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Roth: Breaking Down the Buzzword in Defined Contribution Plans (PDF)
5 pages. "Many participants (and even plan sponsors) are also not aware of some of the unique similarities and differences between Roth when offered in a Defined Contribution Plan versus an Individual Retirement Account (IRA). Our objective is to provide a general overview of Roth, its role and appeal within Defined Contribution Plans, and finally, key considerations for plan sponsors in evaluating this feature in an educated and informed manner." (Portfolio Evaluations, Inc.)
[Guidance Overview] Newly Proposed DOL Fiduciary Rule: Moving to a Universal Fiduciary Standard
33-slide Powerpoint presentation. Topics include: [1] Background on existing rule; [2] Proposed fiduciary definition; [3] Carve-outs from definition; [4] Proposed best interest contract exemption; [5] Other proposed exemptive relief; and [6] Timeline for rulemaking. (The Wagner Law Group)
Four Steps to Taking a Roth Conversion After Age 70-1/2
"It is crucial that you take the RMD before doing the Roth conversion. Missing that step means that you end up with an excess contribution, in the amount of the RMD, rolled over to the Roth IRA. The excess contribution is subject to a penalty of 6% per year for every year that it remains in the Roth IRA." (Slott Report)
[Opinion] Five Ways the DOL Could Improve Its Fiduciary Proposal
"[1] Start by clarifying and narrowing the activities which result in fiduciary status.... [2] Provide a clear carve-out for the actuaries, lawyers and accountants who perform typical professional services in connection with investments.... [3] Provide a carve-out for sophisticated IRA investors similar to the carve-out for large plan investors with financial expertise.... [4] Eliminate the 'catch 22' for acknowledging fiduciary status.... [5] Fix the 'Best Interest' exemption." (Osler, Hoskin & Harcourt LLP)
More Than One Million People Increase Retirement Savings Rate; Account Balances Reach Record High
"The average 401(k) balance at the end of Q1 was $91,800 ... up 0.5 percent from last quarter and up 3.6 percent from one year ago. More than a million workers increased their contribution rate in Q1 2015, and a record 23 percent of employees have increased their contribution rates since Q1 2014. The average overall savings rate, which includes both employee and employer contributions, increased to 12.5 percent. The employee contribution rate remained constant at 8.1 percent while the employer contribution rate climbed to 4.4 percent.... For self-employed 401(k) accounts, the average balance at the end of 2014 was $144,100, a 39 percent increase since 2007. The average contribution was $22,400 at the end of 2014, a 29 percent increase since 2007." (Fidelity)
[Guidance Overview] DOL Proposes New Fiduciary Regulation and Prohibited Transaction Exemption Relief for Investment Advice Fiduciaries (PDF)
10 pages. "The Proposed Regulation, if adopted, is expected to extend fiduciary status to many investment professionals, including broker-dealers, insurance agents, pension consultants and appraisal firms, that do not consider themselves to be fiduciaries under current law.... Unlike the current regulations, the Proposed Regulation does not require that investment advice be furnished on a regular basis, or that the adviser and advice recipient mutually agree that the advice furnished will serve as a primary basis for investment decisions." [Article includes a 2-page chart summarizing the proposed amendments to existing prohibited transaction class exemptions.] (Skadden, Arps, Slate, Meagher & Flom LLP)
A Small But Important Change Proposed for Retirement Savings Rules
"The Obama proposal, which was buried in last February's budget, would exempt those with $100,000 or less in traditional retirement plans from having to make minimum required taxable withdrawals at all. Of course, they always could take out funds if they needed to (and would owe tax on the distribution) but they would not have to.... The idea is a very nice follow-up to rules Treasury adopted a year ago that would allow retirees to avoid the MRD tax on up to $125,000 of retirement savings they convert into longevity annuities." (Forbes)
[Guidance Overview] DOL Proposal Significantly Expands Fiduciary Adviser Rule
"[P]roviding advice regarding distribution planning ... would be a fiduciary act under this proposal.... The increase in the number of advisers who would be considered fiduciaries, as well as the increase in the types of services considered fiduciary acts, would significantly expand the plan sponsor's responsibilities for reviewing and monitoring outside providers. Likewise, plan sponsors would have additional responsibilities associated with reviewing and negotiating agreements with advisers to ensure they comply with general ERISA requirements and any prohibited transaction exemptions the advisers intend to use." (Calfee, Halter & Griswold LLP)
