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Fidelity to Match a Percentage of IRA Contributions for Some New Depositors
"Fidelity's matching program will last for three years, and it's limited to certain customers. Those who transfer a Roth, traditional or rollover IRA to Fidelity with a balance of at least $10,000 and register for the program will get the match. The amount of the match will depend on how much money an investor is bringing to Fidelity. Someone transferring $10,000 would get a match worth 1 per cent of their annual contributions. The percentage rises for people bringing more money: Someone transferring $500,000 would get a 10 per cent match on new contributions." (Brandon Sun)
Traditional and Roth Individual Retirement Accounts (IRAs): A Primer (PDF)
"This report explains the eligibility requirements, contribution limits, tax deductibility of contributions, and rules for withdrawing funds from the accounts. It also describes the Saver's Credit and provisions enacted after the Gulf of Mexico hurricanes in 2005 and the Midwestern storms in 2008 to exempt distributions to those affected by the disasters from the 10% early withdrawal penalty." [CRS Report RL34397, Feb. 12, 2015] (Congressional Research Service [CRS])
The Problem with Naming a Trust as the Beneficiary of an Annuity, and Using a Beneficiary Designation with Restricted Payout Form as an Alternative
"In the case of retirement accounts, the IRS and Treasury have created the 'see-through' trust rules that allow post-death required minimum distributions to occur based on the life expectancy of the underlying trust beneficiaries. However, in the case of annuities, no see-through trust rules exist, compelling trusts to instead liquidate inherited annuities over the far-less-favorable 5-year rule! As a result, consideration of whether to use a trust as the beneficiary of an annuity must weigh the adverse tax consequences against the favorable/desired non-tax provisions of the trust." (Michael Kitces in Nerd's Eye View)
Conflicts Proposal Sent to OMB, Many Investment Roles May Be Affected
"Contrary to widespread rhetoric, it is important to keep in mind that this rule will not only affect broker-dealers; it could impact any RIA affiliated with a broker-dealer or retirement plan service provider. Even fee-only RIAs may have to adapt their business models -- particularly to the extent if they serve as or rely upon solicitors for investment managers.... It is also expected that the DOL will seek to modify its position on IRA rollovers.... Given that the SEC and FINRA have already thrown their hats into the IRA rollover arena, we anticipate that it will not get any easier to assist plan participants in this regard." (Pension Resource Institute, via LinkedIn)
[Opinion] Pension Rights Center Applauds DOL's Release to OMB of Proposed Rule on Conflicted Investment Advice
"[We] hope and expect that, after five years of deliberations, the [DOL] has made much-needed and sensible improvements to ensure that those who give professional investment advice about retirement assets will do so in the employees' best interests. With 401(k) plans and IRAs increasingly the only retirement plan option available to workers, there is a dire need to ensure that all professional advisers and brokers who recommend investments for retirement money put their clients' interests first." (Pension Rights Center)
[Opinion] Using PTEs to Define a Fiduciary Under ERISA: Threading the Needle with Rope (PDF)
11 pages. "The [DOL] has indicated that it intends to address concerns with its proposal to broaden the definition of fiduciary 'investment advice' by utilizing prohibited transaction exemptions (PTEs) to carve back the rule so that it is appropriate in scope.... [The authors] are very concerned that the DOL -- in the name of investor protection -- is actually taking an approach that will harm the very people it is trying to protect. By definition, a regulatory regime that prohibits every transaction unless it is specifically allowed through a PTE may unnecessarily eliminate choices and make it difficult to find new ways to better serve investors. Despite best efforts by the DOL, we remain concerned that no matter how well-crafted the PTEs are, they will prove to be insufficiently narrow and inflexible to accommodate the many beneficial ways that financial professionals serve the needs of investors today and in the future.... This paper provides several examples where the exemptive process has failed to appropriately limit expansive rules." (U.S. Chamber of Commerce)
