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Retirement Savings Flows and Financial Advice: Should You Roll Over Your 401(k) Distribution? (PDF)
"Pension rollovers are an important source of revenue for money managers.... [As] well as addressing an issue of personal finance and the quality of financial advice that individuals receive, this article addresses the issue of the limits of the effects of inertia.... It then considers a behavioral economics explanation for why rollovers have occurred. It considers advertising and advice on rollovers as part of that explanation and examines reasons why participants may not be considering fees in their decision." (Benefits Quarterly, published by the International Society of Certified Employee Benefit Specialists [ISCEBS])
Your Roth IRA Calculator May Be Lying to You
"How many people, after running such a calculation and determining it was advisable to opt for the traditional IRA, actually put aside the amount of money they would have used to pay the tax on the conversion and invest it in a similar manner? Would/do you? Each and every year?" (Slott Report)
Updated GAO Report: Preliminary Information on IRA Balances Accumulated as of 2011
"In 2014, the federal government will forgo an estimated $17.5 billion in tax revenue from IRAs. Congress limited annual contributions to IRAs to prevent the tax-favored accumulation of unduly large balances, but concerns have been raised that tax benefits accrue primarily for higher income individuals. This statement provides preliminary observations based on ongoing work on information on IRA balances in terms of reported fair market value aggregated by taxpayers. GAO analyzed 2011 IRS statistical data." [Originally released Sept. 16, 2014; reissued Oct. 22, 2014.] (U.S. Government Accountability Office [GAO])
[Guidance Overview] IRS Issues Favorable Guidance on After-Tax Rollovers
"Starting in 2015, participants can avoid current taxes on retirement plan distributions that include after-tax amounts. The rules apply to defined benefit, defined contribution, 403(b) and governmental 457(b) plans. Until now, participants had to allocate pro rata portions of pre-tax and after-tax contributions to each direct rollover." (Towers Watson)
[Official Guidance] 2015 IRS Form 5498 (Draft): IRA Contribution Information (PDF)
"The information on Form 5498 is submitted to the Internal Revenue Service by the trustee or issuer of your individual retirement arrangement (IRA) to report contributions, including any catch-up contributions, required minimum distributions (RMDs), and the fair market value (FMV) of the account. For information about IRAs, see Pubs. 590 and 560." (Internal Revenue Service [IRS])
The October 31 IRA Trust Deadline: The Who, What, When and Why
"There is still one more IRA deadline to meet for this month.... It applies to: [1] IRAs with a trust as the beneficiary; [2] The IRA owner died in 2013.... A copy of the trust or a list of the beneficiaries and their entitlements must be provided to the IRA custodian.... Most individuals who name a trust as the beneficiary of their IRA do so with the understanding that the required distributions from the IRA will continue to be made to the trust using the age of the oldest trust beneficiary. This will NOT happen unless the October 31 deadline is met." (Slott Report)
IRS Waives 60-Day IRA Rollover Rule Due to Taxpayer's Medical Condition
"In June 2010, Matt was informed by the bank's attorneys that his accounts would be closed in 30 days and all funds would be distributed. As a result of Matt's mental illness, he ignored the notice and didn't realize that checks totaling the IRA's value were distributed and mailed to him on July 13, 2013. The next month, the checks were discovered by Matt's spouse, who was not aware that the checks were IRA proceeds." (Slott Report)
Recent IRS Guidance on Roth Rollovers Lifts Long-Standing Ambiguity
"The guidance in [the] proposed rules ... and accompanying guidance in Notice 2014-54 clarified that plan participants can transfer after-tax savings from their retirement plans to Roth IRAs. The IRS also gave guidance on sending retirement plan distributions to multiple destinations, something that hadn't been clear in the past[.]" (Bloomberg BNA)
IRS Blesses Tax-Free Roth Conversions
"Recent IRS pronouncements have cleared the path for tax-free Roth conversions of after-tax money in retirement plans for some individuals. To be among the lucky people who can do this, you must meet two requirements: First, you must participate in a qualified retirement plan (such as a 401(k) plan). Second, you must have after-tax money either in that plan or in a traditional IRA. If you have both those characteristics, you can convert the after-tax money to a Roth IRA tax-free with the blessing of the IRS." (Natalie Choate, for Morningstar Advisor)
Recent Guidance Relating to Pretax and After-Tax Distributions
"With an increase in the number of retirement plans that offer Roth after-tax contributions, more participants may be retiring with pretax and after-tax amounts in their plan accounts.... The new rules assign the pretax amount to the direct rollover portion first. This allows participants to directly roll over the pretax portions. Any excess pretax amount is next assigned to any indirect rollover and remaining pretax amounts are taxable." (Milliman Retirement Town Hall)
Can I Move Non-IRA Assets to an Inherited IRA?
