News from Longleaf Advisors

Thanks to the Tax Cuts and Jobs Act of 2017, the vast majority of Americans don’t have to worry about paying estate taxes. This legislation increased the estate tax exemption considerably — the exemption amount is currently $12.06 million per person, or $24.12 million for a married couple filing jointly. This means that for any individual or couple whose estate is worth less than this at the time of their death, no estate tax will be assessed. In recent years, just 0.2% of the estates of Americans who have died have owed estate tax, according to IRS data. Higher Exemptions are Expiring Unfortunately, this could all change drastically in just a few years when the higher gift and estate tax exemptions expire. The exemption amounts are currently scheduled to sunset on December 31, 2025, or in just over three years. When this happens, the gift and estate tax exemption will be cut in half to approximately $6 million per person, or $12 million for a married couple filing jointly. A hypothetical example illustrates the potential impact of this change on an estate. Let’s say that the Smiths, who have an estate worth $30 million, die in 2022. Just under $6 million ($5.88 million to be exact) of their estate will be taxable when you factor in the $24.12 million estate tax exemption. At the highest estate tax rate of 40%, this would result in an estate tax of about $2.35 million. But what if the Smiths live for a few more years and die in 2026 instead of this year? In this case, approximately $18 million of their estate will be taxable. At the highest estate tax rate of 40%, this would result in an estate tax $7.2 million — or nearly $5 million more than if they died before the end of 2025. How to Lower Estate Taxes with an ILIT This upcoming change in estate tax law makes it critical for affluent individuals and families to plan now for ways they can reduce estate taxes in the years ahead. One effective tool for lowering estate taxes is an irrevocable life insurance trust, or an ILIT. The purpose of an ILIT is to reduce the value of your taxable estate by removing life insurance proceeds from your estate, thus shielding them from estate taxes. Proceeds from the policy’s death benefit are deposited into the trust where they’re held on behalf of your beneficiaries. This shields them from taxation. Meanwhile, your beneficiaries will receive the death benefit tax-free upon your death. They can then use this money to pay any estate taxes that may be due (or any other outstanding debts or expenses) without having to sell assets to cover the estate tax bill. The Nuts and Bolts of ILITs There are three parties to an ILIT: the grantor, the trustee and the beneficiaries. The grantor is the person or couple establishing and funding the trust, the trustee is the party managing the trust and the beneficiaries are the recipients of the trust distributions. You can name anyone you want as the trustee, including your spouse, an adult child, a close friend, an attorney or a financial institution. Your trustee may have discretionary authority to control when beneficiaries receive life insurance policy proceeds. For example, proceeds can be paid in full upon your death or when beneficiaries reach a certain age or life milestone such as graduating from college or having a child. As the grantor, you can transfer ownership of an existing life insurance policy to an ILIT after the trust is formed or the trust can purchase the policy directly. When you die, the life insurance policy’s death benefit is deposited into the ILIT and held in trust for your beneficiary or beneficiaries. If your spouse is the beneficiary, he or she will receive regular incremental payments instead of a lump sum that won’t be taxed as part of your spouse’s eventual estate. In addition to potentially reducing estate taxes, an ILIT can also help protect assets from creditors. Any coverage amounts above your state’s creditor limits held in an ILIT are generally protected from the grantor’s or beneficiary’s creditors. The biggest drawback of an ILIT is that, as the name implies, it is irrevocable. This means that no changes can be made once the trust is finalized, nor can you dissolve the trust. Any assets that you as the grantor place in the trust no longer belong to you and you have no control over them. How We Can Help We can help you determine whether an irrevocable life insurance trust might play a helpful role in your estate plan. Give us a call at (803) 791-1111 or send us an email to talk about your situation in more detail. Information is provided by William Amick & Blake Amick and written by Don Sadler, a non-affiliate of Cetera Advisor Networks LLC. This post is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought. The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable by having the policy approved. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications. Investment Advisor Representatives offering securities and advisory services through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker/dealer and Registered Investment Adviser. Cetera is under separate ownership from any other named entity. 171 Lott Ct, West Columbia, SC 29169

Within the context of employee retirement plans, a fiduciary is responsible for ensuring the plan is managed with the best interest of participants in mind. ERISA identifies three different types of employee benefit plan fiduciaries and specifies reporting and disclosure requirements for them. Each of these types of fiduciaries serves a unique role in plan management, administration and support. It’s important to understand these roles so you choose the right type of fiduciary for your plan. 3(16) Advisor: Overseeing Plan Administration and Operations The first type of fiduciary is known as a 3(16) advisor, whose main responsibilities are overseeing plan administration and daily operations. This fiduciary’s tasks typically include the following: •Distributing summary plan descriptions, benefit statements and required disclosures to participants •Maintaining and interpreting the plan document •Ensuring timely deposit of participant contributions •Fulfilling reporting requirements •Soliciting and enrolling new members You can hire an outside third-party administrator (TPA) to handle these responsibilities if you prefer. However, this does not relieve you of your fiduciary duties and liabilities. For example, you still must oversee the TPA’s activities and monitor the fees charged to make sure they are reasonable.  Note that TPAs usually will not agree to sign Form 5500 or be named the plan administrator. You will retain this responsibility as the plan sponsor, along with fiduciary liability for administering all other plan duties and monitoring the prudence of the administrator selection. 