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Old 20-02-2020, 07:58 AM   #1801
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I'm actually Indonesian, and a Singapore PR, so whether I would (or even be able to) return to Singapore is not guaranteed. I will definitely consider your suggestion to maintain my integrated shield plan to prevent the pre-existing conditions to be reset. There is a lot more uncertainty in my case than what you've described as I may not be a PR (or may never be one anymore) by the time I leave the US.
OK, I should have remembered that. In that case I suggest dropping down to Great Eastern’s Supreme Health A Plus with TotalCare Classic rider. The B Plus plan is not good for PRs. If/when your PR status ends you’d end this coverage.

Also, you won’t be eligible for a H-1B1 visa, which is only available to Singaporean and Chilean citizens. Other U.S. visa types are potentially available, and you’re still free to enter the Diversity Visa Lottery every October. If you do manage to snag a Diversity Visa “ticket” please make sure you’re ready to roll and quickly follow all the subsequent steps, carefully and completely. The U.S. Department of State passes out somewhat more tickets than they have green cards since some people don’t follow through (or move too slowly).

Given the relatively (substantially) more expensive premiums of expat/global insurance plans such as the Cigna's Global Platinum, at what point do you think it'd make sense for me to look at those? I recall I've played around with Cigna's configurator, even with reasonable deductible/coinsurance they still cost over USD4k/yr with outpatient treatment and medical repatriation and I'm still under 30. I shudder to think of how much they'd cost when I'm 50.
Not while you have U.S. medical insurance, which is quite excellent and which should cover you even for emergency care worldwide.

Jumping WAY ahead, there’s something called “COBRA” coverage which refers to a U.S. law that lets you keep your employer-provided (or university-provided in this case) medical insurance after separation as long as you pay the full premium, not the employer subsidized premium. So if you’re not quite ready to transition to something else make sure you know about and sign up for COBRA coverage. I think there’s a 30 day deadline after separation to sign up and you can choose however many months you need up to 18 — or something like that. I’m not 100% sure “student” plans are COBRA eligible, but please check that.

Another question: is either university providing long-term disability insurance coverage, or can you optionally buy it? And/or “Long-Term Care” insurance?

Last edited by BBCWatcher; 20-02-2020 at 08:05 AM..
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Old 20-02-2020, 08:35 AM   #1802
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It looks like Indonesia and the United States have a tax treaty, and it contains at least one provision that you may be able to take advantage of. As I read it, Article 19 (“Students and Trainees”) says that the first US$2,000 of legal (visa type compatible) earned student income might be U.S. tax exempt, above and beyond what the U.S. tax code already provides for in exemptions. The figure is as high as US$7,500 for another specific situation. These provisions depend on whether you’re a resident of Indonesia immediately prior to your U.S. studies, please note.

If you’re eligible to avail yourself of that provision you’d file IRS Form 8833 with your tax return, which is a form that tells the IRS “here’s why my calculation looks different than the usual one: the tax treaty says I can do this.”

I would also check the tax treaty to see what it says about IRAs and 401(k)/403(b)s, especially concerning whether Traditional v. Roth is more advantageous. Ideally you want both Traditional and Roth vehicles well protected in the treaty, and then you’d choose Roth probably. However, it looks to me like there’s no or little treaty help (if you should move back to Indonesia) with respect to U.S. tax advantaged retirement savings accounts. This is a pretty weak tax treaty compared to others I’ve seen.
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Old 20-02-2020, 11:12 AM   #1803
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Jumping WAY ahead, there’s something called “COBRA” coverage which refers to a U.S. law that lets you keep your employer-provided (or university-provided in this case) medical insurance after separation as long as you pay the full premium, not the employer subsidized premium. So if you’re not quite ready to transition to something else make sure you know about and sign up for COBRA coverage. I think there’s a 30 day deadline after separation to sign up and you can choose however many months you need up to 18 — or something like that. I’m not 100% sure “student” plans are COBRA eligible, but please check that.

Another question: is either university providing long-term disability insurance coverage, or can you optionally buy it? And/or “Long-Term Care” insurance?
I do recall something like rights to continue coverage or such when I was reading around, but I'll confirm that later. I don't remember DI coverage being mentioned but I'll check as well, thanks.

It looks like Indonesia and the United States have a tax treaty, and it contains at least one provision that you may be able to take advantage of. As I read it, Article 19 (“Students and Trainees”) says that the first US$2,000 of legal (visa type compatible) earned student income might be U.S. tax exempt, above and beyond what the U.S. tax code already provides for in exemptions. The figure is as high as US$7,500 for another specific situation. These provisions depend on whether you’re a resident of Indonesia immediately prior to your U.S. studies, please note.