[Opinion] White House Rule Could Block 401(k) Participants from Advice
"Today the White House launched an attack on advisors and so-called 'hidden fees' and 'backdoor payments' by moving forward with a regulation that has its own hidden backdoor effect -- keeping many Americans from working with the trusted advisor of their choice, even in the critical decision regarding rollovers from their 401(k) and 403(b) plans.... 'The best way to address concerns about 'hidden' fees is through better transparency, not by blocking 401(k) participants from working with the advisor of their choice,' [said Brian Graff, Executive Director of the National Association of Plan Advisors (NAPA)]. 'If the administration moves forward with this proposed rule, American savers will be forced to pay out-of-pocket for their financial advice, or be limited to financial products with identical fees.' " (American Society of Pension Professionals & Actuaries [ASPPA])
Obama Administration to Move Fiduciary Rule Forward
"President Barack Obama is expected to announce the Department of Labor's proposed fiduciary rule is officially under review at the Office of Budget Management on Monday afternoon.... Monday's announcement by the President marks the first step to re-proposing the DOL's rule, which the agency first put forward in 2010. Agencies must first submit to a review by the OMB, a process that could prove lengthy. In the first six months of 2013, it took the OMB an average of 140 days to complete a review ... While no one is certain of what the new rule will look like until after OMB review, it's expected to expand the definition of a fiduciary to anyone who provides advice to retirement plans, including individual retirement accounts and 401(k)s." (
[Guidance Overview] DOL Publishes Materials on Upcoming Fiduciary Rule
The web page, entitled Are Your Retirement Savings at Risk?, includes a video entitled Conflicts of Interest and links to other retirement plan-related materials, including [1] FAQs: Conflicts of Interest Rulemaking; [2] Fact Sheet: Updating our Retirement Protections; and [3] A Look at 401(k) Plan Fees. Excerpt: "With 401(k)s and IRAs, individual investors are more responsible than ever for making important investment decisions, and most don't have the training they need. That means investors are increasingly reliant on the advice they receive. Ideally, your adviser will have your best interest at heart -- but that's not always the case." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
The Effects of Conflicted Investment Advice on Retirement Savings (PDF)
"Savers receiving conflicted advice earn returns roughly 1 percentage point lower each year ... An estimated $1.7 trillion of IRA assets are invested in products that generally provide payments that generate conflicts of interest. Thus, we estimate the aggregate annual cost of conflicted advice is about $17 billion each year. A retiree who receives conflicted advice when rolling over a 401(k) balance to an IRA at retirement will lose an estimated 12 percent of the value of his or her savings if drawn down over 30 years. If a retiree receiving conflicted advice takes withdrawals at the rate possible absent conflicted advice, his or her savings would run out more than 5 years earlier. The average IRA rollover for individuals 55 to 64 in 2012 was more than $100,000; losing 12 percent from conflicted advice has the same effect on feasible future withdrawals as if $12,000 [were] lost in the transfer." (White House Council of Economic Advisors)
When NOT to Convert to a Roth IRA
"Ultimately the decision of whether to bequest a Roth or traditional IRA should be driven by a comparison of the original IRA owner's marginal tax rate and the expected marginal tax rate of the beneficiary in the future. If the beneficiary's tax rates will be higher, it's better for the current IRA owner to go ahead and convert the IRA, paying the taxes now at current rates and leaving the higher-income beneficiary a tax-free account. But if the beneficiary's tax rates will be lower -- for any number of reasons -- then the best thing a wealthy IRA owner can do is leave a traditional IRA, and let the beneficiary pay the taxes at his own lower tax rate." (On Wall Street)
[Opinion] MyRA or the Highway?
