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IRAs


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Sixth Circuit Overturns Tax Court Decision on Abusive DISC Commissions to Roth IRA
"Contrary to the Tax Court, the Sixth Circuit determined that the IRS overstepped its bounds applying a substance over form argument to claim a tax avoidance transaction when Congress created both domestic international sales corporations (DISCs) and Roth IRAs with the purpose of providing taxpayers the opportunity to avoid tax, provided the taxpayers followed the form of structures of the DISC and Roth IRA." [Summa Holdings Inc. v. Commissioner, No. 16-1712 (6th Cir. Feb. 16, 2017)] (RSM US)
Planning to Keep Your 401(k)? Be Careful When You Reach Age 70-1/2
"With IRAs, RMDs must be calculated separately for each account, but the amounts can then be added together and distributed by any one of the IRAs.... In the case of an employer-sponsored plan such as a 401(k), the RMD must be calculated separately and distributed separately from each plan.... Employer-sponsored Roth accounts are subject to RMDs.... If you're still contributing to your employer-sponsored plan, you may be able to delay taking RMDs." (Vanguard)
IRA Annuities: Beware of Death Benefit Taxation
"When an immediate annuity is purchased inside an IRA, the contract and the account step out of the regular minimum distribution rules ... Instead, the IRA becomes subject to the special separate RMD regime that applies to defined benefit pension plans and 'annuitized' defined contribution plans." (Morningstar Advisor)
Text of District Court Opinion Denying Summary Judgment for Plaintiffs Challenging DOL Fiduciary Rule (PDF)
81 pages. "The fiduciary rule does not exceed the DOL's authority ... DOL did not exceed its statutory authority to grant conditional exemptions ... BICE and PTE 84-24 do not create a private right of action ... Neither the new rules nor the rulemaking violate the APA ... BICE meets the prohibited transaction rules exemptive requirements ... Waiver applies and the rules do not violate the First Amendment ... The Exemptions' contractual provisions do not violate the FAA." [Chamber of Commerce of the U.S. v. DOL, No. 16-1476 (N.D. Tex. Feb. 8, 2017)] (U.S. District Court for the Northern District of Texas)
Is This the End of the Fiduciary Rule -- and Will It Matter?
"The language in the [Presidential Memorandum for the Secretary of Labor] suggests that the rule will be history.... The [DOL] can't just issue a replacement rule.... Litigation may reach a standstill.... Financial organizations will have to decide whether they will adhere to a fiduciary standard.... Plan sponsors and plan committee members have it easier.... The real losers here are the IRA holders." (PenChecks)
[Official Guidance] Text of IRS Publication 560: Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) for Use in Preparing 2016 Returns (PDF)
28 pages; Jan. 26, 2017. "What's New: Compensation limits for 2016 and 2017.... Elective deferral limit for 2016 and 2017.... Defined contribution limit for 2016 and 2017.... SIMPLE plan salary reduction contribution limit for 2016 and 2017.... Catch-up contribution limit for 2016 and 2017.... Mid-year changes to safe harbor plans and notices.... Tax relief for victims of Hurricane Matthew." (Internal Revenue Service [IRS])
[Guidance Overview] Second Fiduciary FAQs Package Issued in Final Days Before DOL Transition
"FAQ II deals specifically with the final regulations. Unfortunately, FAQ II did not answer all of the questions posed by industry practitioners. For example, absent was clarification of how the DOL views its conflict-of-interest guidance in the context of employer-sponsored retirement plans that employ IRAs as their investment vehicles. This includes simplified employee pension (SEP) plans and savings incentive match plan for employees of small employers (SIMPLE) plans. Nonetheless, FAQ II does provide many hoped-for clarifications." (Ascensus)
IRA Balances, Contributions, Withdrawals, and Asset Allocation Longitudinal Results 2010-2014: The EBRI IRA Database (PDF)
32 pages. "While the cross-sectional overall average account balance increased 38.9 percent from 2010 to 2014, the increase for those IRA owners who continuously owned IRAs from 2010-2014 was 45.8 percent.... Among Traditional IRA owners, 87.6 percent did not contribute to the IRA in any year, while 2.1 percent contributed in all five years. In contrast, 61.5 percent of Roth IRA owners did not contribute in any year and 10.4 percent contributed in all five years.... Among consistent account owners, the percentage of individuals taking a withdrawal from a Traditional or Roth IRA rose from 12.9 percent in 2010, to 15.4 percent in 2011, to 16.7 percent in 2012, to 18.5 percent in 2013, and to 19.6 percent in 2014." (Employee Benefit Research Institute [EBRI])