"Only inherited IRA or inherited employer plan assets can be directly transferred from one inherited retirement account to another inherited IRA account. If you moved the non-IRA assets into an inherited IRA you would have an excess contribution, which would be subject to a penalty of 6% per year for every year that it remained in the inherited IRA." (Slott Report)
Qualifying a 'See-Through' Trust as an IRA Designated Beneficiary -- Conduit or Accumulation?
"Treasury Regulations actually do allow trusts in certain circumstances to be treated as designated beneficiaries eligible to stretch post-death RMDs over life expectancy, by looking through the trust to the underlying beneficiaries and using their life expectancies instead. The caveat, though, is that qualifying for "see-through" trust treatment requires the trust to be drafted properly, consider crucial decisions like whether to be structured as a 'conduit' or 'accumulation' trust, and at best may still entail the trade-off of less favorable income tax treatment to achieve other financial and estate planning goals!" (Michael Kitces in Nerd's Eye View)
[Guidance Overview] Changes to Allocation Rules for Distributions Including After-Tax Amounts (PDF)
"Although the participant now has flexibility to determine the amounts to be rolled over and the destinations, the requirement that the first dollars rolled must be pretax is unchanged. A participant can effectively roll all the non-Roth, non-taxable money to a Roth IRA, but only if all pretax dollars are rolled over to an eligible retirement plan; it is not possible to roll over only the non-taxable money and take the taxable amount as a distribution." (Buck Consultants at Xerox)
[Guidance Overview] New Allocation Rules for Roth Account Rollovers
"A major benefit of the new rules will be the ability to choose one rollover target for pre-tax money and a different rollover target for Roth money. For example, an employee changing jobs could send the pre-tax money to the new employer's plan and set up a new Roth IRA for the Roth money. Plan administrators will need to be aware of these rules for purposes of reporting on Form 1099-R distributions of pre-tax and after-tax amounts that will be separately rolled over." (McGuireWoods LLP)
[Guidance Overview] IRS Guidance Relaxes Allocation Rules Making After-Tax Rollovers Easier
"The new guidance applies only to eligible rollover distributions and does not change the requirement for allocation of the investment in the contract between a lump sum and an annuity when a participant is receiving both.... While the new rules provide that multiple disbursements to different destinations are treated as a single distribution, each disbursement may still be required to be reported on a separate Form 1099-R.... Plan sponsors should consider reviewing and updating their 402(f) safe harbor notices[.]" (Ice Miller LLP)
If You Really Have to Touch Your Retirement Stash, Here's How to Do It Right
"Gone are the days when it was considered taboo, or even unusual, to consider touching one's 401(k) before retirement.... Here are five questions to ask yourself before deciding whether -- or how -- to start raiding your 401(k). [1] What's the tax hit on a 401(k) loan compared with a withdrawal? ... [2] If I choose a withdrawal, can I avoid some of the tax penalties? ... [3] Am I feeling solid in my job? ... [4] Will I mind my account in a slow lane for six months or more? ... [5] Do I have an IRA alternative?" (The Wall Street Journal; subscription may be required)
[Opinion] Text of Group Letter to Congress: 40 Facts About ERISA and Retirement Plans (PDF)
"The employer-provided retirement system has been overwhelmingly successful in providing retirement income. In 2011, private-sector employers contributed over $255 billion into their retirement plans and paid out over $470 billion in retirement benefits. [The authors] support the current system and encourage Congress to maintain the flexibility that allows employers to provide benefits tailored to their workforce." (American Benefits Council and 22 other Employer and Professional Organizations)