"[T]he MyRA has several significant drawbacks: Because the MyRA only invests in government debt (bonds), it is not the wisest choice for workers who have decades before retirement. The MyRA is only available to workers whose employers are set up to make automatic payroll deductions. The MyRA account is limited to 30 years or a $15,000 balance, at which time the account must be rolled over into a private IRA." (National Center for Policy Analysis)
In the FY2016 Treasury Greenbook: Proposals for Eliminating Stretch IRAs, Repealing NUA, and the $3.4M Retirement Account Cap
"Every year, the proposed changes to the tax laws encapsulated in the President's budget request for the Federal Government are recorded in the Treasury Greenbook, which is then taken under advisement by Congress to create its own budget resolution.... While some tax proposals in the Greenbook are relatively minor, or pertain to issues not directly relevant to our work as financial planners, this year's FY2016 budget request had several proposals that would represent major changes in the world of planning for retirement accounts, both during clients' lives and after they pass away." (Michael Kitces in Nerd's Eye View)
A Plan Participant's Checklist for Leaving Employment: Consider All Angles Before Selecting 'Rollover to IRA'
"Usually, but not always, the best course is to roll those benefits over to an IRA. For most people, the IRA offers wider investment choices, potentially lower expenses, and better post-death options for beneficiaries than they can get in their qualified plan. But stop, look, and listen: You need to consider all angles of this particular retirement plan and this individual, plus all applicable tax considerations, before you press that 'rollover to IRA' button." (Morningstar Advisor)
Inheriting a Previously-Inherited IRA: A Most Confusing Scenario
"Inherited IRA accounts are becoming more common, and advisors have learned the differences between the options a spouse has versus the options available to a non-spouse who inherits a retirement account. But do you know how to treat an IRA that was inherited from someone who inherited it from someone else? This is where the rules really get complex." (Morningstar Advisor)
Eliminating Small RMDs and Killing the 'Backdoor Roth' -- Key Retirement Proposals Under the Administration's FY2016 Budget
"While the tax proposals in this year's budget span a wide range of categories and topics, the proposed retirement changes are significant, and include some good, some bad, and some that are downright ugly. This [article reviews] some of the good (eliminating RMDs for those with less than $100,000 of retirement assets and allowing inherited IRA rollovers for non-spouse beneficiaries) and the bad (Roth crackdowns including no more backdoor Roth contributions and new Roth RMDs after age 70-1/2)." (Michael Kitces in Nerd's Eye View)
[Opinion] Five Ways to Improve the President's Retirement Initiative
"Obama's proposal is a good start, but with a few tweaks by either the federal government or the states implementing these programs, it could be even better. [1] Auto escalation.... [2] Removal of the income limit on Roth IRA contributions.... [3] Consider mandating auto enrollment in 401(k) plans, with an employee opt-out.... [4] Limiting access to account balances except in emergencies.... [5] Higher IRA contribution limits." (Scott Cooley, in Morningstar)
Bill Introduced to Make IRA Charitable Distributions Permanent
"H.R. 637, legislation that would make permanent the IRA qualified charitable distribution (QCD) option, has been approved by the House Ways and Means Committee. It will now advance to the House floor for debate and an expected vote.... This option was extended only for the 2014 tax year by the Tax Increase Prevention Act of 2014 (H.R. 5771), which was enacted in December 2014." (Ascensus)
President Obama's 2016 Budget Takes Aim at Your Retirement Savings
"[T]his year's budget featured over a dozen provisions that, if they were to become law, could directly impact your retirement savings. [These include:] Limit Roth conversions to pre-tax Dollars... 'Harmonize' the RMD rules for Roth IRAs with the RMD rules for other retirement accounts... Eliminate RMDs if your total savings in tax-favored retirement accounts is $100,000 or less... Create a 28% maximum tax benefit for contributions to retirement accounts... Establish a 'Cap' on retirement savings prohibiting additional contributions... Mandatory 5-year rule for non-spouse beneficiaries... Require retirement plans to allow participation from long-term part-time workers... Mandatory auto-enrollment IRAs for certain small businesses." (Slott Report)
Overview of Retirement Savings Provisions in 2016 Proposed Federal Budget
"[This article] is a general overview of the budget items that would, if enacted, have an impact on tax-preferred savings vehicles, including IRAs and employer-sponsored retirement plans. These and other provisions of the administration's 2016 budget are only proposals at this time. It is yet to be seen if any of the proposals find their way into legislation." (Ascensus)
[Opinion] President's 2016 Budget Sends Mixed Messages on Retirement Planning
"[W]hat is surprising about President Obama's Fiscal Year 2016 Budget is the lack of a cohesive position on retirement planning.... [T]he 2016 Budget includes language supporting the enhancement and protection of Social Security retirement benefits, broader retirement plan coverage, and increased savings opportunities, but at the same time takes aim at limiting savings opportunities through IRAs, Roth IRAs, and qualified plans, such as your employer-provided 401(k) plan." (Jamie Hopkins, in Forbes)
When Does the Roth IRA 5-Year Clock Begin?
"For anyone who did a Roth IRA conversion in 2010 -- and there were a lot of you because of the 'deal,' the two-year spread for the taxes due -- you have now fulfilled the 5-year waiting period for taking penalty-free distributions from your 2010 Roth conversion. You have also passed one test for taking a qualified distribution, the other being attainment of age 59-1/2, death, disability, or a distribution for a first-time home purchase. A qualified distribution means there is no tax or penalty on any funds withdrawn from your Roth IRA -- ever -- for the rest of your life." (Slott Report)
The Role of IRAs in U.S. Households' Saving for Retirement, 2014 (PDF)
"About half of traditional IRA-owning households indicated their IRAs contained rollovers from employer-sponsored retirement plans. Among households with rollovers in their traditional IRAs, 81 percent indicated they had rolled over the entire retirement account balance in their most recent rollover." [Editor's note: see also the Appendix of additional data on IRA ownership.] (Investment Company Institute [ICI])
[Guidance Overview] Will the Illinois Payroll Deduction IRA Plan Be Pre-empted by ERISA?