[Guidance Overview] Once More Unto the Breach: The New 'Fiduciary' Definition
"The Proposed Regulations would not require that advice be individualized to the needs of the plan, participant, or IRA owner. If the advice merely is 'specifically directed to' the participant or IRA owner, that would be sufficient to cause it to be fiduciary advice.... [T]he Preamble to the Proposed Regulations states that ... lawyers, accountants, and actuaries would not be treated as fiduciaries merely because they provide such professional assistance in connection with a particular investment transaction. Despite the Preamble statement, however, the actual language of the proposal is not clear on this point, and there is no express carve-out for such professional services.... In a departure from existing law that has been in effect since 1996, the carve-out for 'investment education' would not permit the use of asset allocation models that refer to specific investment products available under the plan or IRA." (Jones Day)
DOL Not Budging on Fiduciary Rule Comment Period
"Labor Secretary Thomas Perez indicated Thursday that his department will not extend further the 75-day comment period for its redraft to amend the definition of fiduciary under [ERISA]. When asked ... if DOL would honor the Tuesday request by industry trade groups to extend the comment period another 45 days, Perez reiterated DOL's previously stated comment guidelines." (ThinkAdvisor)
[Guidance Overview] DOL's Re-Proposed Fiduciary Definition Widely Prohibits Personalized Investment Assistance Even If the Assistance Is in Customer's Best Interest
7 pages. "The framework set up by the DOL could work conceptually, but in its current form, it would have the same effects as the original 2010 proposal -- cutting off the option for low and middle-income individuals and small businesses to receive personalized investment assistance.... The re-proposal [includes] an exemption from the prohibited transaction rules that could, if it worked correctly, preserve access to investment assistance. But the exemption does not work: it is extremely narrow, is not principle-based, and includes such impractical conditions that it is unusable." (Davis & Harman LLP)
[Guidance Overview] The New Fiduciary Regulation Proposal, Part I: All It Was Cracked Up to Be? (PDF)
"The DOL refers to the participants, beneficiaries, and IRA holders who will continue to receive conflicted advice under the Proposal as 'the investors [that] are particularly vulnerable to abuse.' The DOL also notes in the preamble to the Proposal that these consumers of advice services 'often do not read the legal documents.' Yet, the proposed exemption would leave these individuals to depend most substantially on the first two mechanisms to protect them: disclosure (which the DOL says they will not read) and integrity (which the DOL clearly believes investment advisors do not have ... at least, not in large enough measure).... The big difference is the ability of the DOL to get involved[.]" (Ferenczy Benefits Law Center LLP)
Execs See Fiduciary Proposal as Complicated, Costly
"Early assessments of the Department of Labor's fiduciary proposal find the new rules will be complicated to implement and costly for the industry, according to wealth management executives.... [A]nalysts at investment banking firm Keefe, Bruyette & Woods ... estimated that the DOL's proposal could be a 2% drag on Morgan's earnings, which the authors described as modest. For Raymond James, the analysts estimated 'roughly $2,400-$4,800 in increased compliance and litigation cost per advisor which equates to roughly $15 million to $30 million of incremental expenses.' " (On Wall Street)
Why Labor Department Gets a Say on IRA Advice
"Why does Labor's rulemaking extend to IRAs? That dates back to a 1978 agreement between the Labor and Treasury departments that is sometimes referred to as the 'peace treaty,' says Norman Stein, a law professor at Drexel University.... Under that division of labor, the Labor Department defines when advisers to retirement plans and to retirement savers are 'fiduciaries' who must put clients' interests first.... The proposal ... says IRAs and workplace plans should have similar protections, given that both benefit from tax incentives to encourage retirement security. In that way, IRAs are more like workplace plans than other investment accounts, the Labor Department proposal says." (The Wall Street Journal; subscription may be required)
[Guidance Overview] DOL Proposes Sweeping Expansion of Fiduciary Duty Rules
"The DOL mentioned and solicited advice with regard to, but did not formally propose, a 'streamlined' exemption which would allow advisers to receive compensation in connection with a plan's or IRA's purchase of certain high-quality, low-fee investment options, which might include mutual funds which are index funds or certain target date funds." (Ropes & Gray LLP)
