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Money Management Q&As


Social Security; guardians; IRAs; T notes.


Money Management Q&As

Jump to:
Choose article section...Switching retirement plans with IRS approval Can you change your mind about a tender offer? Social Security benefits for ex-retirees How to avoid a clash between guardians Ways to locate an insurance policy Local air service when you're in Europe If you want to move IRA accounts around Preserving CD insurance when a joint owner dies The easy way to deal with T notes

Switching retirement plans with IRS approval

Q: We want to replace our existing money-purchase plan with a profit-sharing plan and add a 401(k) option, to take advantage of the higher contribution limits allowed by recent changes in the law. Can we transfer the assets from our present plan into the new one, or must we terminate it and distribute the assets to the participants?

A: You needn't terminate the plan; you can merge it into the new one. The IRS has ruled that termination isn't required if the profit-sharing plan covers the same employees as the money-purchase plan and contains the same vesting schedule. However, you must give each employee affected a notice describing the impact of the conversion on future benefits.

Can you change your mind about a tender offer?

Q: If I accept an offer to tender stock and the market price goes above the bid price before the tender deadline, can I change my mind?

A: Yes, unless the bidder aims to acquire less than 5 percent of the company's total shares. Such "mini tenders" needn't comply with SEC rules that larger tender offers must follow to safeguard investors' rights. Bidders have been known to lock investors in by keeping mini tenders open, hoping to profit from a rising market price before the offer closes and improperly canceling if it doesn't.

Before surrendering your stock to a mini tender bidder, verify his ability to pay and find out what the net offer price will be. Some mini tender offering statements fail to disclose clearly that certain fees or expenses may be deducted from the bid price.

Social Security benefits for ex-retirees

Q: I started collecting Social Security benefits when I retired two years ago at 65, but I've decided to go back into practice. Would it be to my advantage to stop taking benefits until I quit for good?

A: No. Earnings after age 65 won't reduce the benefits you're now receiving, and your new earnings may entitle you to higher benefits than you're now getting. But if that's the case, Social Security will automatically raise them.

How to avoid a clash between guardians

Q: We want my wife's sister to care for our young children if anything should happen to us, but we'd like my financially experienced brother to handle their inheritance. How should our wills guard against possible disagreements?

A: They should specify your desires regarding the children's upbringing and education and should authorize reasonable expenditures by your wife's sister, as "guardian of the person," to carry them out. Your brother, the "guardian of the property," will have to provide an annual accounting to the probate court to show that he is discharging his responsibility properly. The job will be easier and disputes less likely if you make your wishes clear.

Ways to locate an insurance policy

Q: My recently deceased father once told me that my son was the beneficiary of his life insurance, but we haven't been able to find the policy among his papers or in his safe deposit box. What can we do to locate it?

A: First, review your father's canceled checks to search for insurance premium payments. You may not find any if the policy was paid up years ago, but his papers may include annual statements from the insurer. If the company paid interest on the accumulated policy value, this may be shown in your father's tax returns. Also get in touch with any insurance agents listed in his address book, and check out the possibility that the insurance was provided by a former employer. If you draw a blank, you may want to ask the carriers doing business where your father lived. The state insurance department can give you a list.

Local air service when you're in Europe

Q: To see as many places as we can while we're in Europe, we want to travel from place to place by plane. What are some good sources of information about intra-European air service?

A: Well-known travel authority Rick Steves suggests trying the online sites of secondary airlines based in the countries that interest you. Examples include www.flybmi.com , www.easyjet.com , and www.virgin-express.com, all based in the United Kingdom; www.vlm-air.com, in Belgium; and www.air-europa.com, in Spain.

Major European airlines offer some competitive fares but may require you to buy your trans-Atlantic flight from the airline as well. Check www.europebyair.com for passes usable on more than one airline, and look at the classified sections of newspapers published abroad. For more suggestions, go to www.ricksteves.com.

If you want to move IRA accounts around

Q: When I changed jobs in January, the retirement plan trustee transferred my $25,000 distribution into an existing IRA at my request. Can I now roll over all the IRA money into my new employer's plan?

A: You can roll over the $25,000 distribution plus subsequent earnings on it, even though IRA funds generally can be rolled over only once every 12 months. That's because a direct transfer between trustees doesn't count as a rollover. But if you rolled any other funds into the IRA less than a year ago, you'll have to leave them there until the deadline expires, unless the IRA custodian is willing to transfer them to the plan trustee directly.

Preserving CD insurance when a joint owner dies

Q: My recently deceased father owned $150,000 worth of high-interest, long-term certificates of deposit in a local bank. Since the CDs are in my mother's name as well, I've advised her to leave them there until they mature. Am I right in assuming that the FDIC will continue to cover all the funds?

A: Probably not. While your father was alive, he and your mother were each entitled to $100,000 of coverage on jointly held accounts. Once the accounts become individually owned, coverage is limited to $100,000 total per depositor per bank. The FDIC allows a six-month grace period before the lower limit takes effect.

To make sure she remains fully insured, your mother may want to move some of the funds to another institution. If so, ask the current bank to waive any early withdrawal penalty.

The easy way to deal with T notes

Q: I bought some Treasury notes through a broker, but now I'd like to open a commission-free account with the Treasury. Can I transfer the securities I already own to this account, and if I do, what happens if I later decide to sell them?

A: Your broker can arrange to transfer the notes on his books (there are no actual certificates) to a TreasuryDirect account after you've opened it in your name. To sell a security held in a TreasuryDirect account, you can have the Treasury either transfer it to the financial institution you designate or handle the transaction through the Federal Reserve Bank of Chicago's Investment Division. The Treasury will obtain quotes from different brokers, sell at the highest price, and deposit the proceeds into your account. You'll pay only $34 for each security sold. For details and downloadable forms, visit the Treasury's Web site at www.publicdebt.treas.gov.


Edited by Lawrence Farber,
Contributing Writer

Do you have a money management question that may be stumping other doctors, too? Write: MMQA Editor, Medical Economics, 5 Paragon Drive, Montvale, NJ 07645-1742, or send an e-mail to memoney@medec.com (please include your regular postal address). Sorry, but we're not able to answer readers individually.


Lawrence Farber. Money Management Q&As. Medical Economics 2003;6:113.

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