"[T]here is an open question whether a state law requiring employers to participate in a state-run payroll deduction IRA program is preempted by Section 514(a) of ERISA, which generally overrides state laws that 'relate' to employee benefit plans.... Section 95 of the Act requires the board to request in writing an opinion or ruling from the DOL regarding the applicability of ERISA.... [P]ayroll deduction IRAs established by employers under the program may fall under a regulatory safe harbor that applies to certain individual account plans in which an employer's participation is minimal.... There is a substantial question whether employers who establish payroll deduction IRAs in compliance with the Act can also satisfy the requirements of the Safe Harbor and thereby avoid the application of ERISA.... The Act contains some internal inconsistencies and ambiguities." (Steptoe & Johnson LLP)
When a Roth IRA May Be a Terrible Asset to Inherit
"If the beneficiary's tax rates are higher, it's clearly beneficial for the current IRA owner to go ahead and convert the IRA, paying the taxes now at current rates, and leaving the (high income) beneficiary a tax-free account. However, if the reality is that the beneficiary's tax rates are actually lower -- perhaps because the original IRA owner's wealth is being spread across multiple beneficiaries, because the beneficiary simply has less income and assets, or maybe just due to the fact that the beneficiary lives in a different state that has a lower tax rate -- then the best thing a (higher-income) IRA owner can do is simply to leave a traditional IRA to the beneficiary and let the beneficiary pay the taxes at his/her own lower tax rates!" (Michael Kitces in Nerd's Eye View)
Retirement Plans for Young People: Know Your Choices
"The first choice to consider is an employer-sponsored cash-or-deferred plan (such as a 401(k) plan) where the employer matches some or all of the employee's contribution.... The next best retirement plan for younger people is undoubtedly the Roth IRA.... The worst type of plan for the young person is the traditional IRA." (Morningstar)
[Official Guidance] Text of IRS 2014 Publication 590-A: Contributions to Individual Retirement Arrangements (IRAs) (PDF)
62 pages. Revised January 13, 2015, for use in preparing 2014 returns. "What's New for 2014: Publication 590 split ... Modified AGI limit for traditional IRA contributions increased.... Modified AGI limit for Roth IRA contributions increased.... What's New for 2015: Modified AGI limit for traditional IRA contributions increased.... Modified AGI limit for Roth IRA contributions increased.... Application of one-rollover-per-year limitation.... Airline Payments." (Internal Revenue Service [IRS])
[Official Guidance] Text of IRS Publication 590-B: Distributions from Individual Retirement Arrangements (IRAs), for Use in Preparing 2014 Returns (PDF)
60 pages. "Publication 590 has been split into two separate publications ... Publication 590-A covers contributions to traditional IRAs as well as Roth IRAs. This publication will include the rules for rollover and conversion contributions. Publication 590-B covers distributions from traditional IRAs as well as Roth IRAs. This publication will include the rules for required minimum distributions and IRA beneficiaries.... What's New for 2015: Application of one-rollover-per-year limitation." (Internal Revenue Service [IRS])
The Case For and Against Taking Your RMD Early in the Year
"Reasons to Consider Taking Your [2015] RMD Now: [1] You don't have to worry about the 50% penalty ... [2] Don't leave beneficiaries with a tight window ... [3] You can convert or rollover the remainder of the account ... Reasons to Wait Until Later This Year to Take Your RMD: [1] Giving up tax deferral ... [2] No [qualified charitable distribution] provision currently in place ... for 2015(.]" (Slott Report)
[Guidance Overview] Allocating Pretax and After-Tax Amounts to Multiple Destinations; Tracking After-Tax Amounts in Traditional IRAs (PDF)
"[IRS Notice 2014-54] presents a middle-of-the-road approach that incorporates Sections 72(e)(8) and 402(c)(2) and provides new planning opportunities for participants with after-tax amounts who want to arrange a multiple destination distribution.... When a 401(k) participant has after-tax dollars in his or her account, the plan administrator tracks the amounts and, upon distribution, reports them appropriately on Form 1099-R. But when there are after-tax amounts in a traditional individual retirement account (IRA), they are generally not tracked by the institution holding the IRA. Instead, the IRA owner is responsible for keeping track of after-tax amounts." (Pentegra Retirement Services)
Plan Sponsors Need to Take Advantage of Regulators' IRA Rollover Scrutiny (PDF)
"While financial institutions will bear the brunt of expanded regulatory scrutiny of IRAs, it is important that employer plan sponsors be aware of financial institution practices regarding these accounts. Having knowledge of current guidance about IRAs also can be of use when highly compensated employees in the plan seek direction from the benefits office on decisions about their outside retirement savings." (ERISAdiagnostics via Thompson Pension Plan Fix-It Handbook)