Roth IRAs and the Magical Disappearing and Reappearing Compensation Trick for Individuals with Foreign Earned Income
"In determining compensation for purposes of the 'dollar limitation' applicable to Roth IRAs ... compensation does NOT include foreign earned income (nor any amounts excluded through the foreign housing exclusion).... On the other hand, ... foreign-earned income IS treated as income for purposes of ... the phase-out limit.... Under phase-out rules, the contribution limit for Roth IRAs may be reduced based on a combination of the amount of a taxpayer's modified adjusted gross income (AGI) and federal income tax filing status.... AGI is computed for purposes of the 'phase out limitation' without regard to the I.R.C.'s provisions excluding certain foreign earned income or housing costs from gross income." (Bloomberg BNA)
[Guidance Overview] IRS Reaches a Split Decision on Rollover Allocation Rules
"The guidance issued in Notice 2014-54 becomes effective on January 1, 2015. For periods before January 1, 2015, the Notice permits a reasonable interpretation of the statutory rollover rules, which would include allowing pre-tax and after-tax amounts to be directed to separate destinations. Plan administrators using the IRS model rollover notice or a notice with similar language may consider revising their rollover notices to reflect the new guidance." (Sutherland Asbill & Brennan LLP)
[Guidance Overview] IRS Provides Flexibility for Allocating the Pre-Tax and After-Tax Portions of a Distribution Made to Multiple Destinations
"In its background discussions, the IRS indicates that ... comments ... following the release of the 2009 rollover notice ... pointed out that participants could achieve their allocation goals by taking their distributions in several steps, but only if they had sufficient other funds to replace the portion of the distribution withheld to pay income tax withholding.... [Notice 2014-54] clarifies and simplifies the process for multiple destination distributions. It also indicates that the IRS will revise the 2009 rollover notice to reflect this change." (Thomson Reuters / EBIA)
Strategies Arise to Take Advantage of New IRS After-Tax Rollover Opportunity
"Retirement plan advisers have said after-tax savings programs aren't a common feature at the employers they're working with. In fact, some companies have actively backed away from those programs.... For plan sponsors, the issue goes back to whether they're able to keep the contributions in the 401(k) separate from the earnings, as the earnings on that after-tax money can't be pulled into the Roth -- only the after-tax money ... Though larger employers are likely to already have their custodians account for contributions separately from the earnings, this isn't necessarily the case for smaller firms." (InvestmentNews)
After-Tax Money in Retirement Plans: Five Questions for Employees After IRS Notice 2014-54
"Aren't after-tax contributions the same as Roth contributions? ... Do all plans allow for after-tax contributions? ... Do the same contribution limits that apply to pre-tax and Roth salary deferrals also apply to after-tax contributions? ... Do the same distribution rules that apply to pre-tax and Roth salary deferrals apply to after-tax contributions? ... If I have after-tax funds in my employer plan, how does IRS Notice 2014-54 impact me?" (Slott Report)
[Guidance Overview] IRS Notice 2014-54 Acquiesces on Splitting After-Tax 401(k) Contributions for Roth Conversion
"[It] appears that the new IRS rules are so open in this regard, that they not only permit the free conversion of after-tax 401(k) contributions into a subsequent Roth IRA, but the availability of this conversion makes it more appealing than ever to make after-tax contributions into a 401(k) plan in the first place (at least after first obtaining the employer 401(k) match and maxxing out available pre-tax or Roth contribution limits). Will the new rules lead to a resurgence of higher-income individuals making after-tax contributions to a 401(k) plan, after maxxing out available alternatives, for the sole purpose of preparing to complete a future tax-free Roth conversion of the contributions down the road?" (Michael Kitces in Nerd's Eye View)