Seven Ways You Can Mess Up Your Required Minimum Distribution
"[1] Using the wrong table to determine your life expectancy factor.... [2] Taking your RMD from the wrong type of account.... [3] Failing to adjust your prior year-end balance for an outstanding rollover or transfer.... [4] Failing to adjust your prior year-end balance for a recharacterization of a Roth IRA conversion made in the year after conversion.... [5] Taking your RMD from your spouse's retirement account.... [6] Forgetting to take your RMD altogether.... [7] Failing to timely correct any mistakes you uncover." (Slott Report)
Asset Location for Stocks in a Brokerage Account Versus IRA Depends on Time Horizon
"[W]hile the traditional 'rule of thumb' for asset location is that tax-inefficient bonds go into an IRA, while equities eligible for preferential tax rates go into a brokerage account, the reality is that for investors with long time horizons the optimal solution may be the opposite. Once stock dividends and portfolio turnover are considered, the ongoing 'tax drag' of the portfolio can be so damaging to long-term returns that placing equities into an IRA may be more efficient, even though they are ultimately taxed at higher rates! ... [In] the end, good asset location decisions depend not only on returns and tax efficiency, but an investor's time horizon as well!" (Michael Kitces in Nerd's Eye View)
[Opinion] Watered-Down Fiduciary Rule May Be the Best Case Scenario for Investors
"While a clean fiduciary standard offers brokers and insurance agents a straight-forward path for delivering conflict-free investment plan advice, a 'best interest contract exemption' makes that path fuzzy and subject to attack in court. That may not be a bad thing.... [R]etirement plan lawsuits, brought by lawyers like Jerry Schlichter, have been more successful in driving down excessive 401k fees than DOL fee disclosure regulations. Maybe a fuzzy fiduciary standard will fuel more suits that drive the cost of advice lower than a clean fiduciary standard would?" (Employee Fiduciary)
[Guidance Overview] DOL Fiduciary Rule Includes Carve-Out for Investment Education (PDF)
5 pages. "[It] appears possible to avoid fiduciary status when providing participants with [1] the list of plan options, and [2] tools for identifying the type and amount of assets that should achieve desired goals, respectively -- but not when furnishing these two types of material in tandem. The need to separate this information may reduce its value to participants." (Buck Consultants at Xerox)
[Guidance Overview] Details of DOL's New Proposed Rules Defining Fiduciary Investment Advice
"[T]he proposal does not require a meeting of the minds as to the extent to which the recipient will actually rely on the advice, but the parties must agree or understand that the advice is individualized or specifically directed to the particular advice recipient for consideration in making investment decisions.... [T]here is no requirement that the advice be specific to the needs of the plan, participant or beneficiary or IRA owner; rather, the advice only needs to be specifically directed to such recipient.... By requiring the 'best interest' standard to be included within the investment advice contract as an exemption condition, the exemption would provide IRA owners a private right of action for the adviser's failure to comply with such standard, which would not otherwise be available." (Proskauer's ERISA Practice Center)
[Guidance Overview] Limited Relief Provided by Carve-Outs and Exemptions in DOL's New Conflict of Interest Proposal
"The breadth of the general definition makes it vital to come within the terms of a carve-out if one is available. However, the carve-outs are not available to a person who admits to being an ERISA fiduciary.... [E]ven for advisers and financial institutions that undertake the many compliance duties and disclosures necessary to come within the 'best interest contract' exemption, in the end, the exemption only exempts the person from the prohibited transaction rules, including potential excise taxes for IRAs under the Internal Revenue Code.... [T]he exemption does not exempt a person... from the general fiduciary duties under ERISA ... or from potential civil liability to make up any loss to the plan resulting from a breach of those duties." (Dentons)
[Guidance Overview] DOL Reproposes Expanded ERISA Fiduciary Definition and Revised Complex of Exemptions
"DOL made a legitimate effort, from its frame of reference, to address a number of criticisms of the earlier proposal made formally during the 2010-2011 rulemaking process and informally during the intervening years.... On balance, however, there is substantial reason to question both the justification for and the execution of the reproposal. At bottom, the reproposal does not target 'bad actors' for reform. Instead, it would materially modify otherwise permissible practices in the affected industries and impose substantial compliance costs, uncertainties and exposure on 'good actors.' Consequently, important interests of plan sponsors, participants, IRA owners, financial services providers and the retirement system as a whole are in play." (Sutherland Asbill & Brennan LLP)