3(21) Advisor: An Investment Professional The second type of fiduciary is known as a 3(21) advisor who serves as a financial advisor to the plan. This fiduciary role is usually filled by an outside investment professional who charges a fee. 3(21) advisors make recommendations and offer advice about how plan assets are invested, and sometimes help ensure that the plan is complying with ERISA’s investment-related provisions. Importantly, 3(21) advisors do not actually make investment decisions — this responsibility lies with the plan administrator. A 3(21) advisor might present the plan administrator with a list of investment options that meet the plan’s objectives. As a result, the fiduciary responsibility and liability of a 3(21) advisor is limited. 3(38) Advisor: Going a Step Further The third type of fiduciary is known as a 3(38) advisor. This fiduciary goes a step further than a 3(21) advisor by actually making investment decisions and purchasing securities. Banks, insurance companies and Registered Investment Advisors (RIAs) usually serve as 3(38) advisors. A 3(38) advisor has full fiduciary responsibility to manage the retirement plan and make investment decisions that are in the best interests of plan participants while maintaining transparency about these decisions. This includes providing investment performance reports to the plan sponsor. While the 3(38) advisor has the final authority to make investment decisions, the 3(16) fiduciary can replace the 3(38) advisor if performance is deemed unsatisfactory. Choosing the Right Fiduciary As a plan sponsor, it’s critical that you understand the three different types of employee benefit plan fiduciaries and their specific roles so you choose the right one for your particular circumstances. We can answer any questions you have about retirement plan fiduciary support and help you make the right choice for your plan. Give us a call at (803) 791-1111 or send us an email if you’d like to talk about your plan in more detail. Information is provided by William Amick & Blake Amick and written by Don Sadler, a non-affiliate of Cetera Advisor Networks LLC. This post is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought.

Most of us don’t like to think about our own mortality. But as the owner of a closely held business, you have a responsibility to plan for what would happen to your company if you were to unexpectedly die or become disabled. Without a succession plan, the future of your business could be at risk if this were to occur. Failing to create a succession plan could also be financially dangerous for your family and employees who might have to scramble to pick up the pieces in your absence. Here are 6 factors to consider as you think about creating a succession plan for your business. 1. Get started early It’s never too early to start thinking about business succession and creating a plan. If fact, you should have some idea of your eventual business endgame on the day you start your business. It takes time for a business succession plan to evolve and take shape. Therefore, you should start thinking seriously about business succession and creating a plan at least five years before your planned exit from the company. 2. Define roles and identify potential future leaders Give some thought to what your company’s future leaders should look like and the skills and character traits they should possess. For example, do they need technical expertise? What about people and management skills? These are often more important for leaders than technical or product knowledge. Once you have an idea of leadership roles, you can start looking for good potential candidates. They could be current employees or you might need to look for outside talent. Your choice of a successor CEO, of course, will be most critical, so plan to focus most of your attention and efforts on this. 3. Begin preparing future leaders for their roles This will require you to take on more of a mentorship role with employees you’re going to tap as future leaders. In some respects, you may want to “clone” yourself by teaching them everything you’ve learned over the years about managing and growing your business. This will require an investment of time and energy, but it’s critical to help ensure a smooth succession. Also think about what kinds of training and education future leaders will need and make sure they receive this during the transition period. For example, they might need industry technical certifications or advanced degrees (such as an MBA) or training in the areas of organization, leadership and strategy. 4. Identify types of potential buyers Business buyers fall into one of two broad categories: internal or external. Internal buyers are existing employees (especially top managers and executives) or family members (in a family business). Employee stock ownership plans (ESOPs) and management buyouts (MBOs) are commonly used to accomplish these types of purchases. External buyers fall into one of two different categories: financial buyers and strategic buyers. Financial buyers include private equity groups that are looking for businesses with high growth potential that they can sell to realize a return on investment. Strategic buyers seek businesses with complimentary products or services. This includes competitors, who can gain market share and consolidate operations by acquiring your firm. 5. Plan for how you can add value to the business There are things you can do before listing your business for sale to increase its value in the marketplace. You should be focusing on these value drivers during the months and years leading up to the business sale. Having clean and accurate financial statements and current, signed customer contracts is one value driver. Another is building a strong “bench” of seasoned, experienced executives and managers who can help ensure a smooth transition to new ownership. One of the main things buyers want to see is strong growth potential, so be sure to create a growth plan that’s realistic and attainable. 6. Get a professional business valuation Many owners have a “gut feeling” about what their business is worth, but this value often isn’t realistic. The fact is, most owners have an emotional connection to their business, which they’ve built through years of sweat equity. So it’s hard for them to look at their business’ value objectively. This is why obtaining a professional business valuation is so important. Buyers examine businesses from a purely analytical approach, based on what the numbers say. In particular, they will look carefully at the quality and consistency of earnings. Having a quality of earnings study performed by a valuation professional will help you estimate your business’ future cash flow potential, which will assist in determining an accurate business valuation. How We Can Help Given its importance, you should consider engaging a professional to help you with business succession planning. Give us a call at (803) 791-1111 or send us an email to talk about how we can help you create a succession plan for your business. Information is provided by William Amick & Blake Amick and written by Don Sadler, a non-affiliate of Cetera Advisor Networks LLC.  This post is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should b e sought.

