Financial Frontlines®

***Deadline Extended to 18 March 2011***

8 Dec 09.  The Navy site is up and running.  Go to:  :   http://www.npc.navy.mil/channels to make your application.

25 Nov 09. The Navy Retro Stop-Loss Pay program isn’t quite finalized yet, but soon. Once finalized, details will be published on the Navy Personnel Center web site. In the meantime, you can contact the project office to have your name added to the list of eligibles. The eligibles will be contacted with application procedures. Call or write: CDR Raffier, (703) 614-5565 or john.raffier@navy.mil.

————UPDATE 25 Nov 09—————-

I spoke to the Army last Friday. The process is stumbling along but there is nothing shady going on. The Army program office is getting plenty of “help” from the top of the food chain. This program is getting loads of visibility from OSD and Congress. Until they get the flow down on the process, things will be a bit rocky. The main issue with the mismatch letters is how the law and Army policy defines being Stop-Lossed. Evidently, the law-policy is not the same as the dates on Service docs. That causes manual reviews.

Regarding the Navy; they owe me a call back but I’ll be following up with them. When I spoke to them 3 weeks ago or so, I was told there are so few Navy members impacted by Stop-Loss that the Navy would personally contact each member and work the application. I’ll confirm this soon.

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Here is the Army site for applicants. 

For you Air Force folks, here is your application site.

For Navy, email NXAG_N132C@navy.mil.

For Marines, go to https://www.manpower.usmc.mil/stoploss.

Please help spread the word on this special pay. Let’s try to prevent the situation where some people never get the word.

————————————UPDATE 19 Nov 09—————————-

Just got off a conference call with the Army Stop-Loss project officer. Here are the main takeaways from the phone call:
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* Number of apps is about 16k so far but many of these are duplicate apps or incomplete. His best estimate is that around 10k are legit. Of the incompletes and dups, most don’t have all or correct docs. This causes some of the processing slowdown as they review which apps are legit and which are not. He said it appears some folks apply more than once–not helpful.

* Vast majority are getting the standardized email claiming a mismatch—approx 90%. This goes to a difference between Army systems and docs being submitted. Of the mismatches of those processed, the mismatch is 1 to 17 months off.

* About 10% of apps are spot on between the dates on the app and the Army files.

* Mismatches between app and Army files are cleared by case workers manually screening app with the Army personnel system. Reasons for the mismatch are examined and the legit dates determined before resolution.

* Getting a mismatch email does not mean denial of benefits or a stalling tactic.

* Wounded members are the priority.

* There’s confusion about what counts as Stop-Loss time. Call-ups/continuation of service of members on the Reserve rolls may not be Stop-Loss time.

* Dash 4s tend to be more reliable than DD214 but both help.

* The Army is not trying to save money by denying or reducing claims. Stop-Loss money is fenced off from other Army programs/requirements. These funds must go to intended beneficiaries–specifically for Stop-Loss. There are no competing requirements.

* In 2-3 weeks, the Army web site will be updated to show an app status line.

* They can’t state how long any person’s app will take. Too many variables to predict.

* Approx 120k are eligible. There are a lot of potential apps out there. Why aren’t there more apps?

* The project office and the Army has to make weekly reports to OSD on the status and regular reports to Congress. At the end of it all, there will be audits and reports to Congress to ensure no one eligible was denied their benefit and all money was used for Stop-Loss only.

That’s it for now…Shane

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Did you serve under stop-loss orders between September 10, 2001 and September 30, 2008? If so, you are eligible for retroactive stop-loss pay. Next-of-kin may apply for their service member if the member died prior to this program.

The new program just signed into law on 24 June 09 provides a $500 a month payment to members who were held on active duty due to stop-loss orders. The pay is tax-free if in a combat zone and taxable if not. Must have been released from the Service with better than an under other-than-honorable conditions discharge.

The Pentagon has the next four months to implement the program and the application window is short. You must apply for the pay within the year after implementation. No late claims will be accepted so get your application in early.

The exact documentation and filing process is not yet known but get your paperwork together now. We assume stop-loss orders are a given. Same tuned to MOAA electronic newsletters and the Financial Frontlines blog for updates.