The Role of IRAs in U.S. Households' Saving for Retirement, 2016 (PDF)
40 pages. "More than one-third of US households owned IRAs in 2016.... Rollovers from employer-sponsored retirement plans have fueled the growth in IRAs.... Although most US households were eligible to make IRA contributions, few did so.... IRA withdrawals were infrequent and mostly retirement related." [Also see 24-page Appendix, which includes supplemental data tables.] (Investment Company Institute [ICI])
Small Business Views on Retirement Savings Plans
"Three-quarters of business owners who do not offer a plan said that under current circumstances, they would be no more likely to offer one in the next two years than they are now. Key changes that could lead employers to offer a plan include greater profitability, financial incentives, and increased demand from employees.... Support for an auto-IRA initiative proved highest if the plan would be sponsored by an insurance or mutual fund company; it dropped if a state or federal government ran the program." (The Pew Charitable Trusts)
Retirement Plans Comparison Table for Small Businesses, 2017 Plan Year
"This table provides a comparison of the features and benefits that apply to retirement plans that can be sponsored/adopted by small business owners. Focus is on the areas that are important to the business owner, so as to help ensure that the plan that is chosen is the plan that is most suitable for the business. Plans covered: SEP IRAs; SIMPLE IRAs; 401(k)s; Solo 401(k) / Individual-K; Profit Sharing; Money Purchase Pension; Defined Benefit Pension." (Appleby Retirement Dictionary)
[Guidance Overview] Breaking Down the Three Key Elements of the DOL Fiduciary Rule
"All three elements described in [ERISA] section 3(21)(A)(ii) -- [1] a fiduciary [2] that renders (non-discretionary) investment advice [3] for compensation -- must be present in order for the Rule to apply to an advisor communicating with a plan participant or an IRA owner.... [The Rule] broadens the definition of 'investment advice.' More precisely, 'retirement investment advice' that's rendered to [1] participants in ERISA plans such as 401(k) plans, profit-sharing plans, money purchase pension plans, and defined benefit plans, as well as [2] owners of IRAs and participants in non-ERISA plans. Note that the Rule does not pertain to investment advice rendered to those investing in taxable accounts and non-retirement accounts. That retail environment remains within the purview of the SEC." (Morningstar Advisor)
[Guidance Overview] Inherited IRAs: What Owners and Beneficiaries Need to Know
"Since first developed more than 40 years ago, [IRAs] have become a popular retirement savings vehicle for generations of investors. As time marches on, a new generation of IRA investors is emerging -- one that has inherited, or will inherit an IRA from a parent, spouse or other person. FINRA is issuing this alert to inform brokerage account holders, family members and other beneficiaries about inherited IRAs. We also provide tips for making the IRA inheritance process as efficient and trouble-free as possible." (Financial Industry Regulatory Authority [FINRA])
[Guidance Overview] Text of IRS Publication 590-B: Distributions from Individual Retirement Arrangements (IRAs), for Use in Preparing 2016 Returns (PDF)
60 pages. "This publication discusses traditional and Roth IRAs. It explains the rules for: Handling an inherited IRA, and Receiving distributions (making withdrawals) from an IRA. It also explains the penalties and additional taxes that apply when the rules are not followed. To assist you in complying with the tax rules for IRAs, this publication contains worksheets, sample forms, and tables, which can be found throughout the publication and in the appendices at the back of the publication." (Internal Revenue Service [IRS])
Why the New Fiduciary Rule Spells Opportunity for RIAs
"When the new rule takes effect next April, the DOL will extend to IRAs the kind of best interest protections that have long governed 401(k)s and other workplace-sponsored retirement plans.... These changes, which come as tens of millions of retiring baby boomers face the decision of what they will do with their retirement plan nest eggs, could result in some important benefits for RIAs.... Recent regulatory changes favor RIAs.... RIAs can attract a greater share of 401(k) plan business.... RIAs can capture more IRA rollovers from 401(k) clients.... Advisers can gain other business from plan participants.... Deeper relationships create a competitive advantage." (Financial Planning)
