In this issue of Tomorrow, we shine a spotlight on financial topics that are timely and vital to our members as you work toward achieving and sustaining financial wellness.
We feature the third installment in a year-long series outlining tax reform and how the new tax law may affect your finances, both personally and organizationally. This article, Tax Reform Provision Targets Churches and Nonprofits focuses on a little-known provision of the Tax Cuts and Jobs Act (H.R.1) of 2017 involving fringe benefits that may have a large impact on your church or faith-based organization.
What MMBB Members Need to Know When a Joint Annuitant Dies in Retirement is part 2 of a 3-part series. This article looks at those instances when the joint annuitant dies, and the retired member must address the business details that are part of dealing with the death of a loved one. It contains useful information on how MMBB can assist the member during this difficult time.
Budgeting: Tips for Managing Your Expenses examines the importance of developing and adhering to a budget. It is a crucial component of financial success and the first step toward taking control of your financial life. A budget also helps you to choose how to spend your money, pay off existing debt, save and most importantly, plan for the future.
Next, you’ll find information on How to Protect Yourself Online. In this article, we provide tips on how to safely use the internet for everyday purposes such as shopping, banking and staying in touch with friends and family. We also include information on how to report internet fraud, so you will not fall victim to cybercrime.
Finally, our Ask the CFP® column returns with How Should I Manage My Important Documents? This article contains important information about which documents you should keep and for how long.
At MMBB we’re proud to share your values and priorities. We provide the support that you need to achieve financial wellness for yourself and in your ministry.
It is our privilege to serve you.
Louis P. Barbarin, CPA
Chief Executive Officer
By Louis P. Barbarin, CPA Chief Executive Officer, MMBB Financial Services
Welcome to the third installment in our series of articles outlining tax reform and how the new tax law may affect your finances, both personally and organizationally. This article focuses on a little-known provision of the Tax Cuts and Jobs Act (H.R.1) of 2017 that may have a large impact on your church or faithbased organization. The provision requires that churches, hospitals, colleges and other tax-exempt organizations begin paying a 21 percent tax on some types of fringe benefits they give their employees such as parking, transportation and other benefits.
To put this provision in the proper context, it’s helpful to understand fringe benefits. Generally, compensation and benefits provided by employers to employees are taxable. There are a few exceptions to this general rule, including fringe benefits outlined in section 132 of the Internal Revenue Code. One of the taxable fringe benefits is the “qualified transportation fringe” which includes any of the following:
1. Transportation in a commuter highway vehicle if such transportation is in connection with travel between the employee’s residence and place of employment.
2. Any transit pass
3. Qualified parking1
4. Any qualified bicycle commuting reimbursement
Many churches and nonprofit organizations are not aware of the tax, which could cost them tens of thousands of dollars annually. It will be a financial burden, as well as an administrative one, since it will cause them to file Form 990-T, the Exempt Organization Business Tax Return. For those churches and nonprofits that are aware of the new requirement there is confusion as to how the tax should be calculated. For example, churches are asking how they are supposed to calculate the value of parking spaces for employees. And some are questioning if the garages provided as part of clergy residences are now taxable.
The Treasury is working on regulations spelling out the details of how the tax will work, even though the affected groups should already have been paying the quarterly tax which took effect January 1, 2018. In addition, legislation was introduced in June to rescind this particular tax provision. The Church Alliance (a coalition of the chief executive officers of 38 church benefits organizations), in which MMBB is a member, is advocating to have churches exempted from the tax and the filing requirement. We will keep you updated on any developments wit respect to this situation.
1 The term ‘qualified parking’ means parking provided to an employee on or near the business premises of the employer or on or near a location from which the employee commutes to work by transportation in a commuter highway vehicle, or by carpool.
In the Spring 2018 issue of Tomorrow, we offered the first article in a three-part series geared toward helping spouses address the death of a retired member in the hopes of providing some guidelines during a time of great sorrow. The truth is that death often distracts us from the business of living; for many of us the passing of a loved one opens us to a period of grieving that can last a long time before we begin to feel whole again.