Retirement plan sponsors face a wide range of fiduciary responsibilities when it comes to managing the plan and ensuring compliance. Failure to fulfill these responsibilities can lead to fines and even plan disqualification. Therefore, it’s critical to devise a prudent process for managing your retirement plan and ensuring that it remains in compliance. This process should include creating a plan governance policy document and appointing a chief governance officer. Four Important Rules Among the most important responsibilities of retirement plan sponsors are making sure that the plan meets certain rules, including the following: 1. The exclusive benefit rule —Sponsors must operate the plan for the exclusive benefit of plan participants and beneficiaries. Sponsors must also ensure that plan fees are reasonable. 2. The prudent expert rule — The sponsor’s actions when it comes to operating the plan are held to the standards of an experienced professional or expert. 3. The plan document rule —Sponsors must follow the plan document unless the terms of the document contradict ERISA rules. 4. Investment diversification rule — Sponsors must offer a wide range of investment options that enable participants to meet their investment needs and diversify their investments accordingly. Management of plan investments has historically created the most potential liability for sponsors, who are held to a “reasonableness” standard with regard to investment diversification. Establishing and adhering to a process for managing plan investments and ensuring diversification by creating an investment policy statement is the cornerstone of risk mitigation. Retirement Plan Governance and Sponsors’ Responsibilities There’s a long list of specific sponsor responsibilities related to retirement plan governance. These include: • Selecting and monitoring plan service providers. • Operating the plan according to laws, regulations and the governing documents. • Ensuring fulfillment of reporting and disclosure requirements. • Overseeing plan investments. • Keeping plan documents updated to reflect legislative changes. • Avoiding and/or mitigating conflicts of interest in the plan. • Making sure the plan governance team is effective and has appropriate educational opportunities. Sponsors must also create, maintain and document a plan governance process. This is best accomplished by drafting a plan governance policy document. This document will delegate authority and assign duties, rights and obligations to responsible parties, as well as determine how frequently these parties will meet. In addition, the plan governance policy document should define how actions with respect to the plan are approved, identify recurring agenda items, specify how new agenda items are to be introduced, and describe the process for taking and archiving meeting minutes and notes. The Chief Governance Officer One of the best ways to ensure that you’re meeting all of your responsibilities and obligations as a plan sponsor is to appoint a chief governance officer for the plan. This individual should possess a deep understanding of the retirement plan industry, along with its products and services. The chief governance officer should also have intimate knowledge of your plan’s specific details (including its service providers) and a broad understanding of the retirement industry’s challenges and opportunities. In addition, the chief governance officer should possess skillsets that are well-suited to offering support in the areas of plan coordination and decision-making. The role of chief governance officer does not have to be taken on internally at the plan sponsor. In fact, it is often assumed by a plan advisor as part of the advisor’s overall plan management responsibilities. A Five-Step Process for Compliance Consider the following five-step process for managing your retirement plan and remaining in compliance: 1. Draft a retirement plan governance policy document and create a calendar for meetings of responsible parties during the year. 2. Appoint a chief governance officer and incorporate this individual into the plan. 3. Compare plan documentation and make adjustments or modifications where necessary. This includes making corrective actions. 4. Review conflict of interest rules while identifying possible conflicts and mitigation strategies. 5. Incorporate a plan benchmarking system that goes beyond just plan investments. How We Can Help We can answer any questions you have about your retirement plan fiduciary responsibilities and help you remain in compliance. Give us a call at (803) 791-1111 or send us an email if you’d like to talk about your plan in more detail. Information is provided by William Amick & Blake Amick and written by Don Sadler, a non-affiliate of Cetera Advisor Networks LLC. This post is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought. A diversified portfolio does not assure a profit or protect against loss in a declining market.