If you’re eligible to avail yourself of that provision you’d file IRS Form 8833 with your tax return, which is a form that tells the IRS “here’s why my calculation looks different than the usual one: the tax treaty says I can do this.”

I would also check the tax treaty to see what it says about IRAs and 401(k)/403(b)s, especially concerning whether Traditional v. Roth is more advantageous. Ideally you want both Traditional and Roth vehicles well protected in the treaty, and then you’d choose Roth probably. However, it looks to me like there’s no or little treaty help (if you should move back to Indonesia) with respect to U.S. tax advantaged retirement savings accounts. This is a pretty weak tax treaty compared to others I’ve seen.
Ah right, I completely forgot about it but I did notice that Indonesia has a tax treaty with the US, unlike Singapore, back when I was starting to invest in stocks. I'm a resident of Indonesia as well (I have Jakarta ID card) so I'll see if I can take advantage of the provisions. Thank you.
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Old 20-02-2020, 12:14 PM   #1804
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Ah right, I completely forgot about it but I did notice that Indonesia has a tax treaty with the US, unlike Singapore, back when I was starting to invest in stocks. I'm a resident of Indonesia as well (I have Jakarta ID card) so I'll see if I can take advantage of the provisions.
If it applies, that US$2,000 shielded income treaty provision looks like it'll save you at least US$200 per year in U.S. federal income tax. And if it applies, you may have a similar opportunity with your state and local tax returns. (States and localities are required to honor U.S. treaty obligations, as I understand it.)

There's a caution, though. If you are able to take advantage of this treaty provision and actually do, you won't later be able to argue that you weren't a resident of Indonesia just prior to your U.S. sojourn. You have to be consistent across all borders in the application of this treaty. If something turns out to be unfavorable in Indonesia (or otherwise unfavorable, such as an immigration-related decision), then this US$200+ of tax savings could be quite expensive. IRS Form 8833 is optional.

With respect to COBRA coverage, university medical plans evidently aren't required to offer COBRA continuation terms. (My suspicions were right. Many probably have COBRA or COBRA-like provisions, but technically those particular plans don't have to offer them.) Take a look at the medical insurance plan's "Summary Plan Description" to see if the word "COBRA" appears and what it says. You must opt for COBRA coverage if you want it within 60 days of plan end, and I was right about the 18 month maximum allowable COBRA coverage. (In a few cases the maximum can be longer.)

The reason COBRA coverage exists is to provide "bridge" coverage to another plan. As a classic example, if your employer fires you, you really don't want to lose medical insurance, but you'll need some time to find another job with its own medical insurance. In your case, if you're leaving the United States, you may want/need to keep your U.S. medical plan in place for a period of time (since presumably it covers emergency care outside the U.S.) until you get medical insurance in place in your new country of residence.

Usually your medical plan will do something reasonable in terms of plan end, providing a little bit of buffer. For example, you might get 30 days of coverage after your last day on the job (or in the classroom). COBRA coverage is to extend beyond that.

In case you're wondering, "COBRA" stands for the "Consolidated Omnibus Budget Reconciliation Act," which was the specific law enacted in 1986 that introduced these "bridge" insurance requirements.
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Old 20-02-2020, 07:56 PM   #1805
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If it applies, that US$2,000 shielded income treaty provision looks like it'll save you at least US$200 per year in U.S. federal income tax. And if it applies, you may have a similar opportunity with your state and local tax returns. (States and localities are required to honor U.S. treaty obligations, as I understand it.)

There's a caution, though. If you are able to take advantage of this treaty provision and actually do, you won't later be able to argue that you weren't a resident of Indonesia just prior to your U.S. sojourn. You have to be consistent across all borders in the application of this treaty. If something turns out to be unfavorable in Indonesia (or otherwise unfavorable, such as an immigration-related decision), then this US$200+ of tax savings could be quite expensive. IRS Form 8833 is optional.
Thank you, I'll have a closer look at the tax treaty document and probably consult some of my Indonesian friends who are working in the US now. The student insurance pdf from Columbia (not the complete policy statement, more like a TL;DR table on basic coverage) does mention rights to continue coverage, but not "COBRA". I'll see if I can find more detailed documents around the insurance (to check for DI coverage as well), as I haven't officially accepted the admission offer, I can't access certain parts of the website.

