“How are the schools?” is one of the first questions relocating employees consider, and one we at TRC face daily. It is why we are interested in the Common Core – new academic standards in English language arts and math that 44 states and the District of Columbia are implementing. And although the debate is still raging about whether Common Core is good or bad, one aspect that has gotten little attention is its potential impact for people on the move.
An average American moves more than 10 times during his lifetime, which means that many people are moving with their children, and those children are changing schools. The hope is that with the Common Core Standards, the inconsistencies between school systems and states will not be as glaring as they were pre-Common Core. read more…
It might seem way too early to think about 2015, but when it comes to taxes, now is the perfect time.
Many of the employees of our relocation clients were hit with a heavier tax burden this year, just some of the 3.9 million Americans that had to pay the dreaded alternative minimum tax, aka AMT. Under our dual tax system, taxpayers have to pay whichever amount is higher – regular income tax or AMT. The AMT does not allow many of the deductions allowed on regular returns – personal exemptions, standard deductions and deductions for state and local taxes paid.
You’ve just been told you’re relocating. Next on the list is readying your home for sale, which often includes some repairs. What to fix, how much to invest, and how extensive the repairs are perennial questions that plagued homeowners.
TRC Global Solutions offers these suggestions:
Home inspection: Doing a home inspection before a house goes on the market shows prospective buyers that you care for your home and have kept up on maintenance. Fix any repairs the inspector finds, and document this in any sales literature. read more…
REGISTER NOW FOR COMPLIMENTARY TRC WEBINAR, NAVIGATING TODAY’S MORTGAGE MARKET: STRAGEGIES FOR SUCCESS
April 15, 2014 Webinar to Focus on Qualified Mortgages, Changing Rates and More
After a fairly stable period of stringent mortgage requirements but historically low rates, changes are brewing in the mortgage industry once again. To help transferees succeed in today’s market, it’s important to have a thorough understanding of today’s evolving options, rules and regulations.
Recognizing this, TRC Global Solutions (TRC), a leading relocation management company, will sponsor the webinar, Navigating Today’s Mortgage Market: Strategies for Success, on April 15, 2014 from 2:00-3:00 p.m. EST. read more…
Relocation comes with a lengthy to-do list and its own lingo. Last month, two new words were added to the language of relocation – qualified mortgages – the new rules that now govern who gets approved for a loan and who doesn’t.
So what’s a qualified mortgage, commonly called QM in the world of relocation, banks and real estate?
The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act created the Consumer Financial Protection Bureau, which wrote the newly enacted rules on how mortgages are approved. All lenders must now assess income, assets, credit history, other debt obligations and employment status. If lenders do not follow through on these evaluations, borrowers who cannot make their mortgage payments can contest foreclosures on the grounds that the lenders did not properly judge their financial standings and risk. read more…
Relocating, no matter the distance, is stressful for everyone, including your pets.
“How to safely move pets is a question we are asked over and over again,” says Jerry Funaro, vice president of global marketing for TRC Global Solutions, Inc., a global mobility firm based in Milwaukee, Wis. “Pets are members of the family, and their safety and health is a critical part of a successful relocation.”
According to the Humane Society of the United States, pets are sensitive by nature: If you’re stressed, so are they. Relocating pets from the safe confines of your home takes understanding, care and an investment of time that starts long before moving day.
TRC has developed a 15-point checklist to make a pet’s transition to a new home seamless and less stressful. (If you’re planning to move a pet to another country, remember that rules and regulations vary widely from country to country. Some countries impose quarantine requirements and some make it very difficult or impossible to bring in specific breeds or pets in general. It’s important to research the host country’s requirements well in advance.) read more…
Some call them millennials. Others, generation Y. No matter what you call them, those born between 1980 and early 2000 will soon be the biggest group in workforce, which means we need to start paying attention to their likes, dislikes and what it means to our businesses. Rather than criticize, now is the time to start listening.
Still not convinced? It is estimated that by 2020, a mere six years from now, millennials will compose almost 50 percent of the workforce. Some reports peg them at 80 million strong, a bigger force than the 76 million baby boomers born between 1946 and 1964. Companies have to start paying attention to how this generation thinks. read more…
From the New York Times, January 9, 2014
by Lisa Prevost
The number of loans guaranteed by the Department of Veterans Affairs reached a record high in 2013, perhaps marking the peak of an upward trajectory that began after the housing market collapse.
The department guaranteed nearly 630,000 mortgage loans in fiscal year 2013, setting a new high just as the program enters its 70th year, said Mike Frueh, the director of the V.A.’s Loan Guaranty Program. The average loan was about $225,000, an amount that reflects the program’s value to “working-class America,” he said.
Calling the program’s growth “pretty incredible,” Chris Birk, the executive editor at Veterans United Home Loans, an online broker of V.A. loans, estimated that total loan volume has risen 372 percent since fiscal 2007.