[Guidance Overview] IRS Issues Proposed Rules on Allocation of After-Tax Amounts from Roth Accounts
"Previously, providers were determining whether a distribution to multiple destinations should be treated as separate distributions or a single distribution. Commenters indicated that by treating distributions to multiple destinations as a single distribution, some plan providers were allowing participants to distribute the after-tax amount to one destination and the pre-tax amount to another. As a result of these comments, the proposed rules remove the current allocation rule and treat a distribution made to multiple destinations as a single distribution[.]" (Practical Law Company)
[Guidance Overview] IRS Employee Plans News, Issue 2014-15, September 22, 2014 (PDF)
Topics include: [1] Form 5498 -- errors by IRA trustees, issuers and custodians may cause tax trouble for IRA owners; [2] Finding missing plan participants: steps plan sponsors may take to locate missing participants; [3] DOL corner: Updates on brokerage windows and missing participants; and [4] IRS and DOL guide for retirement plan reporting and disclosure issues (chart summarizes plan sponsors responsibilities on Form 5500 annual reports, participant notices and other items). (Internal Revenue Service [IRS])
[Guidance Overview] Multiple Retirement Accounts: Can I Take the Total Required Minimum Distribution from Just One?
"You cannot take the RMD for one type of account from a different type of account. You cannot take an employer plan RMD from an IRA or vice versa.... An RMD must be taken from each employer plan that you might have.... If you have more than one 403(b), you can calculate each RMD and then combine them and take them from any 403(b) account you have." (Slott Report)
[Guidance Overview] Changes Proposed to Allocation Rules for Rollovers
"Under the new rules, all disbursements of benefits from the [section 401, 403(b) or 457(b)] plan to the recipient that are scheduled to be made at the same time are treated as a single distribution no matter whether the recipient has directed that the disbursements be made to a single destination or multiple destinations. If the pretax amount of the aggregated disbursements that are treated as a single distribution is less than the amount of the distribution that is directly rolled over to one or more eligible retirement plans, the entire pretax amount is assigned to the amount of the distribution that is directly rolled over. If the rollover is to two or more plans, then the recipient can select how the pretax amount is allocated among these plans." (Journal of Accountancy)
IRS Shifts Course with New Rollover Distribution Rule
"[T]he new ruling permits savers to break out that after-tax portion of money within the retirement plan and convert it to a Roth IRA free of taxes. This decision is a shift from where the IRS stood on eligible rollover distributions of money from a retirement plan when those dollars included after-tax contributions." (InvestmentNews)
[Guidance Overview] IRS Notice 2014-54 Allows Splitting Pretax and After-Tax Amounts by Direct Rollover
"Previously, the IRS stated in Notice 2009-68 that the splitting of pretax and after-tax amounts in participant accounts could not be done by direct rollover, but could be done if a plan participant received a direct distribution and then indirectly rolled over ('60-day rollover') a pretax amount to an IRA or retirement plan.... Notice 2014-54 makes possible the splitting of pretax and after-tax amounts by direct rollover." (Ascensus)
[Official Guidance] IRS Notice 2014-54: Guidance on Allocation of After-Tax Amounts to Rollovers (PDF)