[Guidance Overview] Text of 2016 IRS Instructions for Form 8606: Nondeductible IRAs (PDF)
13 pages; dated Nov. 17, 2016, published online Dec. 22, 2016. "What's New: Modified AGI limit for Roth IRA contributions increased.... Due date for contributions. Because April 15, 2017, falls on a Saturday, and Emancipation Day, a legal holiday in the District of Columbia, is observed on Monday, April 17, 2017, the due date for making contributions for 2016 to your IRA is April 18, 2017, even if you don't live in the District of Columbia." (Internal Revenue Service [IRS])
[Guidance Overview] DOL Finalizes Guidance for Local Government-Coordinated Private Sector Plans
"The final regulations contain two clarifications regarding the responsibility of state and local governments to ensure security of withheld wages. First, they must ensure that amounts withheld from wages by employers are 'promptly' forwarded to employee accounts. While not specifying the exact meaning of 'promptly,' the DOL has established a contribution safe harbor.... Second, states and local governments must provide an enforcement mechanism to ensure compliance with the requirement that withheld wages be deposited promptly." (Ascensus)
Interesting Angles on the DOL's Fiduciary Rule, Part 31
"Some forms of additional compensation are obvious. For example, that includes commissions, 12b-1 fees, revenue sharing, trailing commissions, and so on. Others, though, are more subtle and, therefore, easier to overlook. Those could include trips, gifts, awards, reimbursements, marketing support, conference registrations, and so on.... While advisers to retirement plans have, by and large, been aware of these rules, ... advisers who focus primarily on wealth management, including advice to IRAs, are not familiar with the rules." (FredReish.com)
State Auto-IRA Programs: The Keys to Financial Self-Sufficiency
"State auto-IRA programs for private sector workers are intended to pay for themselves. This goal is achievable in the long run, but auto-IRAs will incur losses initially. The keys to financial self-sufficiency are to: keep per-account costs low; set meaningful participant contribution rates; and charge higher fees initially or finance start-up costs over a longer period." (Alicia H. Munnell, Anek Belbase and Geoffrey T. Sanzenbacher, Center for Retirement Research at Boston College)
Rollover Relief Will Come with IRS Scrutiny in 2017
"Proceed with caution if you are using the new self-certification procedure. You should be aware that self-certification is not the same as a waiver of the 60-day rule. You are not necessarily completely off the hook. When you file your taxes, you may report your contribution as a valid rollover on your tax return, but the story does not end there. The IRS can still later audit your return and determine that a rollover was not appropriate." (Slott Report)
[Opinion] Comments of American Benefits Council on Draft of the Retirement Improvements and Savings Enhancements (RISE) Act
10 pages. "[A]n employer would be permitted to make matching contributions under a 401(k) plan, 403(b) plan, or SIMPLE IRA with respect to 'qualified student loan repayments,' which are broadly defined as repayments of any indebtedness incurred by the employee solely to pay qualified higher education expenses of the employee (emphasis added) (expenses of a dependent would not be covered).... We applaud the innovation ... [Another] proposal would eliminate the ability of many plan and IRA beneficiaries to receive benefits over a period longer than five years.... [This] will in many instances reduce retirement savings for beneficiaries." (American Benefits Council)
To Roll or Not to Roll: A Framework for Implementing the DOL's New Fiduciary Rule for IRA Rollovers
22 pages. "Little research explores what should be considered when determining whether a rollover is in the best interests of an investor.... [This article outlines] a framework to make this decision, with a focus on the potential decision to roll retirement savings into an IRA managed by a financial advisor. Fees, the quality and scope of investments offered, the quality and scope of services being provided (e.g., financial planning), as well as other unique considerations should all be considered." (Morningstar)
[Official Guidance] Text of 2017 Instructions for IRS Forms 1099-R and 5498: Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, and IRA Contribution Information (PDF)
23 pages. "What's New: Report late rollover contributions certified by the participant in boxes 13a and 13b on Form 5498. Report the self-certification code in box 13c." (Internal Revenue Service [IRS])
Should You Create a Trust to be the Beneficiary of Your IRA?
