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?????????? is what I feel about the US Economy and where it is going. I have to believe that any person that has experienced an economics course, or a money/banking course, or some basic finance courses understands that what we are doing to ourselves is not working. I have a hard time coming up with a government program that has not cost us more than the problem it set out to fix. Every time the government sets out to fix the economy it costs a fortune even if it started out on the right track. The government is inflexible, it is static, at a time when economic and financial conditions change at the drop of a hat.
For instance, the Fed is pumping $80 billion a month into the economy and it is doing nothing. The jobless rate is still too high, all economic classes are still saddled with excessive debt, the tax picture is scary, workers have not had a raise in years and everybody is waiting for the next shoe to drop that will throw them into financial ruin. All the Fed actions are doing is feeding the market bubble and we all know how that has to end (2008 anybody.) The last time the government “helped” us with a stimulus program in 1980 interest rates wound up at 18% with a similar inflation rate. I unfortunately remember that period and was able to buy quite a bit of house for not a lot of money, with a doable payment even at 18% interest.
I guess if we had to list our challenges for the near future they would be interest rates and inflation. Once the stimulus funds get worked into the system we can expect a rise in interest rates and then inflation, not to mention the negative impact on the currency and especially the savings people have to retire on. There is no doubt that every man, women and child will feel the negative impact of these questionable antics of the Fed. Sure it will allow us to pay off the national debt with cheaper dollars, but at what cost to our citizens.
Our current economic situation is obviously difficult to plan for. As a dealer CEO you deal with investment questions, inventory questions, financing questions, hiring questions, pricing questions, cash flow questions and even with all this going on have to consider shareholder value questions. In addition, CEO’s have to deal with marketing and market share issues and especially customer credit issues. In the end some tough decisions have to be made to ensure the ship remains afloat.
And if you didn’t have enough to worry about, you also have to plan for the Affordable Care Act (PPACA). I have been doing my homework on this topic and conclude that it is a very tough issue to come to grips with, but one that needs to be addressed by senior management to ensure compliance with the law to avoid costly fines and penalties that are not deductible.
What can you expect from PPACA?
- More employees opting for coverage.
- Some employees asking to leave the plan in favor of the exchange.
- Significant price increases for coverage.
- Low paid employees entitled to subsidies.
- Tax and contribution questions.
- A monumental problem for your HR department.
Management has to know what they are in store for, how to determine the number of employees covered, how to calculate the cost of coverage, how to modify their current plan to be in compliance and what different options are available to the company.
I am amazed how many dealers have still not addressed this issue because if there was ever an issue to be proactive about it is this one. A well-educated professional needs to help you understand what you are facing and what it is going to cost. Waiting until next year isn’t the smart thing to do because by doing so you may find yourself out of compliance and subject to penalties. The IRS hired an additional 100,000 agents to make sure you comply with PPACA, and they will do so.
If you are not dealing with an insurance expert I suggest you contact one of the experts I have mentioned in the past who developed a financial model that takes your data and provides a report that tells you what you need to do to be compliant at minimum cost. His name is Ryan Holst at Alper Services (you have heard about them before) and he can be reached at 312 654 4260.
You have a lot on you plate for the remainder of 2013 and 2014. Make sure you consider all aspects of every question before reaching any final decision. Before we always said Cash is King…..now that depends on what the Cash is worth.
Garry Bartecki is a CPA MBA with GB Financial Services LLC. E-mail [email protected] to contact Garry.