"This notice provides rules for allocating pretax and after-tax amounts among disbursements that are made to multiple destinations from a qualified plan described in Section 401(a) of the Internal Revenue Code. These rules also apply to disbursements from a Section 403(b) plan or a Section 457(b) plan maintained by a governmental employer described in Section 457(e)(1)(A). Section VI of this notice provides transition rules." (Internal Revenue Service [IRS])
GAO Report Shines Light on IRAs: Popular and Ripe for the Picking
"The report provides some fascinating information about the number of people who have IRAs, as well as the staggering amounts that some people have accumulated in them.... The government realizes that IRAs are ripe for the picking.... There are a lot of people with IRAs.... Mitt Romney' s IRA has company!" (Slott Report)
Text of GAO Report: Preliminary Information on IRA Balances Accumulated as of 2011
"For tax year 2011 (the most recent year available), an estimated 43 million taxpayers had individual retirement accounts (IRA) with total reported fair market value of $5.2 trillion. About 99 percent of those taxpayers had aggregate IRA balances (including inherited IRAs) of $1 million or less.... [F]ew taxpayers had aggregated balances exceeding $5 million as of 2011." (U.S. Government Accountability Office [GAO])
IRS Rules Verbal Request a Timely IRA or ESA Contribution
"The IRS has issued a private letter ruling (PLR) to a nonbank trustee that would permit the trustee' s clients to satisfy IRA and Coverdell education savings account (ESA) contribution deadline requirements by making timely written or oral requests to transfer funds from general accounts to IRAs or ESAs. PLR 201437023 was issued to a nonbank trustee whose clients commonly have IRAs or ESAs as well as general investment accounts with the organization. IRA and ESA contributions are often executed by the trustee transferring the appropriate amount from a client' s general account to his IRA or ESA." (Ascensus)
401(k)/IRA Holdings in 2013: An Update from the Federal Reserve
"The Federal Reserve's 2013 Survey of Consumer Finances provides an opportunity to examine trends in retirement savings over the past few years. The good news is increased use of target date funds; the bad news is no improvement in participation rates, significant leakages, and high fees. Surprisingly, for working households nearing retirement, median combined 401(k)/IRA balances actually fell from $120,000 in 2010 to $111,000 in 2013. Younger households did see rising balances but retirement savings levels are clearly inadequate, and about half of all households have no 401(k) assets at all." (Center for Retirement Research at Boston College)
How Safe Is Your Retirement Nest Egg from Creditors?
"IRA funds dwarf the amount of retirement assets held in employer sponsored retirement plans. Those IRAs will offer tempting targets to creditors when they pass on death to beneficiaries other than a surviving spouse. Consider leaving retirement assets in your employer sponsored plans, where protection from creditors is assured, as long as possible. Alternatively, for assets currently held in an IRA, consider retaining the spouse as the primary beneficiary (that appears to be safe for now) and naming only a spendthrift trust as the alternative beneficiary[.]" (The Retirement Plan Blog)
What Happens When an IRA Beneficiary Dies?
"[If] the primary beneficiary survives the participant but later 'disclaims' the account by means of a qualified disclaimer, he is treated as having predeceased the participant -- he drops out of the picture. In that case the contingent beneficiary comes back in to the picture ... [W]ith a trusteed IRA it is possible for the original participant to dictate who the successor beneficiary is.... [If] the primary beneficiary (having survived the participant) later dies while there is still money in the account, that money will pass to the participant's chosen successor beneficiary, not to the estate of the primary beneficiary." (Morningstar Advisor)
Can You Contribute to a Roth 401(k) and Roth IRA in the Same Year?