"While placing a discretionary trust as the beneficiary of the inherited IRA allows the owner of the IRA to provide 'post mortem control' over the beneficiary's access to funds, it may not produce a good income tax result. If the Trustee, using his discretion, decides to keep the IRA distribution in the Trust, i.e. not to make a distribution to the trust beneficiary, the IRA distribution is taxed at the Trust level instead of the beneficiary level. This decision may create a much larger tax." (WithumSmith+Brown, PC)
RMDs When You Move Money from an Employer Plan to an IRA
"There are only three instances when you have to adjust an IRA balance before calculating an RMD. [1] Outstanding rollovers or transfers ... [2] Roth recharacterizations done the year after the conversion ... [3] Return of an excess QLAC contribution." (Slott Report)
[Official Guidance] 2016 IRS Form 5329: Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts (PDF)
"If you only owe the additional 10% tax on early distributions, you may be able to report this tax directly on Form 1040, line 59, or Form 1040NR, line 57, without filing Form 5329. See the instructions for Form 1040, line 59, or for Form 1040NR, line 57." (Internal Revenue Service [IRS])
Interesting Angles on the DOL's Fiduciary Rule, Part 28
"Under the DOL's fiduciary regulation, the recommendation of a plan distribution and IRA rollover will be fiduciary advice, subject to the best interest standard of care and the prohibited transaction rules. But, what if a participant takes a distribution and rolls over into an IRA with an adviser ... without a recommendation by the adviser?" (FredReish.com)
Comparing IRAs: Trusteed and Traditional
"With a traditional IRA, beneficiaries can choose to name their own beneficiaries for those assets ... This gives traditional IRA beneficiaries more control over IRA assets passed on to them but it may not be in line with IRA owner's intentions or wishes. Likewise, traditional IRA beneficiaries can choose to withdraw any amount from the IRA and spend down the money quickly. With a Trusteed IRA, you can maintain control even after you've passed away, ensuring that your loved ones can receive regular distributions and also name how, when, and to whom you would like your IRA assets to be distributed." (Manning & Napier)
[Opinion] Trump Election Casts Doubt on DOL Conflict of Interest Rule
"Though there is little detail on specific policies by the Trump campaign about many issues including the DOL rule ... the rule could be in jeopardy based on rhetoric from Trump about rolling back on regulations in general. In October, Anthony Scaramucci of Skybridge Capital and recently named adviser to Trump on small business affairs, boldly claimed that the DOL rule would be repealed if Trump was elected calling it a clear case of Federal overreach. Any chance that the SEC would promulgate fiduciary rules under Dodd-Frank seems unlikely now." (401kTV)
The Reason for the DOL Rule: IRAs
"The primary reason for issuance of the Rule doesn't involve qualified retirement plans. Although litigation over the last decade has shown that hidden -- and therefore high -- costs exist even in multibillion-dollar 401(k) plans sponsored by giant corporations ... the $4.7 trillion held in 401(k) plans is relatively better regulated and incurs relatively lower costs than the $7.4 trillion held in IRAs.... The real reason for issuance of the Rule is to mitigate what the DOL regards as the bad effects resulting from the practices of some advisors providing conflicted investment advice and products to unsuspecting IRA owners." (Morningstar)
[Guidance Overview] DOL Issues FAQs Explaining Aspects of the 2016 Final Fiduciary Rule
"[So] long as the advisor is not making the actual rollover decision, the BIC exemption remains available.... While the Department has interpretive authority over how the ERISA prohibited transaction rules apply to IRAs, the IRS has enforcement authority.... The Department made clear that an adviser/financial institution may not rely on the level fee provisions in the BIC exemption if they receive third party payments (e.g., 12b-1 fees or revenue sharing payments) in connection with the assets recommended.... [I]ndependent marketing organizations (IMOs) can sell annuity contracts to retirement investors and receive compensation such as commissions and override payments." (Mintz Levin)
Bank of America Merrill Lynch Tells Advisers to Stop Selling Mutual Funds in Brokerage IRAs Now
"The brokerage firm is eliminating the potential for compensation conflicts that could arise between now and April 10, 2017, when the Labor Department fiduciary rule takes effect. The new regulation, which requires advisers to put their clients' interest first for retirement accounts, has created a rift in the industry on whether to keep selling IRAs on a commission basis or restrict them to fee-based accounts." (InvestmentNews)
[Guidance Overview] FAQs on New Fiduciary Rule Issued
