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Friday Financial Five – February 14th, 2014

Friday, February 14, 2014


Another delay in the Affordable Care Act mandate

The U.S. Treasury Department released final regulations for the Affordable Care Act (ACA) and they contain another delay in required implementation for businesses with 50 to 99 employees. One would think that businesses could comply by the beginning of 2015 given over a year to prepare. That leads to speculation that the actual implementation is either more expensive or more detrimental to business practices than originally projected. The Treasury estimates that this will affect roughly two percent of businesses in the U.S.

Increased scrutiny of 401(k) rollovers

There will be special attention paid to advice ex-employees or retiring workers receive regarding their 401(k) plans. After leaving a job, an ex-employee can leave the money in the former employer’s plan or move the money to an IRA Rollover. The variables of that decision and the advice of investment advisers will come under more scrutiny by federal regulators. For example, if the old 401(k) has numerous low cost investment options and an advisor is suggesting the money be moved to a variable annuity within an IRA, there will have to be documentation that this transition best benefits the client.

Hedge funds trail again in 2013

Last year, the Bloomberg Hedge Fund Aggregate Index again trailed the S&P 500 by a wide margin. In returning only 7.4% for 2013, this index even greatly underperformed a traditional balanced allocation of equities and fixed income holdings. For hedge funds, there certainly was a benefit provided by restricting losses in 2008, but recent evidence to justify large management fees continues to be sparse.

The return of Fantex

After an uneventful initial attempt to connect athlete brands and investment markets using Arian Foster, Fantex (https://fantex.com/ ) recently paid San Francisco 49er Vernon Davis $4 million for a piece of his marketability. This will be a true test of this investment premise, as Davis is in line for a new contract and has various outside business interests. It’s a truly speculative premise, with success seemingly dependent on Davis transitioning to a successful post-playing career. The company’s site currently prices a share at $10 with just over 400,000 shares being offered.

Valentine’s Day and the economy

Today is Valentine’s Day, and the prevailing wisdom is that there’s an economic bump due to increased spending in an attempt to impress loved ones with candy, flowers, or tickets to a Brown basketball game. The fact that it’s on a Friday would only seem to bolster this theory. However, the National Retail Federation expects sales for this day to come in $1 billion less than 2013. Per person spending is expected to increase, but a dramatic drop in the number of people celebrating the holiday is expected to account for decreased spending.

Dan Forbes is a regular contributor on financial issues. He is a CFP Board Ambassador. He leads the firm Forbes Financial Planning, Inc in Providence, RI and can be reached at [email protected] .


Related Slideshow: 7 Strategies for Rhode Island Economic Development in 2014

What will it take to move the Rhode Island economy forward in 2014?  GoLocal talked with elected officials, candidates, and leaders for their economic development plans in the coming year. 

Below are key elements of the economic priorities for Governor Lincoln Chafee, Speaker of the House Gordon Fox, Senate President M. Teresa Paiva-Weed, House Minority Leader Brian Newberry, gubernatorial hopefuls General Treasurer Gina Raimondo and Ken Block, and RI Center for Freedom and Prosperity's Mike Stenhouse.  

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Governor Lincoln Chafee

"My goal is to have the state continue to focus on the fundamentals.  We will invest in education, workforce development and infrastructure , and provide aid to  cities and towns to lessen the burden on property taxpayers.  I’m confident that these investments and our focus on the basics will allow Rhode Island to exceed Moody’s predictions.”
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Speaker Gordon Fox

"Among the many pieces of legislation the House will address will be issues of higher education affordability, expanding apprenticeship opportunities, and offering help to our manufacturers.  We will also look closely at our tax structure to make sure we are competitive with our neighboring states, including the corporate tax and the estate tax, and I will carefully review the recommendations of the commission studying our sales tax.”

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Senate Pres. Paiva-Weed

Greg Pare, spokesperson for the Senate President, said that the Senate is planning to issue recommendations soon on workforce development initiatives to address the skills gap among Rhode Island job seekers.

"An example of a proposal anticipated in that report is the elimination of state’s Indirect Cost Recovery on the Job Development Fund, which is about $1.2 million this year. Those funds would be directed towards job training and skills development programs to provide immediate impact and help workers gain the skills necessary to succeed in today’s economy."

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Gen. Treasurer Raimondo

"To grow our economy, we need to make Rhode Island a leader in manufacturing again.  Great things can happen at the intersection of government, higher education, and the private sector.  Rhode Island is lucky to have thriving institutions in each of these three sectors, and we need to foster collaboration among them to find solutions to our challenges, and spark our economy.  

By promoting partnerships in high-growth areas, [Rhode Island Innovation Institute] will help grow our manufacturing base, and create new, high-quality jobs."  

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Ken Block

"First, we need to fix Rhode Island’s broken Unemployment Insurance program. The state’s Unemployment Insurance tax, paid by employers, is ranked worst in the country by the Tax Foundation. It is one of the factors that makes Rhode Island an uncompetitive place to do business. Also, it is inherently unfair that a large group of businesses are effectively subsidizing the payrolls of a small group of businesses who misuse the system. There is a simple change to state law that can fix this problem."

"Rhode Island’s temporary disability tax (TDI) is broken, and places an unnecessarily high tax burden on Rhode Islanders. This tax, paid for by employees, will be reduced by changing the way we manage the program. As Governor, I will substantially reduce the cost of purchasing this insurance by requiring that Rhode Island’s program adhere to national norms."

"To best encourage new job creation, I propose the following tax incentive: exempt from future capital gains taxes any new investments in Rhode Island-based businesses. This change would create a powerful incentive for investors who are deciding where to locate a new business, or where they relocate an existing one. This proposal has the potential change the economic playing field for Rhode Island."

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Minority Leader Newberry

“It would be overly ambitious to set being #1 as a goal right now, but we think 25, the middle of the pack, is a reasonable goal to set, one we think we should pursue, and one we can achieve,” said Newberry. "One of the initiatives is a requirement that every bill receive a fiscal evaluation before it can be heard by committee, better insuring that legislators know the real cost of the legislation they are acting on."

"Another proposal would exempt social security income from RI state income tax, making Rhode Island more tax-friendly for our seniors and keeping them here rather than migrating to more tax-friendly states."

“Strong action is way overdue here. Nearly 60% of Rhode Islanders now believe that the state is headed in the wrong direction. We think they’re right, and our central goal is to get it turned around."

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Mike Stenhouse

"As part of the Center's 2014 Prosperity Agenda we recommended that the state:
Repeal or rollback of the state’s regressive sales tax; or the requirement that families have no choice on what schools best educate their children; or punitive estate taxes that drive wealthy people to other states; or restrictions on out-of-state companies to sell health insurance in RI; or the minimum franchise tax, which stifles entrepreneurship; or corporate welfare, to level the playing field; or even renewable energy mandates that drive up costs for every family and business …"

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