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Abstract:
When a person should begin taking Social Security retirement benefits is a critical question for planning one's retirement. This article explains the various factors at play in determining the optimum starting point, including: longevity considerations; spousal implications, whether for a previously employed or a previously unemployed spouse; the impact of post-retirement employment; the availability of health insurance prior to Medicare eligibility for the worker and the worker's spouse; alternative sources of retirement income, including distributions from retirement savings plan assets and lifetime liquidation of nonretirement assets (and the pertinent income tax ramifications); and anticipated investment strategies.

Abstract:
Beginning in 2010, all taxpayers will be able to convert their existing Individual Retirement Accounts (IRA) to Roth IRAs, without regard to their level of income or marital status. In effect, taxpayers will be able to lock in current income tax rates on account values that have been eroded by recent investment market declines. This article analyzes who should take advantage of this opportunity, using the barest minimum of arithmetic (and no calculus).

Abstract:
This Article examines three major problems that contributed to the wave of corporate audit failures that ravaged investors in recent years: (1) auditing firms are too cozy with corporate management to provide a truly independent check on management's abuse of corporate financial reports, (2) auditors have further compromised their independence by offering nonaudit services to audit clients, and (3) audits have failed to uncover colossal frauds and major financial misstatements. After explaining the nature of each of these three problems, the Article considers and evaluates the responses of the Sarbanes-Oxley Act of 2002 - namely, mandatory rotation of partners within the audit firm, restrictions on client hiring of audit firm personnel, prohibition of certain nonaudit services, allowance of other nonaudit services (including tax advice) with prior approval, regulation of accountants by a new oversight board, and formulation of audit standards by an organization not dominated by accountants. The Article concludes that the Sarbanes-Oxley Act represents a largely missed opportunity for serious reform of the auditor-client relationship, adopting half-hearted measures that are unlikely to make a significant difference in the vital function of providing credibility to corporate financial reporting.

Abstract:
Few federal programs are as well known and as widely misunderstood as Social Security, despite its national prominence in matters both political and economic. As efforts to reform this creation of the Great Depression era are likely in the coming years, this article examines the principal myths surrounding this program to set the stage for evaluating possible revisions. The myths considered in this article include the following: (1) there is a trust fund, (2) Social Security does not increase the federal budget deficit; (3) retirees are only recovering their own money, (4) Social Security will not be there when one retires, (5) retirement benefits are proportional to one's lifetime earnings, (6) Social Security favors two-income married couples, (7) Social Security favors long-lived marriages, (8) one could do better investing directly, (9) working after retirement makes financial sense, and (10) retirement benefits are taxed more heavily than other pension payments.

Abstract:
This Article examines the major missing component of retirement planning - namely, how to finance the potentially explosive cost of long-term care. It begins by reviewing the wide array of long-term care options currently available, including home care, assisted living facilities, and nursing homes. The Article next examines the coverage for long-term care provided by the government health program for older American, Medicare, and private insurance policies that supplement that program. Finding such coverage woefully deficient, the Article then considers the governmental health care program for poor people of any age, Medicaid, and assesses that program's coverage of long-term care and its eligibility limitations as tightened by recently enacted legislation. The Article then turns to private long-term care insurance and analyzes its major components and the various pitfalls that prospective retirees encounter in purchasing such insurance. Finally, the Article critiques the federal government's major initiatives to encourage such insurance - namely, the tax deduction of premiums and coordination of certain long-term care insurance policies with the Medicaid program.

Abstract:
This article examines several different mechanisms for funding college expenses from the perspective of a grandparent. The mechanisms considered include direct gifts to the grandchild or the educational institution, college savings bonds (both state and federal), prepaid tuition contracts, college savings plans created under tax code section 529, and Coverdell Education Savings Accounts.

Although these college funding mechanisms are not new, legislation enacted within the past two years has radically altered many of the rules of thumb that have applied in the past. Specifically, the Tax Increase Prevention and Reconciliation Act of 2005 (actually enacted in May 2006) and the Small Business and Work Opportunity Tax Act of 2007 that accompanied that year's increase in the federal minimum wage have basically eliminated any tax advantage of custodial accounts as college funding vehicles. On the other hand, the Pension Protection Act of 2006 has enhanced the tax appeal of 529 plans at the same time that the Deficit Reduction Act of 2005 (actually enacted in February 2006) improved the financial aid status of such plans. Finally, that Deficit Reduction Act also created significant hurdles for grandparents who anticipate accessing the Medicaid program to pay their long-term care costs.