"Maybe. Participation in an employer plan does not disqualify you from contributing to an IRA or a Roth IRA ... [T]he question is not whether or not you can make the [IRA] contribution, but whether or not you can deduct the contribution.... If you make a non-deductible contribution, be sure you file Form 8606 with your tax return to tell IRS that you have made an after-tax contribution. Otherwise, when you go to take the funds out, you will be taxed again." (Slott Report)
Leaving a Legacy: Three Differences Between Roth IRAs and Life Insurance
"Life insurance and Roth IRAs have a lot in common. They are both often used as wealth transfer tools to help facilitate an efficient transfer of assets from one generation to the next, and they are both able to provide a tax-free legacy, just to name a few.... [1] Roth IRAs are always included in your estate ... [2] There's a limit to the amount you can contribute to a Roth IRA ... [3] There are no RMDs for life insurance." (Slott Report)
IRS Allows Spouses to Roll Inherited IRAs Through Own Trusts to Their IRAs
"In private letter rulings (PLRs) 201430026 and 2014130029, IRS allowed the surviving spouses to roll their inherited IRAs through a trust to their own IRAs. The twist here is that the trust beneficiary was the spouse's own trust, not a trust established by the decedent." (Slott Report)
What New IRS Rules Mean for Your Retirement Account
"Starting in 2015, new rules apply for withdrawing money from an IRA with the aim of rolling it into another IRA investment, taking possession of the funds yourself in the process. The short version of the new rule is that you can only roll over an account this way once every 365 days ... But the longer version is: Don't even try to skirt this rule." (U.S. News & World Report)
Five Retirement Account Creditor Protection Myths ... And the Real Facts
"Myth #1: Retirement money is universally protected from creditors ... Myth #2: Plan money is always creditor protected ... Myth #3: General creditor protection and bankruptcy protection are the same ... Myth #4: Retirement account beneficiaries have the same levels of protection as owners ... Myth #5: Plan money retains its creditor protection when it's rolled over to an IRA." (The Slott Report)
IRA Withdrawals Tied to RMD Requirements
"For those at or above the required minimum distribution (RMD) age of 70-1/2, the withdrawal rates at the median (mid-point) appeared close to the amount that is required to be withdrawn, though some were significantly more ... [A]mong individuals under age 60, 10% or fewer had a withdrawal.... 65.4% of the individuals taking a withdrawal were ages 65 or older, and just over half (51.1%) were ages 71 or older, while just 11.5% were younger than age 50." (Wolters Kluwer Law & Business)
Two IRA Rollovers from One Account in One Year: Nothing Good Happens
"If you request two distributions on two different dates, then you can decide which one you want to rollover with the 60-day rollover period. As long as you have the funds, the smart choice is to roll over as much as you can of the larger distribution. This reduces the amount you will have to include in income for the year and any 10% early distribution penalties you might owe.... When the excess contribution is not timely corrected, then the client will owe a penalty of 6% per year for every year that the excess amount remains in the IRA." (The Slott Report)
A 401(k) Rollover Checklist for Plan Participants
"[A]t a minimum, holding multiple retirement accounts here and there means that you have more holdings to monitor. And if the old 401(k) is subpar, you may actually hinder your returns by staying put.... [1] Check your account value.... [2] Determine whether to stay within the 401(k) confines.... [3] Assess the quality of your 401(k) options.... [4] Find the right IRA provider.... [5] Decide whether to convert your Traditional 401(k) assets to Roth.... [6] Execute.... [ 7] Determine what to invest in." (Morningstar)
[Opinion] Former DOL Deputy Director Declares Scandal in IRA Rollovers
"The current standards allow brokers to present sales pitches that appear to be similar to investment advice. Retail investors have a difficult (impossible?) time distinguishing between a sales pitch and unbiased advice. The result is that many investors are lured away from appropriate and low-cost investments into higher-priced investment vehicles sold by someone who puts his or her own fees ahead of the best interests of the investor. Allowing these practices just adds to the many challenges people face in saving for retirement. Financial advisors should be in the business of helping people succeed at investing. Period." (Employee Fiduciary)