[Guidance Overview] DOL Proposes New Rules Defining Fiduciary Investment Advice
"The 'best interest' standard of the exemption is particularly important for IRA owners. Fiduciaries to ERISA-covered plans are already subject to duties of prudence and loyalty, but IRA fiduciaries are not subject to similar standards under the Code. By requiring the 'best interest' standard to be included within the investment advice contract as an exemption condition, the exemption would provide IRA owners a private right of action for the adviser's failure to comply with such standard, which would not otherwise be available." (Proskauer Rose LLP)
[Opinion] Why Exactly DOL's Latest Action Is So Shocking to So Many Brokers
"[M]illions of investors, holding a combined $7 trillion of individual retirement account assets, will be empowered for the first time to file class actions against advisors and their broker-dealers whom they believe have failed to put their interests first.... The financial services industry has been anticipating stiff 401(k) rules for years. Even so, the 120-page proposed rule was a shocker, carrying an IRA bombshell and a brand new 'best interest standard' for brokers.... For an industry accustomed to muddy rules and a focus on funneling the fury of ERISA toward 401(k) plans, not IRAs, the long-awaited proposal seems harsh, unforgiving and out of left field, according to broker-dealers and advocacy groups." (RIABiz)
[Opinion] Memo to Industry: Get Behind Fiduciary Rule
"Leaving aside the overblown rhetoric -- really, all American savers, including people with a deposit account in a bank, will suffer if brokers adhere a fiduciary standard?--the critics of a fiduciary rule have a point. There are some protections for investors who receive poor broker-provided advice on their retirement accounts. And smart people can poke some holes in the Administration's economic arguments in favor of the fiduciary rule.... [T]he issue comes down to the harm that can and does come to individual retirement investors in the absence of the fiduciary rule." (Morningstar)
[Guidance Overview] DOL's Expansion of the Definition of Investment Advice (or 'Fiduciary')
"The DOL's position is that the suitability standard is not sufficient to prevent the rendering of conflicted advice that it believes costs retirees billions of dollars in inappropriate fees. The brokerage industry contends, in part, that the cost of compliance with the new rule, the enhanced risk of litigation, and the fact that fees must necessarily be higher to provide advice on an individual basis make the rule unworkable and that small plans and small investors will lose the ability to obtain investment advice and to continue to work with a trusted advisor. At a minimum, compliance with the new rule is expected to alter the way that brokerage houses do business." (Benefits Bryan Cave)
[Guidance Overview] 2015 Proposed Revisions to Existing Prohibited Transaction Exemptions (PDF)
7-page chart details the current prohibited transaction exemption and proposed changes, and provides commentary. A more detailed summary and analysis of each PTE is also available: [1] Best Interest Contract Exemption (11 pages); [2] Pre-Existing Transaction Exemption (2 pages); [3] Insurance and Annuity Exemption (2 pages); [4] Principal Transactions in Debt Securities Exemption (5 pages). (Groom Law Group)
DOL's Fiduciary Advice Definition Proposal: The Regulatory Impact Analysis (PDF)
"Section 7 of the RIA discusses the regulatory alternatives that the DOL considered before settling on the 2015 Proposed Regulation. Although it appears that DOL considered a number of alternatives, some appearing more credible than others, DOL concluded that that none would protect plan and IRA investors as effectively as the 2015 Proposed Regulation." (Groom Law Group)
[Guidance Overview] Proposed DOL Regs Include Major Changes to Fiduciary Advice Definition (PDF)
6 pages. "The changes proposed by the DOL to the fiduciary definition will expand the universe of individuals and entities viewed as investment advice fiduciaries to ERISA retirement plans and IRAs. While the proposal includes some helpful exceptions to the application of the new fiduciary definition, these exceptions are relatively narrow. As a result, certain sales activities, and consulting, recordkeeping, participant education and valuation services that do not currently give rise to fiduciary status, would do so under the proposal." (Groom Law Group)
[Guidance Overview] Is Your Rollover Business at Risk Under Proposed Fiduciary Plan?