***Deadline Extended to 18 March 2011***

The Federal Trade Commission web site has a special page for military members on how to reduce your odds of becoming a victim of ID theft. It tells you how to place an Active Duty Alert on your credit report, provides information resources, and what actions to take if you’ve been ripped off. Nice job by the FTC. See the page here.

Annuities sold by insurance companies are popular savings and investment vehicles used by financial advisors. Often because the commissions on annuities are among the highest in the business, however there are valid reasons for owning an annuity.

This blurb focuses on fixed, deferred annuities. That means the annuity pays an established interest rate and doesn’t pay an immediate income stream to the owner. This type of annuity is usually used as an alternative to other fixed accounts like CDs or money market accounts. Just as a matter of comparison, I’m not discussing variable annuities which have stock and bond mutual funds as their investment options or immediate annuities which create an immediate income stream.

Annuities have rules that make them like retirement accounts. Withdrawals prior to age 59½ are a no-no and the earnings are tax deferred. Don’t open an annuity if you are younger than 59½ and can’t afford to tie your money up for the required years. You will pay ordinary income tax rates upon withdrawal for all but the principal amount since the principal amount was post-tax money in the first place.

A common challenge in the current economic environment is finding a decent interest rate for your safe money. Annuities can often provide a better fixed interest rate than CDs, money markets or short-term bonds. The catch is the lock-up period and withdrawal policies. Questions to ask the salesman include: How long is the lock-up period? Have them show you the surrender period/penalty table in the paperwork. Seeing is believing. Can you withdrawal funds early without penalties; how much and how often? Is there an escape clause in an emergency? What is the renewal rate if you leave the money in the annuity past the lock-up period? Is there a way to change rates mid-stream if rates rise? Can you add to the annuity or is a new annuity account required for each contribution?

Equity Indexed Annuities can also be enticing. Lots of complexities here. Equity indexed annuities allow you to participate in the gains of a rising stock market and at the same time have a safety net should the market drop. Sounds good; what’s the catch? Your potential positive returns are capped. If the stock market goes up 15%, your return may be capped at 7%–just an illustrative example here. However, if the stock market goes down, you may be guaranteed a minimum 2% return and are protected from the market’s loss. Check out the fees, lock-up period, withdrawal penalties and emergency escape provisions. Have the salesman show you the surrender period chart.

Late(r) Breaking News:

Friday, June 12, 2009

The OSD tax person advised today that they have a “fix” that will make HAP benefits in the PCS category non-taxable.  The fix is under review by OMB; OSD hopes to attach the provision to a bill later this year.  So for now, HAP benefits are taxable, but if the proposed measure passes Congress, the PCS HAP category could become tax exempt .

June 11, 2009

We just found out some of the financial assistance for members under the Homeowners Assistance Program is taxable for some applicant categories. The PCS category is one of the taxable categories and we are determining whether the other categories are affected.

This is a surprise to us as we believed the benefit to be excluded as income as was HAP program payments prior to this recent expansion of the program.  See IRS Publication 3, page 4.

We are researching this issue and will report back as soon as we can get a source and a decision. In the meantime, if you apply for the HAP, ask about the tax status of your possible benefit. It could be that your $100,000 HAP payment could go down as income when you file your taxes for 2009.

NEWS FLASH…see my comments in the comments section for 13 Nov. Legislation was passed that gives military members a break on the 3-year live-in rule.

We have received a few calls and emails about this tax credit. The issue is how it effects a military member who can’t live in the house for three years to qualify for the credit.

This credit applies to homes bought in 2009. The credit can be for up to $8000. A “first-time” home buyer is someone who hasn’t owned a home as a primary residence for 3 years prior to the 2009 home purchase. Under the law, if you don’t live in the house for 3 years as your “primary residence” after using the credit, you pay back the full amount of the credit when you file annual income taxes for the year you moved out–even if you rent the place. The term “primary residence” is key. This is one of the provisions of the 2009 Stimulus bill that was passed in February and was under the tax code changes.

Members have stated the 3 year requirement shouldn’t apply to military members and there should be a military exemption. You need to look at the 3 year requirement as the price you pay to get the credit. It’s no different than getting the tax benefits of a retirement account but it costs you having to wait until you are 59 1/2 years old to earn the benefit.

MOAA does not see an opportunity to work on a military exemption to this law. Instead, our focus is on educating members about the risk assumed by using the credit. This is one more risk factor that must be considered by military members when buying a home. Buyer beware.