One last thing (for now, hopefully ), how would my exit plan look like, if suppose many years later I decide to leave the US permanently and move to another country? Entering the US from Singapore, I can just sell all my PFICs, but the other way around would require me to sell, and thus realize capital gains and pay taxes right? And IRAs/401(k) plans seem to have 10% "early redemption" penalty if I'm not 59.5 years old.

Another way I thought of was to "transfer" my employer-provided 401(k) into my personal IRA without selling shares, and then leaving the IRA alone until I'm 59.5. But if I no longer am a US tax resident, that'd incur 30% withholding tax on dividends, and potentially huge estate taxes if I pass away?

Last edited by lemniscate; 20-02-2020 at 07:58 PM..
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Old 20-02-2020, 09:48 PM   #1806
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One last thing (for now, hopefully ), how would my exit plan look like, if suppose many years later I decide to leave the US permanently and move to another country? Entering the US from Singapore, I can just sell all my PFICs, but the other way around would require me to sell, and thus realize capital gains and pay taxes right?
1. There's no requirement to sell. For example, if you move to a country that has a reasonable tax treaty with the United States and/or taxes investments comparably or higher, your U.S. investments could well be perfectly excellent as-is.

2. If you were to sell, you'd (hopefully!) realize capital gains, yes.

3. Whether those capital gains are taxable or not depends on your tax situation at the time. In broad outline, the U.S. doesn't tax capital gains on intangible assets held by non-U.S. persons. (Real property in the U.S., yes.) Some other country might, but see #1. Also, the other country might consider the cost basis of those assets to be upon your entry into that country.

And IRAs/401(k) plans seem to have 10% "early redemption" penalty if I'm not 59.5 years old.
If you were to withdraw funds prematurely, yes. (Withdrawal is a better word here.) However, within each U.S. tax advantaged account you can shift investments around as you wish with no U.S. tax consequences. Typically you wouldn't want to or need to because you'd set up a simple, long-term investment portfolio consisting of one or a couple funds (a low cost "target date" fund would be a nice single fund choice), configure them for automatic dividend reinvestment, and leave them alone. But you can change things if you wish.

The investments within these accounts need to be U.S. investments. You cannot hold London listed funds (VWRA, IWDA, etc.) within a U.S. IRA, 401(k), or 403(b). But this is the U.S. we're talking about here, the world's largest financial market and economy, so you're spoiled for choices. The U.S. also has lots of tax treaties.

Another way I thought of was to "transfer" my employer-provided 401(k) into my personal IRA without selling shares, and then leaving the IRA alone until I'm 59.5. But if I no longer am a US tax resident, that'd incur 30% withholding tax on dividends, and potentially huge estate taxes if I pass away?
While you are allowed to roll a 401(k) or 403(b) into an IRA after you separate, you don't have to, and if the investment choices in your 401(k) or 403(b) are reasonable then it's perfectly fine to stand pat. There's a quirky little rule that 401(k) and 403(b) plans are shielded from creditors in every state while IRAs are shielded only in some states (thus probably not shielded if you're a not a resident of any U.S. state). Not that I expect you to have creditors trying to grab assets, but you never know. And you can also use two different custodians, so there's probably a minor advantage in that. Also, sometimes the 401(k)/403(b) plan administrator offers an attractive life annuity when you get to retirement age that might not be available from the IRA administrator.

As far as U.S. estate tax, I'll have to do a little more research. However, I don't think possible U.S. estate taxability is a reason to shy away from these U.S. tax advantaged accounts. In the "worst case," if you get to a point where you're concerned about possible U.S. estate tax, you'd just start your withdrawals as soon as allowed (age 59 1/2). And I don't think there'd be any difference in estate tax treatment of IRAs, 401(k)s, and 403(b)s when it comes to a non-U.S. person holding them. But time permitting I'll have to look into that.
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Old 20-02-2020, 10:16 PM   #1807
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1. There's no requirement to sell. For example, if you move to a country that has a reasonable tax treaty with the United States and/or taxes investments comparably or higher, your U.S. investments could well be perfectly excellent as-is.
Thanks, that'd definitely be convenient. Now if I could get past the legalese in the tax treaty document...

If you were to withdraw funds prematurely, yes. (Withdrawal is a better word here.) However, within each U.S. tax advantaged account you can shift investments around as you wish with no U.S. tax consequences. Typically you wouldn't want to or need to because you'd set up a simple, long-term investment portfolio consisting of one or a couple funds (a low cost "target date" fund would be a nice single fund choice), configure them for automatic dividend reinvestment, and leave them alone. But you can change things if you wish.