Typically, it is the spouse of an MMBB member who is left to mourn their passing. Part 2 of this series, takes a look at those instances when the joint annuitant of a retired member dies, and the retired member must address the business details that are part of dealing with the death of a loved one. During this difficult time, MMBB is here to guide you through the process. It is essential that members notify MMBB of your loved one’s death by phone, mail or e-mail as soon as possible and you will need to provide an original death certificate or certified copy. If notification is delayed, adjusted benefits may not be made available on a timely basis. Adjustments to an annuity may occur based on the annuity payments received following the death of the joint annuitant and the date MMBB is notified which may cause an overpayment or underpayment of annuity benefits. In the majority of cases the deceased joint annuitant is the spouse of a retired member who holds a joint annuity, however, the joint annuitant can also be a non-spousal party such as a sister or brother.
Once MMBB receives notification that a joint annuitant has died, a Senior Benefits Specialist (SBS) will call the member or family representative to offer our condolences. The SBS who is assigned to the case, will review the details of the annuity plan, determine the benefit eligibility and send a letter to the member or family representative with instructions and forms explaining the terms of the benefits for which they are eligible. These forms need to be completed and returned to MMBB.
Unlike when a retired member dies, the death benefit is not applicable upon the death of a joint annuitant.
Typically, the letter will explain the following:
To review once again, there are three types of joint annuity options:
In the event that notification to MMBB is delayed, this may have a greater financial impact on the retired member’s annuity benefits being reduced.
Benefits may need to be reduced to cover an overpayment of benefits in addition to being reduced as a result of the chosen 80% annuity option.
After the passing of a joint annuitant the retired member’s annuity automatically changes from a joint and survivor annuity to a single-life annuity. It cannot be changed back to a joint annuity even if the member remarries. However, if the member’s original annuity took advantage of the monthly guarantee, the member can designate their new spouse as the beneficiary of any remaining monthly guarantee value.
As with a joint life annuity, a single-life annuity is taxable income. However, the annuity of a retired member who is a clergy person continues to be eligible for the clergy housing allowance.
Part 3 of this series will explain “What Family Members Need to Know When a Premium Paying Member of the Comprehensive Plan Dies Prior to Retirement.”
If most of us are honest about our finances, we would have to admit that we are not always as diligent about keeping track of our expenses as we could be. Too often we only have a vague idea of what we are actually spending and what it costs us to live on a monthly basis, even though we may be aware of our sources of income.
At MMBB Financial Services we understand the struggle of pastors and church workers whose income is often not sufficient to meet living expenses and sometimes it may be preferable not to know the actual details. But managing your financial decisions is especially important so that money does not get in the way of your calling to serve God. Successfully managing your expenses and achieving financial wellness does not have to seem like an elusive goal. Start with creating a budget and gain a sense of empowerment from truly knowing how your money is spent and where you may need to adjust in order to accomplish your financial goals.
Developing a Budget
This is a crucial component of financial success and the first step toward taking control of your financial life. Budgeting allows you to see first-hand what you have vs. what you can spend. A budget also helps you to choose how to spend your money, pay off existing debt, save and most importantly, plan for the future.
To develop a budget, start by identifying all your current household income sources. Income is not limited to just salaries, annuities and social security; don’t forget to include honoraria from speaking or preaching events, weddings and funerals. Now that you have an idea about how much money is coming in, you need to know where your money is going. What are your regular expenses? Start by reviewing your bank and credit card statements, and your checking account register. Remember to include expenses that you only pay annually or quarterly—insurances, security systems and taxes.
Required vs. Discretionary Expenses
One key factor to controlling your expenses is to distinguish between required and discretionary expenses. Required, or “must” expenses (housing, utilities, food, child care, insurance, auto) need to be paid. While discretionary or “want” expenses as the name itself suggests, are optional. Remember to use your discretion before incurring “want” expenses such as dining out, luxury items, vacations, movie tickets. Your current discretionary or “want” costs should be thoroughly reviewed. These are the costs that are most likely the hardest to monitor and that may interfere with your financial goals.