IRA under SIMPLE Plan Held to Be Protected by State Anti-Garnishment Law
"The state anti-garnishment law would unquestionably protect a run-of-the-mill IRA. The creditor contended that this IRA was different, because; [1] it was the funding vehicle for a SIMPLE (IRC Section 408(p)); [2] SIMPLEs are employee benefit plans subject to ERISA; and [3] the state anti-garnishment law was therefore preempted by ERISA. The court agreed that the SIMPLE funded by the IRA was an ERISA-covered plan.... [T]he reasoning of VFS Financing is open to challenge, although its outcome -- the consistent application of a state anti-garnishment law to all IRAs, regardless of their origin -- has the effect of closing an apparent 'gap' in anti-alienation creditor protection for SEPs and SIMPLEs." [VFS Financing, Inc. v. Elias-Savion-Fox LLC, No. 12-Civ-2853 (S.D.N.Y. Dec. 1, 2014)] (Steptoe & Johnson LLP, via Lexology)
2015 Resolution: Avoid 60-Day Rollovers
"Should clients attempt a second rollover, the problem cannot be fixed. The IRS does not have the authority to help correct the situation. This could end an IRA, for example, if clients were moving their entire IRA balance to a new custodian or a new adviser. It can get worse. If clients do a second 60-day rollover, it's now not only taxable but an excess IRA contribution subject to a 6% penalty each year the ineligible rollover funds remain in the account." (InvestmentNews)
[Guidance Overview] Treasury Softly Launches myRA Program
"While certain employers (reportedly including the U.S. Office of Personnel Management) will formally participate in a pilot initiative, the myRA program apparently is open to any employer that will accommodate payroll direct deposit for employees who open an account. No formal action on the part of the employer appears required, except as necessary for the transmittal of payroll deductions to employees' myRA accounts. Even for employers participating in the pilot initiative, the program appears primarily employee-driven at this time." (Sutherland Asbill & Brennan LLP)
[Official Guidance] Text of IRS 2015 Draft Instructions for Forms 1099-R and 5498: Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., and IRA Contribution Information (PDF)
24 pages. "What's New: FATCA filing requirements of certain foreign financial institutions (FFIs). Beginning in 2014, an FFI with a chapter 4 requirement to report a cash value insurance contract or annuity contract that is a U.S. account held by a specified U.S. person with the FFI may satisfy this requirement by electing to report the account in a manner similar to that required under section 6047(d). Form 1099-R is to be used for such reporting. See Regulations section 1.1471-4(d)(5)(i)(B) for this election. Also see Regulations section 1.1471-4(d)(2)(iii)(A) for how a U.S. payor may satisfy its chapter 4 reporting requirements by reporting on Form(s) 1099." (Internal Revenue Service [IRS])
Seven Reasons to Beg Your Employer to Offer a Roth 401(k)
"[1] Tax-Free Withdrawals in Retirement ... [2] Income Tax Diversification ... [3] If You're In a Low Tax Bracket Right Now ... [4] You'll Probably Still Get the Employer Match ... [5] No Required Minimum Distributions ... [6] More Flexibility for Your Life in Retirement ... [7] Advance Protection From Widely Anticipated Income Tax Increases." (DailyFinance)
[Guidance Overview] 2014 Legislative and Regulatory Update (PDF)
49 presentation slides provide an overview of: [1] IRS and DOL guidance; [2] COLA limits and the Bipartisan Budget Act of 2013; [3] HATFA and pension smoothing; [4] Charitable donation of an IRA; [5] Ending of the SSA letter forwarding program; [6] Changes at IRS TE/GE; [7] IRS compliance tools; [8] Qualified Longevity Annuity Contract final regulations; [9] The myRA; [10] U.S. v. Windsor: impact on qualified plans; [11] FAB 2014-1: updated guidance on handling missing participants under a terminating DC plan; and [12] Form 5500 series. (McKay Hochman)
myRAs Are an ERISA-Free Zone
"Now that the federal government has officially rolled out the myRA retirement savings program, has it also left participating employers open to possible fiduciary liability? The answer is no -- employers who decide to help enroll workers in these new accounts need not fear marauding bands of fiduciary-violation-seeking plaintiffs' attorneys." (BenefitsPro)
[Guidance Overview] IRS Releases 2015 Form 5498 With Little Change
"The IRS has released the 2015 Form 5498, IRA Contribution Information. This form is used to report IRA contributions, rollovers, conversions, recharacterizations, fair market value, and certain other information. The only changes from the 2014 version of Form 5498 are year and deadline changes; no box or information changes appear in the updated form." (Ascensus)
Think Your Taxes Will Be Lower in Retirement?