"Adding rollovers and IRAs to the definition of fiduciary duties, the U.S. Department of Labor's new proposed rule could have a huge impact on firms in a fast-growing and profitable segment of the retirement savings industry. The new proposal will permit broker commissions if certain conditions are met for those advising individuals or small plans rolling over from company 401(k) plans to particular IRAs. The inclusion means that broker dealers and advisors would have to disclose, for instance, if a client would be putting their money in an investment vehicle with a higher fee[.]" (On Wall Street)
[Opinion] Save Our Retirement Coalition's Initial Statement on Rule Protecting Americans' Retirement Savings
"Although some Wall Street interests are attacking the rule already, those attacks ignore numerous provisions specifically designed to accommodate their concerns.... This rule promises to be a major improvement over the status quo, which allows too many financial professionals to offer self-serving investment advice at the expense of their clients' retirement security." (Save Our Retirement Coalition, via Pension Rights Center)
[Guidance Overview] DOL Fiduciary Rule to Revamp Regulation of Advice to Plans and IRAs
"The proposal includes a revised and broader definition of activities that would result in fiduciary status, a series of limited exceptions to fiduciary status, a package of new prohibited transaction exemptions, amendments to current exemptions for existing and newly covered fiduciaries (as well as nonfiduciaries), and a new regulatory impact analysis." (Morgan Lewis)
[Guidance Overview] DOL Re-Proposes ERISA Fiduciary Rule (PDF)
"Much like the 2010 Proposed Rule, the 2015 Proposed Rule is focused more on regulating conduct between retail investors and their advisors than between institutional investors and their advisors. These distinctions appear to be drawn more sharply in the 2015 Proposed Rule." (Fried, Frank, Harris, Shriver & Jacobson LLP)
[Guidance Overview] Definition of the Term 'Fiduciary' -- DOL 'Conflict of Interest' Rule (PDF)
"[T]he carve-outs would cover seven activities of persons who do not represent themselves as ERISA fiduciaries. [1] Seller's Carve-out....[2] Swaps.... [3] Plan Sponsor Employees.... [4] Investment Platform Providers.... [5] Objective Criteria or Financial Data.... [6] ESOP Appraisals ... [7] Investment Education." (fi360)
Worried About Fiduciary Rule? Two Options for Brokers
"ERISA Section 601 exempts brokers from fiduciary status as long as they follow investment advice provided by third-party computer models -- a ruling which encompasses what we now know as robo advisors.... The other workaround is to forego a plan fee and instead be named the fiduciary advisor to participants, as also described in ERISA Section 601.... The risk is that all levels of employees may take you up on your offer for advice, since you may not exclude those with lower balances. One emerging option is to encourage the plan sponsor to add a cost-effective financial wellness or education program for those with simple investment issues or those with minimal assets and significant debt and budgetary issues." (Financial Planning)
[Opinion] Watering Down the Fiduciary Standard?
"Fiduciary advocates, in particular, will worry that the proposal, unveiled Wednesday, waters down the fiduciary standard currently applicable to fiduciaries under ERISA, and that some of the exemptions provided could be so expansively interpreted that they permit the egregious conduct that bona fide fiduciary standards are designed to constrain.... If enacted, the new proposal could dramatically change the landscape for providers of advice to retirement plan sponsors, retirement plan participants, and IRA account holders. However, enactment of a final version of the rule is far from certain, as the 2015 Proposed Rule will likely receive intense opposition from SIFMA, the American Council of Life Insurers, and many of the players associated with broker-dealer firms and life insurers." (Financial Planning)
[Guidance Overview] DOL Proposes New Fiduciary Rule for Retirement Advisors
"[T]he DOL proposal would require conflicts-related disclosures from many advisors who are not currently subject to this requirement, and it would also put pressure on broker-dealers and insurance firms to more closely monitor and limit the levels of variable compensation earned by their registered representatives and agents. If adopted, the DOL proposal may significantly increase compliance costs for these firms and their retirement businesses.... [It] may be difficult for firms to determine if they have adequately mitigated the conflicts arising from the payment of differential compensation to their individual advisors ... [S]ome individual advisors may decide to become RIAs (or investment adviser representative of RIAs), on the grounds that they would be subject to the same fiduciary standard anyway. Those who switch to a RIA service model would, of course, have to forfeit their right to receive any commissions." (The Wagner Law Group)
