ASSOCIATION
LENDING & INSURANCE

Small business retail traders often are on their own (trading from a home office) and face challenges in obtaining mortgage loans and insurance coverage for their families. Institutional traders often receive rich compensation packages including a fixed base salary – reported on W-2 tax statements, which lenders want to see for income verification purposes – plus incentive bonuses based on trading profits. Institutional traders also receive generous employee benefits including health, life and disability insurance policies. Online and self-employed business traders cannot easily document their fluctuating income and often have a hard time obtaining a mortgage and insurance policies. The media has reported that many self-employed businesses can’t obtain home mortgages because a lender isn’t comfortable with the risks of a new small business. Traders often don’t have fixed base salaries in connection with their trading businesses, although this can be arranged with a trading entity and payroll. Some lenders may see through that and others may think it’s just what they need to satisfy their lending requirements.

Our Traders Association can help traders get loans and insurance coverage. We plan to organize a Traders Business Alliance, a business-to-business network of participating lenders, mortgage brokers, insurance companies, equipment and service providers. We envision crafting business standards for traders, instituting an association accreditation program (where you can earn “gold” or other status levels), standardizing and providing support to the application process, and forging special relationships with interested vendors. Our Traders Association can arrange discounts on goods and services using our great numbers of customers too.

Our Traders Association will standardize trading business practices and reporting to fit the needs of our lenders, insurance companies and other vendors. Our standard business practices will include risk management, due diligence, financing and budgeting, business plans, management techniques, and much more. We will offer standardized reporting and application letters to use with each type of vendor. We will have a “members only” content area for tips on working with our different vendors and special rules by state and otherwise.

More content to come soon, including details on the benefits mentioned above, participating vendors and more.

We seek relationships with lenders and insurance providers.
Traders come from all walks of life and many are highly coveted customers for financial service providers. These desirable customers include ex-Wall Street high-net worth traders who recently left high-paying jobs due to the financial-crisis; high-net worth physicians, attorneys, technology executives and other professionals trading as a second occupation; wealthy retirees looking to stay engaged through trading; and young successful traders. Traders also include the recently unemployed and/or those who want to pursue their dreams in trading. Most traders need financial services including mortgage loans and insurance, and we plan to provide many partners in these areas. Our members offer a risk profile that is within your standards. In addition, we assist with accreditations, standards and paper work.

If you’re interested in doing business with a large number of qualified small-business trading entrepreneurs, kindly contact us at association@greencompany.com.

Health insurance:

It’s unfortunate that current health-insurance law doesn’t allow association plans. However, Congress and the Obama administration are rewriting health-insurance laws. Hopefully, association plan choices will be one of the new options too. Currently, health-insurance plans are unique to each state and can’t be sold across state lines. Republicans suggest allowing national plans, something our Traders Association is in favor of as well, provided it includes an association plan option. Until we can tackle (the yet to be determined specifics of) health insurance changes in Washington and on state levels, our Traders Association will offer resources and content on how to obtain health insurance in your home state. Options include applying for an individual plan, electing temporary Cobra from your ex-employer (generally a more expensive option), or forming an entity and establishing a group plan on the entity (which may cost more but covers pre-existing conditions).

"Cooperative" health care plans are also in the news. Some Republicans in Congress have proposed expanding the use of cooperative health care options in lieu of the more highly contested public option (federal and/or state government health care plans). Cooperatives are not insurance and are not regulated like insurance companies are. Cooperative plans are often referred to as a “shared” self-insurance plan, usually set up for a community of people who fall into the same geographic, ideological, religious, trade or business category. In a sense, a government public option is one big cooperative plan for all taxpayers. However, some people may prefer to pool their risk within a smaller community.

For this reason, we believe a voter-passed state public option plan makes more sense than a national public option plan. States that want public plans should allow their voters to have a say on the plan features that suit the state’s needs. Other states that don't want a public option shouldn't be forced to enact a national plan. Cooperative health care plans could be the attractive alternative in these states.

Industry experts suggest it takes over 25,000 participants in a cooperative health care plan to safely and profitably absorb the administration costs and risks. Imagine the possibilities of 25,000 online traders paying an assessment into a “traders” cooperative health care plan each year, using deductibles and co-pays similar to those from insurance companies, and having the cooperative pay all health care costs over the deductible amount. Traders can set their own rules within a cooperative, including granting leniency for traders during unprofitable years, and requiring traders to kick in extra reserve money in better years. Cooperatives are known to save significant amounts for their members by cutting out insurance-company profit margins, shareholder returns, highly paid executives and even more administration paper work.