The cost of providing health insurance for employees continues to rise with no end in sight. In a survey conducted by Business Group on Health, employers said they expected their total health benefit costs to rise by more than 5% in 2021. Meanwhile, the total annual cost of healthcare (including premiums and out-of-pocket costs) was expected to reach $15,500 per employee in 2021. Employers cover about 70% of these costs on average while employees cover about 30% of the costs. High-Quality Care at Low Prices One way to lower these costs is to encourage employees to shop for high-value healthcare services. Or in other words, to look for high-quality healthcare at the lowest possible price. The fact is, prices for healthcare services vary widely even within a region or market area. Prices vary by an average of 650% for the same procedure in the same market, according to Healthcare Bluebook data. And the cost is usually driven by the location where service is provided or the healthcare facility itself, not the physician or provider. In other words, paying more for healthcare doesn’t necessarily translate into higher quality service or outcomes. The problem often is that many healthcare providers are opaque when it comes to their pricing, making it difficult for consumers to find out how much services cost until they’re at the facility — or worse, when they start getting bills in the mail weeks later. Making Pricing More Transparent Recognizing this problem, the federal government is starting to take steps to make healthcare pricing more transparent. New rules became effective early last year requiring hospitals to post pricing online for hundreds of different services and procedures. And starting next year, health insurers will have to share their negotiated prices with the public. However, some hospitals have been slow to follow the rules. And even among those who have, the data is often confusing and hard for consumers to decipher. A number of third-party administrators and health plan partners are now offering tools to make healthcare costs more transparent for employees, thus making it easier for them to shop for services. For example, these tools allow price comparisons among local service providers and benchmark data showing how different providers’ prices compare to the overall market. Some tools also provide quality data for different providers and facilities. It’s estimated that employees who don’t use price transparency tools overspend on routine healthcare services like MRIs, x-rays and blood tests by more than $4,500 per year. For a company with 100 employees, that’s nearly half-a-million dollars in healthcare overspending per year. Make Healthcare Shopping Top-of-Mind For many employees, the idea of shopping around for healthcare services isn’t exactly top of mind. In a survey conducted by HealthEquity, nearly half (48%) of healthcare consumers said that it’s too hard to find reliable healthcare pricing information while about a third (32%) said that healthcare pricing is too complex and difficult to understand. Meanwhile, about a quarter (26%) said they don’t have time to do the research required. To get these employees to buy into the idea of shopping for healthcare, you need to explain the value of doing so to them. Educate them about how their healthcare service and provider choices impact the company’s financial well-being and potentially their own health insurance costs in the future. And show employees how making smart choices can potentially result in direct out-of-pocket savings for them and their families. Also consider offering incentives to employees to shop around for healthcare services and use price transparency tools. Reward programs are one type of incentive. For example, you could create a system whereby employees can earn wellness points for certain healthcare shopping behaviors. Points could then be redeemed for Health Savings Account contributions, reduced cost-sharing (like zero co-pays or deductibles) or even cash rewards. You could even offer employees a percentage of the savings realized by selecting high-value healthcare services and providers. The goal should be to make the incentives and rewards enticing enough to get employees to participate while ensuring that they add up to a small share of the total savings. Companies that take this approach realize an average of $10 in savings for every $1 they spend in rewards, according to Benefits Pro. Some companies create interactive games to try to get employees to shop for high-value healthcare services. One example might be a “The Price is Right” game in which employees try to guess the market price of different healthcare services and procedures. Or you could create a game that challenges employees to find the highest value service providers in your area using a cost transparency tool. According to the Healthcare Bluebook, employees are 11 times more likely to shop for healthcare services when playing a game like this. Be Proactive in Lowering Healthcare Costs It’s doubtful that health insurance premiums are going to start decreasing anytime soon. Therefore, it’s up to employers to be proactive in reducing their healthcare costs — this includes encouraging employees to shop for high-value healthcare services.  We can brainstorm with you ways to accomplish this. Give us a call at (803) 791-1111 or send us an email to schedule a consultation. Resources & Disclosures Information is provided by William Amick & Blake Amick and written by Don Sadler, a non-affiliate of Cetera Advisor Networks LLC. This post is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought. https://www.businessgrouphealth.org/en/who-we-are/newsroom/press-releases/large-us-employers-accelerating-adoption-of-virtual-care-mental-health-services-for-2021 https://www.benefitspro.com/2021/03/10/4-strategies-to-encourage-employee-health-care- shopping/?slreturn=20211128115951 https://talonhealthtech.com/your-employees-are-wasting-12-49-a-day-by-not-shopping-for-healthcare/ https://blog.healthequity.com/5-tools-to-help-employees-become-better-healthcare-price-shoppers