[Guidance Overview] Game Changer: A First Look at the DOL's 2015 Conflict of Interest Proposal (PDF)
11 pages. "This is an ambitious proposal that makes a genuine attempt to eliminate or mitigate the effects of conflicts of interest in ALL retirement plans, including IRAs. It is too soon to tell if the proposal, in its current form, will actually accomplish this goal, or what t he intended and unintended consequences might be ... We in the retirement industry now have the obligation to find the flaws and unintended consequences in the proposal and work with our partners in government to achieve a final regulation and/or effective legislative alternatives that truly serve the country's best interests. The purpose of this article is to provide a technical, 'first glance' overview of the proposal and some early thoughts about possible ramifications." (Pentegra Retirement Services)
Brokers Selling IRAs Face Tougher Rules in Obama-Backed Plan
"[B]rokers would have a legal duty to put clients' interests first, a shift that could reshape how they steer clients and collect fees, and potentially create winners and losers among mutual funds and other products.... Brokers won concessions, including a framework that would let them continue selling bonds out of their own inventory.... Compliance costs for the industry would be $2.4 billion to $5.7 billion over 10 years, according to the Labor Department." (Bloomberg)
[Guidance Overview] Text of DOL Regulatory Impact Analysis: Fiduciary Investment Advice (PDF)
250 pages (!) "In developing the new proposal, the Department conducted an in-depth economic assessment of current market conditions and the likely effects of reform. As further discussed [in this analysis], the Department found that conflicted advice is widespread, causing serious harm to plan and IRA investors, and that disclosing conflicts alone would fail to adequately mitigate the conflicts or remedy the harm. By extending fiduciary status to more advice and providing flexible and protective PTEs that apply to a broad array of compensation arrangements, the new proposal will mitigate conflicts, support consumer choice, and deliver substantial gains for retirement investors and economic benefits that more than justify its costs." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
[Official Guidance] Text of Proposed Amendments to Class Exemptions 75-1, 77-4, 80-83 and 83-1 (PDF)
27 pages. "These existing exemptions generally permit fiduciaries to receive compensation or other benefits as a result of the use of their fiduciary authority, control or responsibility in connection with investment transactions involving plans or IRAs. The proposed amendments would require the fiduciaries to satisfy uniform Impartial Conduct Standards in order to obtain the relief available under each exemption. The proposed amendments would affect participants and beneficiaries of plans, IRA owners, and fiduciaries with respect to such plans and IRAs." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
[Official Guidance] Text of Proposed Amendment to PTE 75-1, Exemptions from Prohibitions Respecting Certain Classes of Transactions Involving Employee Benefit Plans and Certain Broker-Dealers, Reporting Dealers and Banks (PDF)
25 pages. "PTE 75-1, Part V, [as amended] permits the extension of credit to a plan or IRA by a broker-dealer in connection with the purchase or sale of securities; however, it does not permit the receipt of compensation for an extension of credit by broker-dealers that are fiduciaries with respect to the assets involved in the transaction. The amendment proposed in this notice would permit investment advice fiduciaries to receive compensation when they extend credit to plans and IRAs to avoid a failed securities transaction. The proposed amendment would affect participants and beneficiaries of plans, IRA owners, and fiduciaries with respect to such plans and IRAs." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
[Official Guidance] Text of Proposed PTE for Principal Transactions in Certain Debt Securities Between Investment Advice Fiduciaries and Employee Benefit Plans and IRAs (PDF)
60 pages. "This document contains a notice of pendency before the [DOL] of a proposed exemption from certain prohibited transactions provisions of [ERISA] and the Internal Revenue Code ... The provisions at issue generally prohibit fiduciaries with respect to employee benefit plans and individual retirement accounts (IRAs) from purchasing and selling securities when the fiduciaries are acting on behalf of their own accounts (principal transactions). The exemption proposed in this notice would permit principal transactions in certain debt securities between a plan, plan participant or beneficiary account, or an IRA, and a fiduciary that provides investment advice to the plan or IRA, under conditions to safeguard the interests of these investors. The proposed exemption would affect participants and beneficiaries of plans, IRA owners, and fiduciaries with respect to such plans and IRAs." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
Age 69-1/2: The IRA Owner's Most Important Year?