Why a Roth Conversion May Be a Bad Idea Even If Taxes Are Higher in the Future
"[T]he simple reality is that there are many paths to higher tax burdens in the future that don't necessarily involve higher marginal tax rates on IRA withdrawals. Which means ultimately, advisors should be very cautious about doing Roth conversions -- especially conversions at rates that are 33% or higher -- and the best possible thing to do with a pre-tax IRA may simply be to continue to hold it, and wait for tax burdens to increase... because when paired with a compression of tax brackets that leads to lower marginal tax rates, not converting to a Roth could actually be one of the best long-run tax savings strategies around!" (Michael Kitces in Nerd's Eye View)
[Opinion] Supreme Court Disregards ERISA and Goes Further Astray in Applying Bankruptcy Law to Retirement Assets
"The Court's implicit addition of the phrase 'debtor's created' at the start of the exemption is based on its unexamined assumption that otherwise the phrase, 'Retirement funds to the extent that those funds are in,' would be rendered 'superfluous.' ... The phrase 'retirement funds to the extent that those funds are in' has a significance without the addition of any words that is consistent with the legislative history of the phrase, the other bankruptcy provisions, and ERISA.... Under this analysis the bankruptcy fund protection would be available to the participants and beneficiaries of such non-ERISA pension plans." [Clark v. Rameker, No. 13-299 (U.S. June 12, 2014)] (Albert Feuer via SSRN)
Brokers Lure Soldiers Out of Low-Fee Federal Retirement Plan
"Workers who leave jobs with the federal government transferred $10 billion last year out of the Thrift Savings Plan. Forty-five percent of participants who left federal service in 2012 removed all of their funds from the plan and closed their accounts by the end of 2013.... 'Swayed by the financial industry's marketing efforts,' Thrift Savings Plan members in recent years 'have become an even more popular target' for companies luring them into higher-cost IRAs, Gregory Long, the plan's executive director, wrote[.]" (Bloomberg)
Recent Supreme Court Case Highlights New Concerns in Naming IRA Beneficiary
"While most states ... do not exempt inherited IRAs, some states (e.g., Florida and Arizona) specifically provide that inherited IRAs are exempt.... However, one should carefully consider whether reliance on the state protection creates a false sense of security. If a parent resides in Florida or Arizona but the child inherits the parent's IRA and resides in a state that does not specifically protect inherited IRAs ... the inherited IRA could be subject to the claims of creditors in bankruptcy." (Quarles & Brady LLP)
How to Get Closure on IRA Mistakes
"For some mistakes, the statute of limitations eventually protects you -- if you file the right kind of tax return. The problem is, until 2011 (when the Paschall case was decided), people didn't realize that the 'return' they needed to file was Form 5329.... Since Paschall, it has become imperative for prudent IRA owners to file Form 5329 every year, even when they (think they) owe no penalties. If you just file Form 5329, even if you report "zero, zero, zero" in each penalty section, you start the statute of limitations running." (Morningstar Advisor)
[Guidance Overview] Accepting Rollover Contributions Now Easier for Retirement Plans
"The IRS now has provided a streamlined process for validating rollover contributions in the form of two safe harbors, one for rollovers from other employer qualified plans and another for rollovers from IRAs. These safe-harbor rules eliminate the need for plan administrators to obtain a copy of a qualified plan's IRS determination letter ... and in the case of rollovers from IRAs, obtain evidence that the rollover amount originated from a qualified or governmental 457(b) plan." (Poyner Spruill LLP)
Eighth Circuit Reverses Tax Court's Denial of Taxpayer's Partial Rollover Contribution
"The court determined that the fact that entitlement to the partial rollover was overlooked by the IRS before the Tax Court where the taxpayer represented himself pro se was enough to excuse the taxpayer from not raising the issue until represented by counsel on appeal. Though the appellate court generally does not consider issues not raised in the lower court, it makes an exception 'where injustice might otherwise result.' Accordingly, the Eighth Circuit reversed the Tax Court and allowed the taxpayer's belated partial rollover argument." [Haury v. Comm'r, No. 13-1780 (8th Cir. May 12, 2014)] (Wolters Kluwer Law & Business)
How Long Must I Keep My Year-End IRA Statements?