For examples of cooperatives, Google "cooperative health plans." Leading links include:
Senator Conrad's co-op health insurance proposal
Group Health Cooperative, Seattle, Washington
Seeking Divine Protection - washingtonpost.com - church cooperative plans

Online and small business traders have viable options for individual or group health insurance plans, which vary significantly by state. Many traders don't need to worry about health insurance coverage in their trading business because they or their spouses have other jobs providing health care benefits.

Change is coming with health care reform and perhaps a public option (if passed). Health care reform may be attractive for some small-business traders, who rarely have employees to worry about in terms of mandatory coverage or tax payment. Regardless of whether or not Congress enacts health care reform, a Traders Association group plan or cooperative plan may be an attractive option. The association will address health, life and disability insurance for traders and their families.

When you join our alliance, you are entitled to work with our alliance insurance brokers. We highly recommend this as your first step. Our alliance brokers will interview you, find out your general medical history (it's confidential), health needs, goals and more. They will then recommend your best options and present you with several. At this time, we encourage traders to use our national health insurance site through Fortis (see below) and we are still arranging for health insurance brokers in many states. If you are a health insurance broker or a trader that wants to recommend one in your home state, please do, we need the help.

Every trader and family has different medical histories, needs, concerns and goals, and when it comes to health insurance, plans offered cover the gamut and they vary greatly by state.

Our association can not offer group rates to its members on health insurance
A few years ago alliances and associations were allowed by law to have their own insurance group plans available to their membership. This was abused when people who were denied coverage in individual-level plans joined alliances to get guaranteed group coverage. So the laws changed and alliances may no longer have group plans for health insurance.

Alliances still may have group plans for other types of insurance such as life, disability and long-term care. We plan to pursue these types of group plans soon.

Our alliance can help our members get health insurance on a member-by-member basis. Again, if a member is denied individual-level plan coverage or it's far too expensive because of pre-existing conditions, we can probably arrange for you to have a group plan on your own, providing you have trader tax status (business treatment).

Rather than have a one-person group (also covering family members), it may be better rate- and tax-wise to hire your spouse and children in your trading business, or have a family trading partnership. Click here to learn more about these types of entities on the Greentradertax.com Web site. GreenTraderTax CPAs can also consult you on and form your entities to execute these and other tax-savings strategies (retirement plans).

We have been told that if our alliance grows to a large number of members (figure around 10,000 members), we may be able to arrange savings on health-insurance plans through general agents and insurance companies (but still not as an alliance group health-insurance plan, which is not permitted by law).

Health Savings Accounts (HSAs)
For some traders this may be the preferred solution – adding an individual-level HSA plan on top of an existing "high-deductible" (and low-cost) individual-level health insurance plan. Click here to learn more about HSAs on the GreenTrader Health Benefits website. Click here for more information about HSAs.

Note: If you want an HSA, you are required to first have an underlying health-insurance plan in place. Currently, HSAs are only available for individual-level plans. Group HSA plans are expected in October 2004, and that will be a boon for larger companies. You will hear much more about them then.

What's especially interesting for traders with HSAs is that you can trade an HSA actively in a similar manner as a retirement plan. Click here for our ground breaking article (in Active Trader and the Fidelity newsletter) for trading your retirement plan. We will soon publish more information about special trading and tax strategies using HSA accounts.

Our association can make the documentation and paperwork process an easier process
Insurance underwriters, bankers and brokers generally ask for documentation for salaries, fees or business “earned income.” Most traders don’t have this type of information to provide. Some business traders form entities and pay themselves a salary or a fee, giving them the proper documentation. Click here to learn more about trader entities.

More insurance companies are reckoning with the needs of sole proprietor traders and some will now accept a business trader's individual tax return, Schedules C, D, Form 4797 and 6781 for documentation on group plans. Income documentation is usually not needed for individual-level plans.

Whether you are filling out the paperwork for insurance coverage, a mortgage or a loan, our alliance can help. We can ask the vendors to customize their paperwork for our trader members and we can provide guidance for how to fill it out. We can also fill it out for you.

If a vendor requires a fee, salary or other earned income, we can provide guidance and even the services you need (through our affiliate GreenTraderTax) to form an entity and structure the earned income you need. Click here to learn more.

We can pre-arrange with vendors to waive their normal requirements for documentation and accept trading gains to satisfy their needs.

Our association will offer a variety of savings plans
Although alliances and associations may no longer arrange for group rates on health insurance for their members, they still offer attractive group rate benefits to their members on plenty of other products and services. We plan to arrange lower group rates on life, disability and long-term care insurance, travel, and much more.