"In the year you reach age 69-1/2: [1] If you're still working, this is your final chance to make a traditional IRA regular contribution. [2] And it's your final year to roll your traditional IRA into your workplace plan (if you are still working) to totally avoid taking any required minimum distributions from the IRA. [3] Now's the time to consider other ways to reduce future RMDs too, such as Roth conversions and purchase of a QLAC." (Natalie Choate, in Morningstar Advisor)
Actions Can Be Taken to Further Improve the Strategy for Addressing Excess Contributions to IRAs (PDF)
"The overall objective of of this audit was to determine whether the IRS has an effective strategy to identify and address excess contributions made to IRAs.... While the IRS has taken action to address prior recommendations, TIGTA determined that additional improvements could be made.... TIGTA recommended that, when evaluating future efforts related to the IRA strategy, the Commissioner, Wage and Investment Division, should consider: [1] developing education materials for IRA custodians informing them of common mistakes made on information documents and the importance of submitting accurate information documents and [2] identifying a more complete and accurate universe of individuals who potentially made excess contributions from which to select potentially productive cases." (Treasury Inspector General for Tax Administration [TIGTA])
How to Reduce the Tax Bill on Your IRA to $0 (or Close to It)
"While a totally tax-free IRA may seem like something that only exists in your dreams, there are some circumstances in which it may be possible.... Take distributions in a low-income year.... Diversify your income sources.... Donate part of your IRA to charity.... List your favorite charity as sole beneficiary of your IRA.... Make smart use of life insurance.... Leverage your life insurance." (Slott Report)
Year-of-Death Reporting for Deceased IRA Owners
"Even if the deceased IRA owner didn't take a distribution last year, there is special reporting of his or her IRA balance. For the year of death, the IRA custodian must file IRS Form 5498 for the decedent, showing the IRA's fair market value (FMV), including any contributions the decedent made before he or she died. (Note that if the decedent made any contributions or rollovers last year, those contributions must be properly reported on his/her tax return.)" (Slott Report)
[Guidance Overview] Roth vs Traditional IRAs: Which Is Right for Your Retirement?
"Roth and traditional IRAs may be effective retirement-savings tools, but eligibility limitations apply. Taxes are due at the time of an IRA conversion, so be sure you have the funds to cover them if you take this step. A Roth IRA may be a good choice if you expect to be in a higher tax bracket in retirement, and it may provide estate planning benefits." (Charles Schwab)
[Guidance Overview] Roth IRA Conversion: Does it Make Sense?
"If you pay the tax from your IRA, you lose the potential benefit of tax-free growth on that amount, defeating the purpose of converting. If you're under 59-1/2, withdrawing money to pay the tax would be an even worse idea, since you would also incur a 10% federal penalty.... If you need to sell appreciated assets to pay the conversion tax, the additional capital gains tax reduces the benefits of a Roth conversion. Assuming you have the cash available elsewhere to pay the conversion tax, you still need to account for the opportunity cost -- or how much money you could have earned had [that cash] remained invested in a taxable account." (Charles Schwab)
Most Americans Unaware of Deferral Limits under Tax Code
"According to a recent survey ... fully 90% of Americans do not know the amount of money they can defer to their 401(k) or other defined contribution plan accounts annually without triggering tax repercussions.... Despite the fact that the IRS tends to increase these limits by a small margin annually, ... researchers find very few retirement savers in the U.S. are either aware of the limit or actually set their deferrals to match it." (planadviser)
[Guidance Overview] IRS Employee Plans News 2015-4, April 1, 2015 (PDF)
8 pages. Topics include: [1] Plan sponsors: Keep documentation for hardship distributions and plan loans; Retirement plan distributions to foreign persons require withholding; and Follow up on the plan corrections you agreed to in your VCP compliance statements. [2] Plan document help: Apply for a determination letter for your individually designed plan; Tips to expedite the determination letter process; FAQs on reference lists of changes in qualification requirements (new); and Updated 403(b) Listing of Required Modifications. [3] IRAs: Still time to contribute to an IRA for 2014; IRA limits for contributions and deductions; and April 1 deadline to take required retirement plan distributions for many retirees who turned 70-1/2 in 2014. [4] List of recently updated publications. (Internal Revenue Service [IRS])
[Opinion] Is the MyRA Worth All the Fuss?
"In the end, the MyRA does not offer many differences from Traditional and Roth IRAs, except for the Treasury investment. However, the low growth rate will prevent many employees from successfully saving for retirement. The greater danger comes from those employers who will be tempted to scrap their expensive, complicated 401(k) plans for a cheaper alternative that leaves them out of it. That approach will not serve employers or their employees well." (Frenkel Benefits)
[Official Guidance] Text of IRS Announcement 2015-13: Reporting Airline Payment Amount Rollovers Under Public Law 113-243 (PDF)
"Qualified airline employees who received airline payment amounts should include the full amount on Form 1040 for the year of receipt. Up to 90 percent of the aggregate airline payment amounts may be excluded from income if rolled over to a traditional IRA within 180 days of receipt. To exclude these amounts for 2014, a qualified airline employee must file a paper Form 1040 and include the amount rolled over on line 21 of Form 1040 as a negative amount and write 'airline payment' on the dotted line next to line 2." (Internal Revenue Service [IRS])
Qualified Charitable Distributions from IRAs Have Lapsed Again for 2015 But May Be Reinstated Again: Do Them Anyway!