"Discretionary 'level fee' advisers will be required to comply with the 'streamlined' BICE requirements in connection with any rollover recommendation ... Firms may charge higher fees for complex products that require, for example, greater due diligence, training and closer supervision, but will need to justify the basis for the increased costs and monitor recommendations between categories.... Variable back-end awards, bonuses and similar back-end incentives are not permitted under the BICE and cannot be offered on or after October 27, 2016 (the date the FAQs were issued)." (Warner Norcross & Judd LLP)
[Guidance Overview] Interesting Angles on the DOL's Fiduciary Rule, Part 26
"[T]he reasonable compensation limitation is not new. It's been with us for decades. But, if that's the case, why hasn't there been more discussion and, in the bigger picture, more enforcement of the rule? ... [By] and large, the rule has been ignored.... IRA and plan investors will be able to pursue breach of contract claims for excess compensation.... [W]hile the law limiting the compensation of advisers (and Financial Institutions) is not new, the enforcement mechanism will be." (FredReish.com)
[Guidance Overview] DOL Issues First Guidance on Fiduciary Rule
"The FAQs address a number of important topics: ... Scope of BIC Exemption ... What Constitutes Unreasonable Compensation? ... Incentive Compensation for FAs ... Recruitment Bonuses ... Level Fee Fiduciaries ... Bank Networking Arrangements ... Effective Date." (Morrison & Foerster LLP, via Lexology)
From EBSA Secretary Phyllis Borzi: Your Conflicts of Interest Questions Answered
"Earlier this year, we announced new protections to ensure that Americans who are saving for retirement will have access to financial advice in their best interest.... One of the first and most important efforts on this front is the publication of FAQs based on the input we've received from the financial services industry and others. These questions are an important part of the regulatory process as they allow the department to clarify important parts of the rule, and head off misunderstandings that could lead to bad results for retirement savers, or financial services professionals.... Our initial focus has been, and remains, broad compliance with the rule." (U.S. Department of Labor [DOL] Blog)
[Official Guidance] Text of DOL FAQs on Conflict of Interest Exemptions (PDF)
24 pages. 34 Q&As, including: "Is compliance with the BIC Exemption required as a condition of executing a transaction, such as a rollover, at the direction of a client in the absence of an investment recommendation? ...Is the BIC Exemption available for advisers who act as discretionary fiduciaries to retirement plans and then provide investment advice to a participant to roll over assets to an IRA for which the adviser will provide advice? ... Is the BIC Exemption available for recommendations to roll over assets to an IRA to be managed on a going- forward basis by a discretionary investment manager? ... Is 'robo-advice' covered by the BIC Exemption or other exemption? ... Does the full BIC Exemption prohibit a financial institution or adviser from discounting prices paid by customers for services? ... Under the BIC Exemption, who are 'level fee fiduciaries' and what prohibited transaction relief is available to them? ... Can an adviser and financial institution rely on the level fee provisions of the BIC Exemption for investment advice to roll over from an existing plan to an IRA if the adviser does not have reliable information about the existing plan's expenses and features? ... Can a financial institution and adviser rely on the level fee provisions in the BIC Exemption to recommend a rollover from an employee benefit plan to an IRA if the adviser will become a discretionary manager with respect to the IRA assets after the rollover? ... Can insurance companies rely on independent insurance agents to sell fixed rate and fixed indexed annuities to retirement investors after the applicability date of the Rule? ... What is the role of insurance intermediaries, such as independent marketing organizations (IMOs), in the sale of annuity contracts to retirement investors after the applicability date of the Rule? Can they receive compensation such as commissions and override payments? ...Is there a way to get an exemption for advice to engage in principal transactions involving assets that are not specifically covered by the Principal Transactions Exemption? ... Does PTE 84- 24 cover rollovers into an annuity? ... The wording of PTE 84-24's reasonable compensation standard differs from the reasonable compensation standard used in the BIC Exemption. Does the Department intend to interpret them differently? ... How will the Department approach implementation of the new rule and exemptions during the period when financial institutions and advisers are coming into compliance?" (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
[Official Guidance] Text of IRS Notice 2016-62: 2017 Limitations Adjusted as Provided in Section 415(d), Etc. (PDF)