The investments within these accounts need to be U.S. investments. You cannot hold London listed funds (VWRA, IWDA, etc.) within a U.S. IRA, 401(k), or 403(b). But this is the U.S. we're talking about here, the world's largest financial market and economy, so you're spoiled for choices. The U.S. also has lots of tax treaties.
The availability of investment vehicles and especially the super low-cost (even zero fee) ETFs is definitely impressive. It seems like due to the competitive market of low-cost funds, pretty much every major broker (Vanguard, Fidelity, Blackrock etc.) have very good options. Some seem to believe that Vanguard has a better track record of reducing existing funds' fees rather than launching new funds at lower fees, though that's a claim I've yet to verify (how would that even affect zero fee funds?).

While you are allowed to roll a 401(k) or 403(b) into an IRA after you separate, you don't have to, and if the investment choices in your 401(k) or 403(b) are reasonable then it's perfectly fine to stand pat. There's a quirky little rule that 401(k) and 403(b) plans are shielded from creditors in every state while IRAs are shielded only in some states (thus probably not shielded if you're a not a resident of any U.S. state). Not that I expect you to have creditors trying to grab assets, but you never know. And you can also use two different custodians, so there's probably a minor advantage in that. Also, sometimes the 401(k)/403(b) plan administrator offers an attractive life annuity when you get to retirement age that might not be available from the IRA administrator.
Oh I was (somehow) under the impression that 401(k) is tied to your employment, thus if you leave a job you'd have to somehow transfer the funds to an individual IRA or the new employer's 401(k) account (assuming availability of same funds), but a quick google search invalidated that assumption. Protection from creditors would be a pretty neat thing to have, I'll look into that.

As far as U.S. estate tax, I'll have to do a little more research. However, I don't think possible U.S. estate taxability is a reason to shy away from these U.S. tax advantaged accounts. In the "worst case," if you get to a point where you're concerned about possible U.S. estate tax, you'd just start your withdrawals as soon as allowed (age 59 1/2). And I don't think there'd be any difference in estate tax treatment of IRAs, 401(k)s, and 403(b)s when it comes to a non-U.S. person holding them. But time permitting I'll have to look into that.
That's true, estate tax is just a rather minor concern in my part. Not like I have dependents relying on the funds I leave behind - and even if I do in the future, estate tax should've been accounted for in my estate planning anyway.

I guess I've just been spoiled by Singapore's taxes. I've always been joking with my friends who know that I'm going to study in the US, that the thing I'd miss the most from Singapore would be zero capital gain tax. I guess that might be a reality soon.

Thanks a lot, BBCW!
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Old 20-02-2020, 11:37 PM   #1808
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Hi BBCwatcher,
Do you know if buying UK stocks as a Singaporean , using interactive brokers will incur any dividend withholding tax, capital gain tax or stamp duties?
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Old 21-02-2020, 07:57 AM   #1809
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Some seem to believe that Vanguard has a better track record of reducing existing funds' fees rather than launching new funds at lower fees, though that's a claim I've yet to verify (how would that even affect zero fee funds?).
It’s pretty hard to reduce fees below zero.

To my knowledge there are no ETFs that are zero fee. A few mutual funds are, notably Fidelity’s FZROX and FZILX. Last I checked Schwab offers the lowest cost target date funds, also mutual funds. (Vanguard is very close.) I tend to prefer the mutual funds slightly, other things being equal, since they work a little better for automatic dividend reinvesting.

I guess I've just been spoiled by Singapore's taxes. I've always been joking with my friends who know that I'm going to study in the US, that the thing I'd miss the most from Singapore would be zero capital gain tax. I guess that might be a reality soon.
Within Roth variants of these accounts there’s zero U.S. dividend and zero U.S. capital gains tax, assuming a hold to at least age 59 1/2. You’re not getting a deal that good from Singapore.

Do you know if buying UK stocks as a Singaporean , using interactive brokers will incur any dividend withholding tax, capital gain tax or stamp duties?
U.K. stocks (as opposed to funds) involve stamp duties in at least one direction and estate tax if the total U.K. taxable holdings cross the threshold. I’m assuming in this answer you’re only a resident of Singapore and not subject to any other jurisdiction’s taxes (not a U.S. person for example).

Last edited by BBCWatcher; 21-02-2020 at 08:00 AM..
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Old 21-02-2020, 10:39 AM   #1810
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On the topic of zero cost mutual funds, I assume they cover their operating expenses by the rebate they get from lending stocks to shorters?