To determine the approach that best serves all family members, this article begins by considering several factors that are relevant to the financing of a grandchild's college expenses. These factors include: (1) the grandparents' and the grandchildren's income tax situation, (2) the grandparents' possible exposure to gift taxes, (3) the grandparents' desire to ensure that the funds they provide are actually used to pay for college costs, (4) the Medicaid implications for the grandparents, and (5) the impact on a grandchild's eligibility for needs-based financial aid. The article then examines the various mechanisms that are available to fund a grandchild's college costs and analyzes each mechanism in terms of these factors.

Abstract:
This article examines the recent enactment of Health Savings Accounts (HSA) as they might affect how Americans obtain coverage for their health care expenses and the role that personal responsibility will play in that process. It explains the historical development of this country's tying health insurance to current employment status and especially the role of tax policy in that phenomenon. After considering the advantages and disadvantages of this approach, the article analyzes the key elements of the 2003 legislation that created HSAs. This part examines the "high deductible" insurance plan that must accompany an HSA, including its limit on out-of-pocket expenditures and the scope of additional insurance permitted. The operation of the HSA itself is then addressed, including the relationship of employer and employee contributions into such accounts, the tax treatment of distributions from these accounts, and what happens to unused balances. The article then assesses the likely impact of HSAs according to five C's: complexity of possible configurations, confusion over self-administration, choice of alternative arrangements, control, and cost of health care. The article concludes that HSAs represent a potentially paradigmatic shift in how Americans view health care costs and align a growing appetite for individual control over this critical employee benefit with today's workplace realities.

Abstract:
This article examines the increasingly troubled state of employer-provided health benefits for retirees. The availability of such benefits is a major determinant of both the timing of retirement and the financial security of those who retire. Despite the signal importance of these benefits to current and prospective retirees, employers have been steadily eroding their value and in many cases, eliminating these benefits outright. Such actions are often catastrophic for the retirees affected, especially if they are not yet eligible for Medicare.

This article begins by explaining the economic pressures that have precipitated this unfortunate development, including the increasing cost of health care generally. But much of the decline in retiree health benefits is attributable to financial accounting requirements that required employers to disclose the projected costs of these benefits. These accounting requirements have recently been extended to state and local government employers, and another wave of broken promises may lie just ahead.

The article next examines the extensive litigation regarding the erosion and/or termination of retiree health benefits, focusing on the Employee Retirement Income Security Act (ERISA). Claims that retirees have 'vested' rights to such benefits are analyzed in both the unionized and nonunionized employment contexts, as well as claims of breach of fiduciary duty and estoppel. In short, ERISA has largely failed to protect the reasonable expectations of retirees concerning their post-employment health benefits.

The article then turns to alternative approaches that retirees might consider, including continuation coverage from their former employer, individually obtained health insurance, and health savings accounts. Finding serious problems with each of these approaches, the article considers recent legislative proposals to extend Medicare to early retirees, noting the impact of such an extension on existing employer health benefit programs for retirees and on individuals’ retirement timing decisions.

Abstract:
This article considers the Social Security program and President George W. Bush's proposal for individual accounts. The article begins by addressing the nature of the Social Security program's trust fund and explains how the federal government's ability to pay benefits is a function of political will more than the pecuniary intricacies of governmental trust fund accounting. The article then critically examines the components of the long-term financial situation of Social Security, including the use of economic growth rate assumption's that are extremely low by historical standards. It then analyzes several different possible responses, including reallocating governmental expenditures, changing the formula for calculating initial retirement benefits, increasing the cap on Social Security's payroll tax, and raising the retirement age, among others. Finally, the article notes that folks who would prefer to depend on their own individually managed retirement assets have a mechanism already available in the form of the Individual Retirement Account, a mechanism that is superior to President Bush's proposal for individual Social Security accounts in several dimensions.

Abstract:
In Wealth and Democracy, famed commentator and analyst Kevin Phillips provides a political history of American economic life with a specific focus on the wealthy. He interweaves the development of American technology with the rise and fall of economic fortunes into a compelling tale with significant implications for the formulation of public policy and the laws that implement such policy.

This review begins by examining the major sources of economic inequality and how they have increased the gap between rich and poor in America. The wealth of historical data in the book is considered with particular attention to the past quarter of a century. During this period, after all, economic inequality in the United States grew beyond all previous measures. Some of the key themes developed in this section include: (1) the corrupting effect of concentrated economic power on the political process, (2) the impact of vast wealth on the formulation of public policy, and (3) the increasingly precarious financial situation of middle-class families.