One reason is historically low interest rates, which have driven a tremendous increase in loans for the purpose of refinancing. About half of last year’s V.A. loans were “refis.” That business dropped off toward the end of last year as interest rates rose.
Another factor is the tough lending climate of the last six years, which has made a V.A. loan the most viable option for many service members. “It’s become so much more difficult for military personnel and veterans to qualify for conventional financing,” Mr. Birk said. “This is the only path to homeownership for many.”
One big advantage for first-time buyers is that the loans do not require a down payment. About 90 percent of all V.A.-guaranteed purchase loans are made without any money down. “Our average borrower has about $7,000 in liquid assets at the time they close the loan,” Mr. Frueh said. “That’s not enough to make a significant down payment.”
Another benefit is that V.A.-backed loans do not require private mortgage insurance, which add to a borrower’s monthly payment. According to Mr. Frueh, for the loans made last year, borrowers will save $35 billion they might otherwise have paid out in mortgage insurance premiums over the life of their loans.
There are restrictions, of course. The loan must be for a primary residence. And the V.A. maintains limits on the amount it will guarantee, based on area median home prices. The 2014 limits, calculated by county, range from $417,500 to $1,094,625.
The V.A. does not set a minimum credit score requirement, but lenders typically add their own, which is currently around 620. The V.A. is more concerned with a borrower’s income and expenses.
To qualify, borrowers must show enough monthly income after paying personal debts and housing costs to meet “residual income” levels set by the department. The levels vary by region and household size. In the Northeast, for example, on loans exceeding $80,000, a two-person household must show at least $755 in leftover income, while a family of five must show $1,062.
“Their underwriting is a little bit more restrictive, but it’s prudent,” said William J. McCue, the owner of McCue Mortgage in New Britain, Conn., which has handled the agency’s loans since its founding in 1949. “That’s why the loans perform so well.”
Indeed, V.A. loans have shown the lowest foreclosure rate for the last five years, according to data gathered by the Mortgage Bankers Association. “People naturally assume that these loans are risky,” Mr. Birk said, adding, “You really don’t see people who can’t afford a mortgage getting a loan, because of that residual income requirement.”
According to data gathered by Veterans United, the three states that saw the greatest jumps in loan activity last year compared to 2012 were Arizona, up 40 percent; Ohio, up 33 percent; and Connecticut, up 30 percent.
A version of this article appears in print on January 12, 2014, on page RE7 of the New York Times New York edition with the headline: A Big Year for V.A. Loans.
What an interesting year. A stagnant government. Obamacare. Tax law changes.
Yet through it all, our economy is growing, jobless claims are down, and the housing market continues to rebound. Our clients continue to see employee relocation as a strategic talent mobility tool, and the improving housing market has made relocation a more viable option for more employees.
If our ailing economy has taught us anything these past five years it has been that to succeed, companies have been forced to employ creative business strategies, especially when it comes to relocation. As we barrel into 2014, let’s look at the top 10 issues now shaping the relocation landscape.
- Itemized deductions: Personal exemptions and itemized deductions are now limited for taxpayers earning more than $250,000 or married couples making more than $300,000. Additionally, there is a 3.8% tax on unearned, investment income for these individuals, so if relocation costs are added to employees’ incomes, it could mean a higher tax burden. That means gross-up costs will likely increase.
- Medicare: Employees earning more than $200,000, or married, joint filers earning more than $250,000, are now subject to a 0.9% Medicare tax. Again, employees need to remember that reimbursed relocation expenses might push adjusted gross income over the threshold, increasing taxable income.
- Home sale credit: Those who bought homes with the home buyer tax credit may have to repay the credit if they sell or rent that home. Some companies opt to reimburse employees in this situation.
- Travel expenses: If you earn less than $200,000 a year, certain unreimbursed relocation costs are deductible. These are primarily expenses related to the final trip to the destination. Although meals are non-deductible, transportation and storage of household goods/personal effects, and travel, including lodging, from your old home to your new home are deductibles.
- Real estate market: According to the National Association of Home Builders, builder confidence for newly built, single-family homes rose four points in October, to 58. The Association also reports that the nationwide market is running at 86 percent of normal economic and housing activity. Additionally, all four U.S. regions reported double-digit sales gains in October: Northeast, 19.2 percent; Midwest, 34 percent; South, 28.2 percent; and West, 15.2 percent. We are slowly returning to a more normal market, which will facilitate home sales and purchases.
- Education: According to the Worldwide ERC, companies are turning to pre-decision counseling, advising employees on what relocation entails and the potential financial impact. This is a protection not limited to the employee, since in the past many companies lost valuable time and money when an employee decided – at the last minute – that the cost of relocation was too great.