If cash flow is tight, look for areas in your discretionary spending to cut expenses—fewer meals out, make coffee at home, or a less expensive gym membership. Controlling or making intentional cuts in the discretionary or “wants” spending can lead to significant changes in overall expenses each year.
Review and Adjust
Once you have identified your sources of income and made a budget of your required and discretionary expenses, set some realistic goals to reduce costs and increase the amounts being saved for your long-term goals. Review your spending and saving on a monthly basis. If you are not where you want to be, adjust your plan accordingly. You may need an additional source of income if there are no more options for cutting expenses. It’s not always easy to make the difficult choices that are needed to reach our financial goals.
Developing a budget that you can fine tune as life unfolds will provide peace of mind when it comes to your finances. Once you have your budget on track, you can then focus on other goals such as consolidating and reducing debt.
Excerpts from this article appeared in the Summer 2018 issue of National Baptist Voice magazine.
Nearly everyone uses the internet today for a variety of reasons including shopping, banking and staying in touch with family and friends via email and social media. The internet makes performing these routine activities faster and more convenient. But there are also risks involved. There are scam artists out on the web trying to trick you into sending them money or providing your personal information. That’s why it’s important to be safe and responsible online by learning how to protect yourself and how to report internet fraud so you and others don’t fall victim to these online predators.
Being aware of the many types of internet fraud methods used by cyber criminals is an important factor in protecting yourself. Here are some common examples of internet fraud: Data Breaches – when sensitive data, either personal or financial information is leaked from a secure location to an untrusted environment at a corporate or personal level. Malware – this involves dangerous software that is designed to disable computers and computer systems. Phishing or spoofing – when a scammer uses fake email, text messages, or copycat websites to try to steal your identity or personal information, such as credit card numbers, bank account numbers, debit card PIN, and account passwords. Internet auction fraud – this involves the misrepresentation of a product advertised for sale on an internet auction site, or non-delivery of merchandise. Credit card fraud – when cyber criminals fraudulently obtain money or property through the unauthorized use of a credit or debit card number.
If you believe that you’ve been a victim of internet fraud or cybercrime, it is important that you report it to the proper authorities. The Internet Crime Complaint Center (IC3), https://www.ic3.gov, refers internetrelated criminal complaints to federal, state, local, or international law enforcement. It is important to remember that if you are disputing an unauthorized charge on your credit card or if you suspect that your credit card number has been compromised you will need to contact your credit card provider directly. The Federal Trade Commission (FTC), https://www.ftc.gov, is a resource that shares consumer complaints over a wide range of categories, including online scams, with local, state, federal, and foreign law enforcement partners. It cannot resolve individual complaints but can give you information on the next steps to take. Econsumer.gov, https://econsumer.gov, is a partnership of more than 35 consumer protection agencies around the world. The organization accepts complaints about online and related transactions with foreign companies and helps authorities spot trends and combat fraud. The Department of Justice (DOJ), https://www.justice.gov, helps consumers report computer, internet-related or intellectual property crime to the proper agency based upon the scope of the crime.
The best way to protect yourself from internet fraud or cybercrime is to reduce your vulnerability. Securing your computer and other devices and being aware of the methods criminals use to defraud individuals will go a long way in reducing the risk that you will fall victim to them.
There are several ways to keep your computer and personal information safe when going online. Here are some key actions that you can take to protect your computer:
Keep your firewall turned on.
It helps protect your computer from cyber criminals who might try to gain access for any number of reasons such as to steal passwords or other sensitive information, delete information or even crash your computer. This software is usually prepacked on your computer’s operating system, if not it can be purchased for individual computers.
Install and update your antivirus software.
Antivirus software is a utility that detects, prevents, and removes viruses, worms, and other malware from your computer. Viruses can affect your computer without your knowledge so most antivirus software can be set up to update automatically or remind you when an update is required.
Install and update your antispyware technology.
This technology prevents software (aka spyware) that allows others to look into your online activities from being loaded on to your computer. Some operating systems offer free spyware protection, and affordable software is readily available for download. But beware of online ads offering downloadable antispyware -in some cases these products may not be legitimate and actually contain spyware or other malicious code.
Keep your operating system up to date.