"All IRA custodians are required to send you an annual statement of the December 31 fair market value (FMV) of your IRA by January 31 of the following year. That FMV information is also shown on IRS Form 5498, which is sent to IRS and to you each year in May. Accordingly, there is no need for you to keep the end-of-year mutual fund statements once you check them against the 5498." (The Slott Report)
Study Says DC Plans Work When Supplemented by Social Security
"Recent retirees reported median household assets of $473,000, which included investable assets and home equity, while subtracting debt. Nearly half, or 48%, had $500,000 or more.... Yet despite these healthy numbers, Social Security accounted for the lion's share, or 43%, of their income. The second largest source, at 19%, came from traditional defined benefit plans, followed by amounts withdrawn from personal savings and investment accounts including IRAs and defined contribution plans, at 18%." (On Wall Street)
IRA Withdrawals During 2012: How Much and When (PDF)
"For those at or above the required minimum distribution (RMD) age of 70-1/2, the withdrawal rates at the median (mid-point) appeared close to the amount that is required to be withdrawn, though some were significantly more. In contrast, among individuals under age 60, 10 percent or fewer had a withdrawal. Significantly, when looking at the distribution of the withdrawal rates for those ages 70 or older, the median of the three-year average withdrawal rates also show that most individuals are withdrawing at a rate that is likely to be able to sustain some level of post-retirement income from IRAs throughout their retirement years." (Employee Benefit Research Institute [EBRI])
[Guidance Overview] IRS Provides New Safe Harbors for Validation of Rollover Contributions (PDF)
"Rollovers made electronically will qualify for either of the new safe harbors as long as the distributing plan administrator or IRA trustee provides the required information regarding the source of funds to the administrator for the receiving plan. If the distributing plan is not required to file Form 5500 ... the EFAST2 records will not be an option for confirming plan status.... Plan administrators may develop other processes for making reasonable conclusions that a potential rollover contribution is a valid rollover contribution." (Prudential)
Distribution Planning for Beneficiaries: Why It's Important to Check IRA Agreements and Retirement Plan Provisions
"Most employer plans do not offer a stretch option to a non-spouse beneficiary because they do not have to.... On the IRA side, a custodian does not have to offer a direct transfer option.... Other items to check for are the ability to use a trust as a beneficiary, the ability to use a power of attorney and the ability to disclaim inherited retirement assets." (The Slott Report)
Three Things to Check on a Beneficiary Form -- Besides the Beneficiaries
"[1] Does the beneficiary form work on a per stripes or per capita basis? ... [2] Are there any restrictions on whom you can name as a beneficiary? ... Some beneficiary forms ... may not allow a trust to be named as a beneficiary. Others may limit the number of primary or contingent beneficiaries you can name.... [3] Does the beneficiary form allow the stretch? ... [A] retirement account may require that any beneficiary -- designated or not -- empty an inherited account within 5 years." (The Slott Report)
All-Time High: Fidelity's Average Annual IRA Contribution Climbs to Over $4,000
"The findings ... show investors 50 years of age and over continue to save the most in Traditional and Roth IRAs. Younger investors, those in their 20s, 30s and 40s, are adopting strong savings behaviors and have made strong increases with overall average contributions -- 3.9 percent, 6.7 percent and 6.2 percent, respectively from 2012 tax year to 2013 tax year. Additionally, average contributions to Roth IRAs continue to outpace average Traditional IRA contributions on both ends of the age spectrum." (Fidelity)
IRA Withdrawals in the 'Crossover Zone' Can Trigger the Section 1411 Net Investment Income Tax
"[B]ecause the tax only applies to investment income above certain income thresholds, it's possible for 'non'-investment income like retirement distributions to cause the surtax on other investment income by pushing it over the line. The end result: even types of income not directly subject to the tax end out indirectly causing the 3.8% surtax after all! Given this dynamic, investors whose investment income is in the 'crossover zone' and straddles the income threshold -- such that only a portion of their investment income is subject to the surtax -- have a unique planning opportunity to shift income into other years where they do not face the crossover zone." (Michael Kitces in Nerd's Eye View)

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