The review then explores the role that legal regimes can play in addressing economic inequality and how Phillips systematically understated their importance - specifically, taxation, health care, and Social Security. With respect to taxation, the review analyzes three major provisions of the 2001 Tax Act: repeal of the estate tax, augmented contributions to tax-favored retirement accounts, and creation of tax-exempt college savings plans. Regarding health care, the review examines first the increasing phenomenon of workers without health insurance and then the largely invisible but painfully significant problem of long-term care. Finally, this section analyzes how Social Security consciously ameliorates economic inequality and how this feature will be discarded under most privatization proposals.

The review concludes that Kevin Phillips has written an important book that should give serious pause to lawmakers involved in a wide range of critical issues facing America today. The increasing economic inequality of recent decades poses a significant challenge to the U.S. legal system and its democratic processes. As Phillips contends, the status quo is unsustainable and plutocracy is where we are headed, if we are not already there.

Abstract:
This article analyzes current U.S. pension law and policy in light of the Enron implosion and considers the implications of this analysis for privatizing Social Security. The article begins by addressing the major shift in retirement funding risk from professionally managed plans to ordinary workers, beginning with the substitution of defined contributions plans for defined benefit plans, and continuing with the growing predominance of 401(k) plans. The article then examines the central problem of the Enron catastrophe: the heavy concentration of 401(k) plans in employer stock. From this context, the article then considers the essential premise of Social Security privatization - namely, that individuals should control their own retirement assets. The article concludes with policy recommendations based on this analysis to prevent the sort of financial devastation that Enron (and others) has brought.

Abstract:
This article considers various techniques that grandparents might use in helping fund their grandchildren's college education. The techniques analyzed include outright gifts, college savings bonds (both state and federal), prepaid tuition plans, so-called section 529 college savings plans, and education IRAs. Each technique is analyzed from the following perspectives: income taxation, gift and estate taxes, control over the funds, eligibility implications for Medicaid long-term care benefits, and impact on needs-based financial aid.

Abstract:
This article considers the legal framework that applies when older adults need long-term care in the United States. The financial aspects of this phenomenon hit almost all affected families as an unexpected crisis, because long-term care generally falls outside the purview of Medicare, the government's health care program for older Americans. After families discover this reality, they often look to Medicaid, the government's health care program for poor people of any age, but this program has severe problems of access to quality facilities, and its financial eligibility criteria preclude coverage of most elders. The article then analyzes some impediments to obtaining Medicaid coverage of long-term costs, including questions of legal capacity to undertake asset divestment, ineligibility penalties imposed on uncompensated transfers, and mandatory recovery from the estates of Medicaid recipients. The article then turns to private long-term care insurance as a possible response to this dilemma. The article considers recent tax changes that were intended to promote the purchase of this insurance, but finds that these benefits are often illusory and that regulation of such policies is still needed to facilitate informed comparison shopping. Finally, the article examines why the financing of long-term care costs should be a private responsibility at all, especially when the financing of acute care costs has been socialized via the Medicare program.

Abstract:
This article provides a comprehensive solution to the financing of long-term care for older Americans that balances government and family responsibility, while recognizing the different settings in which long-term care is provided. The article begins by examining the spectrum of long-term care in the United States from home health care to assisted living to nursing homes, as well as hybrids such as continuing care retirement communities. Successive sections of the article then analyze the federal government's health care program for older persons (Medicare), the joint state and federal program for poor people of any age (Medicaid), and private long-term care insurance in terms of how these mechanisms treat long-term care in each setting.

Finding serious deficiencies and inconsistencies in all three mechanisms, the article then offers a co-ordinated alternative: expand Medicare to cover long-term care in nursing homes but maintain responsibility for other long-term care settings with the affected individuals and their families. This approach recognizes that nursing home care substitutes for hospital care that Medicare would otherwise cover, while other long-term care settings substitute for family-provided care. Long-term care insurance would then be used as a means of financing long-term care in settings other than nursing homes, thereby making it more appealing. In addition, such insurance would be less expensive than presently, because it would no longer be priced to cover costly nursing home care. The article also recommends that such insurance be improved by standardizing policy options and features into a fixed set of packages that would be uniform among carriers. Other recommendations include ensuring price stability of issued policies and providing independent reviews of gatekeeper claim denials. The article concludes with some observations regarding financing of these proposals.