"Since everyone would like to pay less income tax in retirement, the tax-free withdrawals from Roth IRAs are very attractive.... Certain tax years can prove optimal for a Roth conversion ... If you have both kinds of IRAs, you have the option to vary the amount and source of your IRA distributions in light of whether income tax rates have increased or decreased." (North Bay Business Journal)
[Official Guidance] IRS Employee Plans News, December 23, 2014: Rollovers of After-Tax Contributions in Retirement Plans
"The Service has received a number of questions following the issuance of Notice 2014-54. The following FAQs are provided to assist taxpayers in applying the notice. [1] Can I roll over just the after-tax amounts in my account to a Roth IRA and leave the remaining amounts in the plan (i.e., take a partial distribution of just the after-tax amounts)? No.... [2] I want to roll over my after-tax contributions to a Roth IRA and roll over earnings on my after-tax contributions to a traditional IRA. Can I do that? Yes...." (Internal Revenue Service [IRS])
The 2014 Charitable IRA Rollover: Who Might Benefit, and When Must Action Be Taken?
"On the surface, you may think it is a 'wash' if a taxpayer includes an RMD in income, and then deducts it after contributing the same amount to charity. But there are many instances in which this is not so. For example, some taxpayers do not itemize; some are subject to limitations on itemized deductions because they have high income; and some find that increased income causes other adverse tax consequences that cannot be wiped out by a charitable contribution (such as a higher percentage of social security benefits becoming taxable, and a higher threshold for deduction of medical expenses)." (Holland & Knight)
Comerica Chosen as myRA Custodian
"Comerica will serve as custodian for the Treasury Department's upcoming 'myRA' retirement savings bond program, which is being rolled out in phases.... Comerica was chosen through a competitive bid process managed by Treasury's Bureau of the Fiscal Service. Comerica and its partner, Fidelity National Information Services, will administer the accounts, a Treasury spokesman said." (Pensions & Investments)
[Guidance Overview] Tax-Free Transfers to Charities Available Through December 31 for IRA Owners 70-1/2 or Older; Rollovers This Month Can Still Count for 2014
"IRA owners age 70-1/2 or older have until Wednesday, Dec. 31 to make a direct transfer of part or all of their IRA distributions to an eligible charity. The Tax Increase Prevention Act, enacted Dec. 19, extended for 2014 the provision authorizing these qualified charitable distributions (QCDs). The provision had expired at the end of 2013. With this retroactive renewal, any eligible IRA distribution during 2014 properly transferred to a qualified charity counts as a QCD." (Internal Revenue Service [IRS])
[Guidance Overview] New Illinois Law Will Require Employers to Enroll Private Sector Employees in State-Run Payroll Deduction IRAs
"The Act requires private sector employers that do not already maintain a retirement plan to enroll their employees in automatic 'payroll deposit retirement savings arrangements' and to remit after-tax payroll deductions to a separate trust fund (State Fund or Fund) established by a state-run board.... [T]he Program will not be implemented if 'the IRA arrangements offered under the Program fail to qualify for the favorable federal income tax treatment ordinarily accorded to IRAs under the [Internal Revenue Code] or if it is determined that the Program is an employee benefit plan and state or employer liability is established under [ERISA].' ... An IRA for this purpose is defined under the Act as 'a Roth IRA under Section 408A' of the Code." (Steptoe & Johnson LLP)
FSI to Fight Rollout of State-Sponsored Auto IRAs
"Having states involved in retirement savings squeezes out financial advisers, said David Bellaire, executive vice president and general counsel at the [Financial Services Institute (FSI)]. 'We see this as unnecessary, unwise competition against small [financial advisers] that are working hard to address these needs,' Mr. Bellaire said. 'There's significant research that shows that investors, particularly those that are planning for retirement, have better outcomes when they work with financial advisers.' " (InvestmentNews)
Treasury Finalizes Rules for New Retirement Savings Account: The myRA
"[T]he new regulations state that the myRA is going to be treated as a Roth IRA. This means all of the interest growth inside the myRA on the new electronic savings bond will come out tax free if certain holding period and trigger events are satisfied. By treating the myRA as a Roth IRA, the Treasury Department also helped exclude myRA account balances from required minimum distribution requirements after age 70-1/2. This could be a big benefit for some individuals looking for tax and investment class diversification." (Forbes)