"Effective January 1, 201 7, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $210,000 to $215,000.... The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2017 from $53,000 to $54,000.... The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) remains unchanged at $18,000.... The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $265,000 to $270,000 ... The limitation used in the definition of 'highly compensated employee' under Section 414(q)(1)(B) remains unchanged at $120,000 ... [T]the deduction for taxpayers making contributions to a traditional IRA is phased out for single individuals and heads of household who are active participants in a qualified plan ... and have adjusted gross incomes ... between $62,000 and $72,000, increased from between $61,000 and $71,000." (Internal Revenue Service [IRS])
Using Public Policy to Create IRA Irony
"By creating a 'safe harbor' that allows states to mandate payroll deduction IRAs for these workers, the DOL fails to provide the protections afforded by ERISA to participants in these State-sponsored IRA plans (other than, presumably, the investment advice rule). The irony (and intellectual inconsistency) is patent: IRAs are important enough to be caught within the ambit of ERISA's fiduciary rule, but large state plans using IRAs can otherwise avoid the myriad of other ERISA protections." (Benefits Bryan Cave)
[Official Guidance] Text of IRS Announcement 2016-39: Retirement Plan Distribution Relief for Victims of Hurricane Matthew (PDF)
"[A] qualified employer plan will not be treated as failing to satisfy any requirement under the Code or regulations merely because the plan makes a loan, or a hardship distribution for a need arising from Hurricane Matthew, to an employee or former employee whose principal residence on October 4, 2016, (October 3, 2016, for Florida) was located in one of the counties identified for individual assistance by [FEMA] because of the devastation caused by Hurricane Matthew or whose place of employment was located in one of these counties on that applicable date or whose lineal ascendant or descendant, dependent, or spouse had a principal residence or place of employment in one of these counties on that date. These counties identified for individual assistance by FEMA are in Florida, Georgia, North Carolina and South Carolina and can be found on FEMA's website ...

"Plan administrators may rely upon representations from the employee or former employee as to the need for and amount of a hardship distribution, unless the plan administrator has actual knowledge to the contrary, and the distribution is treated as a hardship distribution for all purposes under the Code and regulations ...

"[A] 'qualified employer plan' means a plan or contract meeting the requirements of Section 401(a), 403(a) or 403(b), and ... a plan described in Section 457(b) maintained by an eligible employer described in Section 457(e)(1)(A), and any hardship arising from Hurricane Matthew is treated as an 'unforeseeable emergency' for purposes of distributions from such plans....

"To make a loan or hardship distribution pursuant to the relief provided in this announcement, a qualified employer plan that does not provide for them must be amended to provide for loans or hardship distributions no later than the end of the first plan year beginning after December 31, 2016. To qualify for the relief under this announcement, a hardship distribution must be made on account of a hardship resulting from Hurricane Matthew and be made on or after October 4, 2016, (October 3, 2016, for Florida) and no later than March 15, 2017." (Internal Revenue Service [IRS])

[Guidance Overview] IRS Information Release 2016-138: Retirement Plans Can Make Loans, Hardship Distributions to Victims of Hurricane Matthew (PDF)
"Participants in 401(k) plans, employees of public schools and tax-exempt organizations with 403(b) tax-sheltered annuities, as well as state and local government employees with 457(b) deferred-compensation plans may be eligible to take advantage of these streamlined loan procedures and liberalized hardship distribution rules. Though IRA participants are barred from taking out loans, they may be eligible to receive distributions under liberalized procedures.... Currently, parts of North Carolina, South Carolina, Georgia and Florida qualify for individual assistance." (Internal Revenue Service [IRS])
How Proposed Caps Could Impact IRA and 401(k) Accounts
"According to a 2014 [GAO] report ... there are almost 9,000 Americans who have accumulated more than $5 million in an IRA. However, the proposed cap would be a soft cap, allowing more than $3.4 million in an IRA or 401(k), as long as the amounts that exceed the cap are earnings, not contributions. Another interesting finding in the Government Accountability Office report was the estimate that there are 1,000 Americans with more than $10 million dollars saved in an IRA." (InvestmentNews)
When It Comes to Retirement Distributions, 401(k)s Lack Valuable Flexibility