Periodically computer systems are updated to stay current with technology requirements and to fix any gaps in security. Be sure to install any updates when you receive them to ensure that your computer has the most up to date protection.
Be careful what you download.
Even the most vigilant antivirus software may not be able to protect you if you download or open an email attachment from someone you do not know. You should also be wary of email attachments forwarded from someone you do know as they may have unknowingly advanced malicious code.
Look but don’t click.
Cyber criminals love to embed malicious links in legitimate-sounding copy. When you hover your mouse over any links you find embedded in the body of the email, if the link address looks strange, don’t click on it. You could also copy and paste (but again don’t click) the URL into a Text or Word document to check where the URL path leads. Again, if you’ve got a mismatch, you’re right to be wary.
And always turn off your computer.
With the advancement of high speed internet, many people leave their computers on 24/7 so they won’t miss a thing. This renders your computer more susceptible to attacks. Turning off your computer severs connection to the internet and provides effective protection against cyber criminals.
The column where our staff of CERTIFIED FINANCIAL PLANNER™ professionals answer your financial planning questions returns. At MMBB our approach to financial planning is different. We offer diligent, personal advice and service no matter what your salary. The question we’ll address in this issue is:
Q: How should I manage my important documents?
A: An essential part of managing your personal finances is keeping your financial records organized. Whether it’s a utility bill to show proof of residency or a Social Security card for wage reporting purposes, there may be times when you need to locate a financial record or document with relative ease.
What should you keep?
If you tend to keep papers because you “might need it someday,” your desk or home office is probably overflowing with nonessential documents. One of the first steps in determining what records to keep is to ask yourself, “Why do I need to keep this? Is this record vital?”
Documents you should keep are likely to be those that are difficult to obtain or replicate, such as:
On the other hand, if you have documents and records that are easily obtained online, such as bank statements and credit-card statements, you probably do not need to keep paper copies of the same information and you may want to shred them.
How long should you keep your records?
Generally, a good rule of thumb is to keep financial records and documents only as long as necessary. For example, you may want to keep ATM and credit-card receipts only temporarily, until you’ve reconciled them with your bank and/or credit-card statement. On the other hand, if a document is legal in nature and/or difficult to replace, you’ll want to keep it for a longer period or even indefinitely.
Some financial records may have more specific timetables. For example, the IRS generally recommends that taxpayers keep federal tax returns and supporting documents seven years after the date of filing. Certain circumstances may even warrant keeping your tax records indefinitely.
Listed below are some recommendations on how long to keep specific documents:
Records to keep for one year or less:
Records to keep for more than a year:
Records to keep indefinitely:
Keep in mind that the above recommendations are general guidelines, and your personal circumstances may warrant keeping these documents for shorter or longer periods.
Out with the old, in with the new
An easy way to prevent paperwork from piling up is to remember the phrase “Out with the old, In with the new.” For example, when you receive this year’s auto insurance policy, discard last year’s policy. When you receive your annual investment statement, discard the monthly or quarterly statements you’ve been keeping. In addition, review your files at least once a year to keep your filing system on the right track.
Finally, when you are ready to get rid of certain records and documents, don’t just throw them in the garbage. You are opening yourself to the risk of identity theft. To protect sensitive information, you should invest in a good quality shredder to destroy your documents, especially if they contain Social Security numbers, account numbers, or other personal information.
Where should you keep your records?
You could go the traditional route and use a simple set of labeled folders in a file drawer. More important documents should be kept in a fire-resistant file cabinet, safe, or safe-deposit box.
If space is limited or if you want to reduce your reliance on paper, you might consider electronic storage for some of your financial records. You can save copies of online documents or scan documents and convert them to electronic form. You’ll want to keep backup copies on a portable storage device or hard drive and make sure that your computer files are secure. A reputable cloud storage service may be an option also.
Finally, keep a detailed list of where you have stored your financial records. This list can be helpful whenever you are trying to locate a specific document and can also assist your loved ones in locating your financial records in the event of an emergency. Typically, you will want to note:
Maintaining necessary and timely documents in an organized manner will benefit you and others over time. And there is no time like the present to get started!