I haven't delved deep into the differences between ETFs and mutual funds since most of the available MFs here aren't good. I'll take a look at Fidelity's zero fee MFs and other options as well. A two/three-fund portfolio of global equities and US treasuries should be simple to maintain. Given the zero fees of the MFs, is there any reason to choose ETFs instead, assuming all else equal?
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Old 21-02-2020, 02:15 PM   #1811
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On the topic of zero cost mutual funds, I assume they cover their operating expenses by the rebate they get from lending stocks to shorters?
Probably, and possibly via supply of market liquidity and a minor bit of interest on the floats. Fidelity doesn’t make much, though. Mainly they’re to attract and retain customers who then might buy some other Fidelity offerings, and they have some really good ones actually.

I haven't delved deep into the differences between ETFs and mutual funds since most of the available MFs here aren't good. I'll take a look at Fidelity's zero fee MFs and other options as well. A two/three-fund portfolio of global equities and US treasuries should be simple to maintain. Given the zero fees of the MFs, is there any reason to choose ETFs instead, assuming all else equal?
If FZROX and FZILX are what you’re looking for in terms of composition, I can’t think of a good reason to choose an ETF.

Why U.S. Treasuries? You at least wouldn’t put those inside IRA, 401(k), and 403(b) accounts that you’ll be riding until at least age 59 1/2. Which reminds me that once you get a U.S. Social Security Number, U.S. bank or credit union account, and U.S. mailing address you can open a TreasuryDirect account. Then you can purchase U.S. Treasuries and/or U.S. Savings Bonds if you wish, free of charge.

Last edited by BBCWatcher; 21-02-2020 at 02:20 PM..
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Old 21-02-2020, 09:02 PM   #1812
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If FZROX and FZILX are what you’re looking for in terms of composition, I can’t think of a good reason to choose an ETF.
I did look up some information on those, and it seems like they should be good enough for my needs. Closer to the start of my internship I'll try to open an IRA with Fidelity.

Why U.S. Treasuries? You at least wouldn’t put those inside IRA, 401(k), and 403(b) accounts that you’ll be riding until at least age 59 1/2. Which reminds me that once you get a U.S. Social Security Number, U.S. bank or credit union account, and U.S. mailing address you can open a TreasuryDirect account. Then you can purchase U.S. Treasuries and/or U.S. Savings Bonds if you wish, free of charge.
I was meaning to say US treasury ETFs/MFs, anything bad with putting those in IRA/401/403? What's your opinion on using bond ETFs/MFs as opposed to buying US treasuries directly?
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Old 21-02-2020, 11:04 PM   #1813
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I was meaning to say US treasury ETFs/MFs, anything bad with putting those in IRA/401/403? What's your opinion on using bond ETFs/MFs as opposed to buying US treasuries directly?
OK, here are a couple possible problems:

1. You don't have a legal right of abode in the United States, so the U.S. dollar isn't your retirement currency, not yet anyway.

2. U.S. Treasuries are the most conservative U.S. dollar bonds, which would be out of sync with a long-term portfolio anyway.

3. You really don't want to put the most conservative assets inside your IRA, 401(k), and/or 403(b) because that typically dilutes the tax advantages.

So I think it's rather prudent to stay aggressive in your tax advantaged retirement saving vehicles. If you want some bonds, then I'd probably just take the small portion that's inside a low cost "target date" mutual fund. It's not exactly the right currency, but it's small until you get much older. Or maybe a global (including U.S.) investment grade corporate bond fund if you can find a good one.
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Old 21-02-2020, 11:30 PM   #1814
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OK, here are a couple possible problems:

1. You don't have a legal right of abode in the United States, so the U.S. dollar isn't your retirement currency, not yet anyway.

2. U.S. Treasuries are the most conservative U.S. dollar bonds, which would be out of sync with a long-term portfolio anyway.

3. You really don't want to put the most conservative assets inside your IRA, 401(k), and/or 403(b) because that typically dilutes the tax advantages.

So I think it's rather prudent to stay aggressive in your tax advantaged retirement saving vehicles. If you want some bonds, then I'd probably just take the small portion that's inside a low cost "target date" mutual fund. It's not exactly the right currency, but it's small until you get much older. Or maybe a global (including U.S.) investment grade corporate bond fund if you can find a good one.
I see, that makes sense. Thanks a lot.
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Old 22-02-2020, 12:19 AM   #1815
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Hi bbcw, say all of my oa contribution is now being used to service my mortgage. Is this something that I should be worried about? Essentially my oa isn't compounding at all so that's worrying... Whilst at the end of the day I'll need to fork out the compounded interest on my end so the all in cost for borrowing my cpf is 5%. Or do you think topping up the oa to a minimum amount would make sense
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