[Guidance Overview] Tax Extenders Reinstated Temporarily
"In its final form, the legislation 'patches' the tax extenders for one year, retroactively reinstating a wide range of provisions that technically lapsed at the end of 2013, to now be available for the current 2014 tax year. This includes the popular rule allowed those over age 70-1/2 to make a qualified charitable distribution (QCD) from an IRA, satisfying the current year's required minimum distributions while simultaneously completing a charitable bequest and excluding the IRA distribution from income entirely for tax purposes, with just enough time left to complete a QCD before year end." (Michael Kitces in Nerd's Eye View)
[Official Guidance] Text of Treasury Department Final Regs Governing Retirement Savings Bonds for Use by myRA Accounts
"The United States Department of the Treasury, Bureau of the Fiscal Service, offers a new nonmarketable, electronic retirement savings bond for Treasury's new retirement savings program. The bonds will be issued to a designated custodian for Roth individual retirement accounts established under Treasury's program. This new savings bond is only available to participants in the retirement savings program and will protect the principal contributed while earning interest at a rate previously available only to federal employees invested in the Government Securities Investment Fund (G Fund) of their Thrift Savings Plan." (U.S. Department of the Treasury)
[Official Guidance] Text of DOL Information Letter: myRA Accounts Facilitated by Employers Would Not Be Covered Under Title I of ERISA
"[We] do not believe Congress intended in enacting ERISA that a federal government retirement savings program created and operated by the U.S. Department of the Treasury would be subject to the extensive reporting, disclosure, fiduciary duty, or other requirements of ERISA, which were established to ensure against the possibility that employees' expectation of a promised benefit would be defeated through poor management by the plan sponsor and other plan fiduciaries.... Thus, given the character of the program, including its voluntary nature, its establishment, sponsorship, and administration by the federal government, and the absence of any employer funding or role in its administration or design, ... an employer would not be establishing or maintaining an 'employee pension benefit plan' within the meaning of section 3(2) of ERISA based solely on the facts that employees participate through payroll withholding contributions and that the employer distributes information, facilitates employee enrollment, and otherwise encourages employees to make deposits to myRA accounts owned and controlled by employees." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
Three Options for Taking Your RMD When Your IRA Holds an Illiquid Asset
"[1] RMDs from IRAs can be aggregated.... You cannot aggregate your owned IRAs with those of your spouse or with IRAs that you have inherited. [2] You can satisfy an RMD by taking a distribution in-kind of a portion of the asset that is equal to or more than your RMD amount....[3] You can skip the RMD." (Slott Report)
[Guidance Overview] Understanding the New Once-per-Year 60-Day Rollover Rules for IRAs and the Exclusion for Trustee-To-Trustee Transfers
"The IRS has declared that it will begin to enforce the new aggregation-based IRA rollover rules in 2015, with a special transition rule that will still allow old 2014 rollovers to cause a 1-year waiting period for just the accounts that were involved and not all IRAs. Nonetheless, going forward advisors and their clients will need to be more cautious than ever not to run afoul of the rules when engaging in multiple 60-day rollovers over time -- or better yet, simply ensure that IRA funds are only moved as a trustee-to-trustee transfer to avoid the rules altogether!" (Michael Kitces in Nerd's Eye View)
Your RMD Must Come Out of Employer Plan Before Moving Funds to an IRA
"An RMD amount cannot be rolled out of a plan and go to an IRA.... [W]hen the plan sends the entire plan balance to you or to an IRA account without sending you a check for the RMD, what you end up with is an excess contribution in the IRA. You can't fix this by just taking out the RMD amount. You must tell your IRA custodian that you are removing an excess contribution. In order to remove an excess contribution, you must also remove the earnings attributable to the excess contribution." (Slott Report)
[Guidance Overview] IRS Releases Guidance on After-Tax Rollovers -- Part 2: New Rules