- Core-flex programs: The core is a list of eligible relocation benefits within tiers, the flex a list of options that round out the package to meet each employee’s specific needs. According to Worldwide ERC data, 20 percent of companies it surveyed are using core-flex programs, while 11 percent are considering implementing a core-flex program in the near future.
- Rental upswing: Worldwide ERC’s most recent study found that 62 percent of transferees decided to rent rather than buy last year, while 65 percent of companies surveyed saw an increase in homeowners becoming renters. These trends are expected to continue, especially if transferees would be selling their homes at a loss.
- Millennials: The tech-savvy millennial generation – those born between 1980 and early 2000 – numbers around 80 million. Because 83 percent of millennials are willing to relocate – for the right position – many employers have spread their recruiting efforts to previously untapped regions. A typical millennial transferee is single, prefers to rent, and favors social media and e-commerce.
- Social: Before considering relocation, employees factor in quality-of life-issues: spouses’ jobs; acceptance of same-sex relationships; education for their kids; recreation and cultural offerings; weather; culture/attitude in the new location; corporate culture in the new office; and how far their dollar will stretch in the new location. It’s no longer only about the job and salary.
by Jerry Funaro, CRP, GMS
Vice President, Global Marketing, TRC Global Solutions, Inc.
With so many impediments to relocation today, from traditional issues such as spouse/partner career concerns to real estate complications and unique family needs, companies, employers and relocation management companies are all seeking creative ways in which to move the process forward. Economic recovery is helping to overcome some of today’s obstacles. In the meantime, a core-flex approach (explained in part 1 of this blog ) can help control overall program costs, meet employees’ needs for flexibility, and enable companies to achieve their business objectives. In this installment I’ll go over some of the advantages of core-flex programs and – so you can anticipate and minimize their impact – some of the potential disadvantages.
Advantages of core-flex programs
A carefully considered core-flex program can help companies to:
- Tailor relocation benefits more closely to employee or candidate needs
- Empower hiring managers, business units, regional locations, etc.
- Gain a recruiting edge
- Make employees feel more valued and invested in the process
- Control costs, offering only those benefits that are meaningful to the employee
- Eliminate or dramatically reduce exceptions
Flexibility is key
For most companies using a core-flex approach, flexibility is the most compelling advantage. As employees’ real estate and family needs become more complex, corporate relocation managers administering a traditional tiered program can find themselves inundated with exception requests.
The core-flex approach allows a more direct and personalized alignment of benefits and needs. In some cases, it allows relocations and international assignments that otherwise might be stalled to proceed. Moreover, incorporating a flex element is faster and more efficient than a bureaucratic exception process. A core relocation benefit can also help ensure that there is parity and predictability among relocating employees and that all employees receive the basic benefits needed to get the transfer done.
The potential for cost savings
Cost containment can be another powerful motivation to use a core-flex program. In a typical relocation program, companies actually might be providing some “one-size-fits-all” benefits that employees neither want nor use. In a core-flex program, benefits are better aligned with actual needs, and in many cases, companies impose a cap on the total benefit amount.
According to the Worldwide ERC® survey, Relocation Assistance: Transferred Employees, 45 percent of surveyed companies using a menu approach place a ceiling on the value of the selections made. This figure has increased from 39 percent in 2004.
For companies more focused on cost containment, the core-flex menu items would be tied more directly to the core move processes, with more limited menu options. An example is a self-move package for a domestic new hire, or an “assignment-lite” package of travel, household goods transportation, immigration and tax services for a global assignee.
Disadvantages of core-flex programs
Core-flex programs have some potential pitfalls:
- Program/policy administration is more complex than for strictly defined, tiered policies
- Budgeting can be more challenging due to variable policy elements
- Continuing management involvement is crucial to ensure that the package includes all of the elements essential to a successful relocation/assignment
- Employees communicate with each other, and there is always the possibility that an employee will feel entitled to a benefit another employee has received
Parting thoughts on managing a core-flex program
Core-flex programs undoubtedly require more administrative attention and care than more rigidly defined tiered programs. An overarching goal is always to ensure that the program remains as fair as possible. Menu options must be carefully considered relative to employee needs, and should be revisited regularly to ensure that they are still relevant. The costs of these provisions must be estimated with some care as well, to ensure that menu items are interchangeable from a budget standpoint.
Particularly where managers negotiate specific provisions with employees, it is critical that they are well-versed on the program rationale, options and costs. They should be armed with modular communications pieces, such as one-page descriptions of available services, which allow them to present only the applicable benefits to the employee.
Since 1987, TRC has delivered creative, cost-effective relocation and international assignment services across the United States and in more than 150 other countries around the world. TRC partners with its clients to develop competitive, best-practice relocation programs, drawing from a comprehensive range of relocation services, including U.S. home selling, home finding and consulting services and complete international relocation services. TRC’s client base represents a wide variety of products and services and ranges from startup firms to Global 1000 companies.