"[T]he best strategy to handle the uncertainty of whether QCDs will be extended or not is just to do them anyway! At worst, if the rules are not reinstated, the outcome will be no worse than just being forced to take an RMD and making a charitable contribution anyway. However, if the rules are brought back once again, those who make direct charitable distributions from their IRAs will enjoy all the benefits of QCDs... even if the rules are only 'fixed' after the fact!" (Michael Kitces in Nerd's Eye View)
How the Current Regulatory Framework Provides Effective Investor Protections
30 pages. "This white paper describes the framework of regulatory protections currently in place for all investors, including those saving through IRAs, with a particular focus on the securities laws. It also highlights key aspects of the securities laws designed to address the concerns identified in the [Council of Economic Advisors] Report, how the securities laws are calibrated to address particular advice models, and initiatives of the SEC and FINRA to address concerns specific to retirement savings." (Morgan Lewis)
The Growing Divide Between the Retirement Elite and Everyone Else
"[M]ost workers end up retiring well before age 65, and few have enough saved by that point. The least prepared workers, some 32% of those surveyed, were on track to receive just 38% of their income in retirement, which would be largely Social Security benefits. By contrast, an elite group of workers, some 20%, are on track to replace 143% of their current income ... And it's not just those pulling down high salaries. 'The key success factors were access to a 401(k) and consistently saving 10% of pay, not income,' [Empower president Ed Murphy] says." (TIME)
[Guidance Overview] Clarifying the Rules on Distributions from Qualified Plans
"For plans currently offering after-tax contributions, or that have significant legacy after-tax dollars, [Notice 2014-54] may provide participants with the ability to maximize planning opportunities related to rollovers. But there are potential downsides for participants who roll money out of the qualified plan. For example, participants under age 55 would lose the ability to avoid the early withdrawal penalty on 401(k) plan distributions when separating from service after age 55 (but before age 59-1/2), or lose the opportunity to take advantage of net unrealized appreciation rules for company stock. Though these scenarios may not be common, they have significant potential impact for those who are eligible, and should at least be coordinated with the overall Roth conversion strategy." (Vanguard)
[Guidance Overview] IRS News Release 2015-55: Many Retirees Face April 1 Deadline to Take Required Retirement Plan Distributions (PDF)
"The Internal Revenue Service today reminded taxpayers who turned 70-1/2 during 2014 that in most cases they must start receiving required minimum distributions (RMDs) from Individual Retirement Accounts (IRAs) and workplace retirement plans by Wednesday, April 1, 2015. The April 1 deadline applies to owners of traditional IRAs but not Roth IRAs. Normally, it also applies to participants in various workplace retirement plans, including 401(k), 403(b) and 457 plans." (Internal Revenue Service [IRS])
There's $27 Trillion in the U.S. Retirement Savings System: Don't Expect Legislators to Leave It Alone
"At least $9 trillion of the $27 trillion total represents public sector workers ... Public sector retirement assets are heavily concentrated in [DB] plans, while the majority of private sector assets is in [DC] plans.... [B]udgetary considerations, a growing focus on coverage, questions of efficiency, and several other pressure points are leading to a growing likelihood of change in the retirement system. A number of proposals are circulating at the Federal and the States level." (Russell Investments)
Retirement Plan Assets Grow
"[T]otal assets held in employer-sponsored retirement plans were $11.3 trillion at the end of 2014, an increase of 11.5 percent from the $10.1 trillion one year earlier. Individual retirement accounts (IRAs) hold another $5.4 trillion of retirement savings. Total assets, including public, private, 403(b) plans and IRAs is $21.5 trillion.... [M]ore than $3.5 trillion ($3.537 trillion) is in defined benefit accounts among the public sector, while there is $458 billion in defined contribution accounts and $241 billion in 457 Plans[.]" (Spectrem Group)

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