"The new rules are effective for distributions after December 31, 2014. A plan can choose to operate under the new rules (or the old rules) for periods prior to that date, but the new rules cannot apply to distributions from a designated Roth account prior to September 18, 2014. The IRS has issued a proposed regulation to delete from the Roth 401(k) regulations the sentence requiring separate distribution treatment, and will later issue revised special tax notices. Seldom, if ever, would there be a need for a plan amendment to implement the new rules." (SunGard Relius)
[Official Guidance] Text of IRS Announcement 2014-34: Realignment of Technical Work Between the Tax Exempt and Government Entities Division and Office of Associate Chief Counsel (Tax Exempt and Government Entities) (PDF)
"On January 2, 2015, the authority to prepare revenue rulings, revenue procedures, announcements, and notices, and to issue technical advice (including technical advice memoranda (TAMs)), certain letter rulings, and certain information letters on matters involving exempt organizations, qualified retirement plans, and IRAs will be shifted to TEGE Counsel. TEGE Counsel will be responsible for the issuance of letter rulings except for the letter rulings listed [in this announcement]. In addition, TEGE Counsel will be responsible for ruling on issues involving employer deductions for contributions to welfare benefit funds.... The Employee Plans office of TE/GE (Employee Plans) will retain the authority to issue determination letters and the Exempt Organizations office of TE/GE (Exempt Organizations) will retain the authority to issue determination letters, including determination letters on the exempt status of organizations under Sections 501(c) and 521." (Internal Revenue Service [IRS])
Don't Miss Taking a Distribution From Your Inherited IRA by Year-End
"If the IRA owner died before his required beginning date (RBD), which is April 1 of the year after he turned age 70-1/2, then generally you have two options: [1] The 5-year-rule; [2] The single life option (a.k.a. the 'stretch IRA'). In most cases, you're better off choosing the stretch IRA because you can take the funds out over your single life expectancy starting the year after the IRA owner died." (Slott Report)
[Guidance Overview] IRS Updates Special Tax Notice for Retirement Plans
"[T]he new model notices include the following modifications: [1] Provide for the rollover of automatic contributions that are withdrawn upon the request of the employee within 90 days of enrollment; [2] Provide for the penalty-free distribution of amounts rolled over to an IRA to pay for certain health insurance premiums; [3] Update the summary of the tax treatment of rolled-over after-tax contributions; and [4] Update the summary of the tax treatment of rollovers to Roth IRAs." (Bradley Arant Boult Cummings LLP)
Don't Try to Take a Lump-Sum Distribution from a Qualified Plan After Thanksgiving
"Lump-sum distributions from a qualified retirement plan may be eligible for special tax breaks. The special tax breaks include net unrealized appreciation on company stock that's highly appreciated in value over the years it's been in your plan.... To qualify as a lump-sum distribution, the distribution must occur in one tax year and your account balance must be zero by the end of that year." (Slott Report)
[Guidance Overview] Changes Issued for Tax Notices Required to Be Provided to Persons Entitled to Receive a Retirement Plan Distribution
"The changes not only reflect the change in the rollover rules but also discuss the In-Plan Roth Rollover tax treatment. The changes include a clarification that refunds of automatic enrollment contributions are not eligible to be rolled over, if your plan has implemented automatic enrollment in salary reduction or deferral contributions of persons when they are first eligible. There is one notice for a plan without a Roth account and a separate notice for a plan with a Roth Account." (Winstead PC)
[Guidance Overview] IRS Clarifies Key Rollover Question
"One of the most hotly debated issues in the retirement planning community has been whether a client with pretax and after-tax employer-plan money can roll it over in two parts -- moving that after-tax cash to a Roth IRA tax-free, that is, while also directly moving the pretax money into a traditional IRA.... [A] new IRS notice provides an emphatic answer: Yes, they can.... Although the notice says it will generally apply to distributions taken in 2015 or later, it also says taxpayers can apply a reasonable interpretation of the existing rules. Practically speaking, the guidance is effective immediately." (Ed Slott, in Financial Planning)

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