We have already negotiated excellent discounts on mortgages and loans for our members. We have also negotiated significant discounts on courier services. As our membership alliance grows, we will negotiate many other excellent savings programs.

More information about HSAs.

Health Savings Accounts (HSAs)

Recent tax-law changes have created attractive new options for dealing with health insurance and medical-expense reimbursement. Before these changes, one had fewer options: to buy (or not buy) health insurance (self insurance) and how big a deductible to take. This affected the amount of your annual health-insurance premiums.

With the creation of Health Savings Accounts (HSAs), taxpayers received many new advantages. Tax-deductible contributions to HSAs are similar to deducting health insurance premiums from AGI (adjusted gross income). You have more control and flexibility over paying medical expenses, and most importantly a better chance to save money and not overpay your insurance company for benefits you never get. With HSAs, you own the unused premiums – they don't go to the insurance companies.

Here is how HSAs work: First, you need to have a high-deductible health insurance plan as your base plan, so you are not fully self-insured. This high-deductible plan allows you to obtain much lower insurance premium rates (whether you are in a group plan or not). In lieu of higher premiums, you pay the difference (give or take) to your own HSA account.

Note HSAs were originally available for individual-level plans only and HSAs for group plans are being rolled out starting now (as of July 2004).

It’s sort of like a hybrid health insurance and self-insurance plan, sanctioned by the IRS with tax-deferral benefits.

The IRS patterns this concept off the IRA (Individual Retirement Account), where you provide for your own retirement funds with tax advantages.

After paying your high-deductible premiums (which are much lower than before), you next fund your own HSA account. Like an IRA, an HSA account is in your own name and the money in the account belongs to you, not an insurance company. So, any money left over after paying eligible medical expenses belongs to you – and that’s how you better your chances at winning the insurance game! Instead of giving all your money to the insurance company in premiums, you divide up the money and pay some to the insurance company. The rest goes to your HSA account.

If you have a serious medical problem and the bills are outrageously large, no problem – the insurance company pays those bills, above the $1,000 (single) or $2,000 (family) deductible amounts. These are the minimum deductibles; you can have higher ones as you see fit. In some plan designs, the insurance carrier pays for preventive care up front without you having to dip into your HSA account.

Like an IRA, you get a tax-deduction for your contributions to your HSA, which is not really an advantage over AGI deductions for health-insurance premiums. Traders have the same problem of needing earned income for either deduction. Also, like an IRA, an HSA has the tax advantage of tax-free build up of assets.

The worst tax scenario for taxpayers is going out of pocket on medical expenses without any insurance, HSA or HRA plan, and then not being able to get any tax deduction for those expenses because of itemized deduction limitations. Medical expenses are only deductible if in excess of 7.5 percent of AGI, and they are not deductible at all for alternative minimum tax (AMT) taxes.

Note many HSA providers may only pay interest on HSA accounts and it may not be possible to trade an HSA account. Find out beforehand. If you can trade your HSA that is an added plus for traders.

The main purpose of your HSA account is to pay for your "eligible medical expenses" (see IRS guidelines), which are not paid by the insurance company. Those expenses are not submitted above your deductible amount.

All existing MSAs will be converted to HSAs during 2004. HSAs through GreenTrader Health Benefits are an excellent way to pay for health care and save money. Click here to learn more about HSAs on the GreenTrader Health Benefits website.

HSAs are fairly new so it's important to follow the latest developments.

HSA Frequently Asked Questions from the IRS. Click here to view IRS Notice 2004-50 dated July 2004.

HSA plan designs are coordinated between US Department of Treasury and IRS. Click here to read
JS-1748 from June 2004. Here are some other links on that www.ustreas.gov page.
Model Health Savings Custodial Account http://www.irs.gov/pub/irs-dft/d5305c.pdf.
Model Health Savings Trust Account http://www.irs.gov/pub/irs-dft/d5305b.pdf.

Health Savings Accounts - Interaction with other health arrangements, IRS Rev. 2004-45. This applies to you if you have a health flexibile spending account (FSA) or a health reimbursement arrangement (HRA). Click here to read Revenue Ruling 2004-45 published in May 2004. Click here to learn more about FSAs and HRAs on our fringe benefit page in our Tax Center. Our alliance health site offers HRA accounts, click here http://assurantaffinity.com/gthealth/hra.htm to learn more.

HSA Frequently Asked Questions from US Department of Treasury http://www.ustreas.gov/offices/public-affairs/hsa/faq1.html.

US Department of Treasury Issues Additional Guidance on Health Savings Accounts (HSAS). Click here to read JS-1278 from March 30, 2004.

Original guidance from the IRS on HSAs. Click here to read IRS Notice 2004-2.