Abstract:
Medicare Part B covers most doctors' fees, diagnostic tests, ambulance services, and certain other items. Enrollees pay a monthly premium that is calculated to cover 25 percent of the program's expenditures, with the remaining 75 percent coming from general governmental revenues. But starting in 2007, this cost-sharing ratio will be increased for retirees whose annual taxable income exceeds $80,000. This means-testing of Medicare was adopted in the mammoth 2003 Medicare Act that also provided coverage of prescription drugs and was accelerated by the Deficit Reduction Act that was enacted in February 2006. This article examines the decade-long policy debate about means-testing Medicare and explores the tax implications of the mechanism that was finally created. The article also analyzes concerns about the joint administration of this program by the Social Security Administration and the Internal Revenue Service, and discusses such financial ramifications for upper-income retirees as capped contributions from former employers and possible nonenrollment in Medicare Part B.

Abstract:
This article analyzes recent legislative and economic developments that have transformed the "individual retirement account" (IRA) from a modest retirement savings vehicle into an all-purpose savings account. Specifically, it examines three statutory provisions that allow withdrawals to be made from IRAs without the application of the usual penalty for pre-retirement distributions. These provisions pertain to withdrawals made to purchase a home, fund higher education costs, and pay for medical expenses. The article shows that withdrawals made for such purposes are ill-advised, since tax-favored means of addressing these needs without jeopardizing one's long-term retirement security already exist. Accordingly, these provisions represent bad tax policy and should be repealed.

This article then examines the increasing use of large balance IRAs as inter-generational wealth transfer vehicles rather than as retirement funding mechanisms. The newly created Roth IRA represents especially bad policy, since a Roth IRA need never pay out any distribution to its holder, regardless of that person's age. But even regular IRAs allow an account holder's heirs to spread distributions from an inherited IRA over their own lifetimes, thereby extending the IRA's tax deferral inappropriately. The article then makes statutory recommendations to better implement the IRA's purpose of funding one's retirement.

Abstract:
An issue of enormous and increasing significance to the vast majority of older Americans, and their families, is who will care for them as they age and require assistance in their daily lives. Such assistance is usually denominated "long-term care," because it is a chronic phenomenon that is not limited to some specific medical incident. Such care can be provided in a variety of settings, depending upon the intensity of the older person's needs and the medical nature of those needs, but 80% of long-term care is provided by family members and close friends on an informal and typically unpaid basis. This phenomenon reflects a wide range of cultural norms in this country, as well as certain economic realities. As more Americans attain ages at which some assistance with daily life activities is typical, the federal tax treatment of family-provided elder care will become increasingly important.

This Article considers how the provision of informal care for older family members is taxed presently and how such treatment should be changed in light of changing family dynamics. It begins with a brief description of what informal elder care consists of and the impact of such care responsibilities on the family members who provide that care. The Article then considers how courts have assessed informal caregiving in the context of gratuitous transfers by the recipients of such care. It then examines the tax treatment of informal caregiving as it relates to the personal exemption and the deduction of medical expenses. The Article next analyzes a number of recent legislative proposals that would provide tax credits for family caregivers. The Article concludes with some policy responses to this growing societal concern.

Abstract:
This article examines the Medicare Part D prescription drug benefit that became effective on January 1, 2006. The article begins by setting forth the political development of this benefit and explaining the constraints that were imposed by the ill-fated attempt in 1988 to add prescription medications to Medicare's coverage. The article then examines the key components of the Medicare drug benefit, including its unique coverage gap known popularly as the doughnut hole, and illustrates how beneficiaries will fare depending upon their level of annual drug expenditures. After considering the program's penalty for delayed enrollment, the article analyzes the perplexing decisions that Medicare Part D presents for Medicare beneficiaries who have drug coverage from former employers, medigap insurance policies, or managed care plans. The article concludes with some perspective about the uncertainties faced by older Americans as they contemplate what their drug regimens might entail in the future.

Abstract:
This article examines the estate tax reform provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 in the context of important issues affecting older Americans. Contrary to policymakers' claims that the estate tax is a major concern for elders, this article shows that only a tiny minority of decedents have any estate tax exposure, and that the recently increased exemption will reduce this group even further. In any case, the estate tax is an issue for nonspouse survivors of an elderly decedent, rather than the elders themselves. Even more significantly, by focusing on estate tax reform, policymakers have ignored numerous issues that are truly more important to older Americans, including prescription drugs, long-term care financing, advance health-care directives, Social Security's earnings test, and undiversified pension plans. After examining each of these issues, the article concludes by suggesting that more attention be paid to issues that affect the medical and financial quality of most elders' lives, rather than the pecuniary interests of a few elders' nonspousal survivors.