRA is that you keep the same coverage. You know that your doctor is already in-network, so you won’t have to change care providers. And, your deductibles and copays remain the same.

COBRA allows former employees to continue comprehensive medical insurance, dental, and vision plans. COBRA does not apply to life insurance or disability benefits. (more…)

Affordable Care Act – the Subsidies

Due to the 2016 presidential election, parts of the Affordable Care Act described below may change. The current rules will likely stay in place through 2017. We’ll provide updates as they occur.

When an employer provides health insurance, you receive tax advantages that you don’t get when purchasing health insurance on your own. All the premium costs – whether paid by the employer or employee – are excluded from taxable income (both income tax and FICA taxes).

By contrast, individual health insurance you purchase on your own is paid for with after-tax dollars. These payments don’t receive the same tax advantages, so purchasing $1 of health insurance on your own is more expensive than purchasing $1 of health insurance through your employer plan

To address this, the Affordable Care Act (ACA) created a tax credit for individuals who purchase health insurance through the ACA marketplace. The credit is available to taxpayers earning up to 400% of the poverty level in the current year. For a household of two, that limit is $64,080 in 2017. A taxpayer’s income for this calculation is adjusted gross income (AGI), plus tax-exempt interest and any Social Security that was excluded from taxable income. So a married couple with no kids who earn $50,000 in 2017 would qualify for a tax credit if they had to purchase their own health insurance.

Because tax credits aren’t calculated until the end of the year, you have to pay your health insurance premiums all year in order to get money back when you file your taxes after the end of the year. This is where subsidies come in. (more…)