"There's a key area where IRAs have a clear advantage over 401(k)s: in-retirement distributions. Simply put, investors who decide to leave money in their company retirement plans and draw from them to meet their living expenses typically have much less flexibility and control over withdrawals." (Morningstar)
[Guidance Overview] IRS Allows Self-Certification for Late Rollover Contributions
"Retirement plan administrators may accept late rollover contributions from taxpayers who self-certify that they qualify for a waiver of the 60-day rule. Plan sponsors may need to update their communications about rollovers to reflect the new IRS waiver procedures. The self-certification applies only to the 60-day requirement, not to other requirements for a valid rollover." (Willis Towers Watson)
[Guidance Overview] New York City to Establish City-Wide Private Sector Retirement Program
"The proposed program [includes] ... [1] A voluntary 401(k) marketplace, making available to private sector employers 'screened, competing 401(k) and other retirement plans from private and public providers.' ... [2] Private sector employer participation in a 401(k) MEP coordinated by the City of New York, including employers having no common ownership or business purpose.... [3] The New York City Roth IRA would be available as an alternative to [these] options, and employers (the news release says 'all') not offering a retirement plan would automatically enroll employees in a payroll deduction Roth IRA savings program." (Ascensus)
Disability and the Exception to 10% Early Distribution Penalty
"Many people, both advisors and IRA owners alike, think that if they are receiving any sort of disability payment that they will qualify for this penalty exception. Unfortunately, that is not true." (Slott Report)
Merrill Lynch's Move to End Commission IRAs a 'Tectonic Shift' for Brokerage Industry
"The firm, which houses more than 14,000 advisers, will no longer offer new, advised commission-based individual retirement accounts beginning April 10, the implementation date for the rule. Rather, it will migrate clients to its advisory platform, self-directed brokerage or robo advisory service. And, it could push the other large brokerages to respond in a similar way." (InvestmentNews)
New York City Comptroller Unveils 3-Pronged Retirement Program for Private-Sector Employees
"Under the umbrella title of 'New York City Nest Egg,' [New York City Comptroller Scott M. Stringer] proposed creating: [1] The Empire City 401(k), which would enable employers to join a single, publicly sponsored 401(k) plan based on a new federal law allowing multiple employers that are unaffiliated to join a single plan. [2] The NYC 401(k) Marketplace, a voluntary exchange overseen by an independent board that would offer employers a choice of 'screened, competing 401(k) and other retirement plans from private and public providers' ... [3] The NYC Roth IRA, an automatic default designed for eligible private-sector employers that do not select a plan on their own or through the NYC 401(k) Marketplace." (Pensions & Investments)
Merrill Lynch to End Commission-Based Options for Retirement Savers
"Merrill Lynch will no longer give retirement savers the option of paying a commission for trades, a wholesale exit from the traditional Wall Street sales model in accounts that stand to be affected by new conflict-of-interest rules on retirement accounts.... [W]hen the new rules take effect, investors who want a retirement account at Merrill will need to pay a fee based on a percentage of their assets, instead of having the option of being charged for each transaction made in their account." (The Wall Street Journal; subscription may be required)
Interesting Angles on the DOL's Fiduciary Rule, Part 22
"Based on the wording of the new fiduciary rule, if a bank employee recommends that an IRA invest in a certificate of deposit, and is compensated directly or indirectly for that recommendation, it is a fiduciary act for compensation. (The bonus, or bonus credit, is the compensation.) Since the bank employee is being paid compensation that is not stated and level, the payment is a prohibited transaction." (FredReish.com)
[Guidance Overview] New IRS Procedure for Waiving the 60-Day Rollover Deadline
"The IRS increased the fee for certain private letter rulings (PLR) requests to $10,000 per application, effective February 1, 2016. This include PLR requests to waive the 60-day deadline for completing rollovers, which is a significant increase as the fees for such PLRs used to range from only $500-$3,000.... Fortunately, the IRS has issued new guidelines that now allow eligible individuals to avoid having to pay the $10,000 fee by using a new self-certification option." (Appleby Retirement Dictionary)
[Guidance Overview] DOL Finalizes Safe Harbor Rule on State-Sponsored IRAs
"While industry trade groups and others appear to generally applaud and support the fact that the final rule expands access to workplace retirement savings programs, some continue to be concerned about the fact that it creates favorable standards for payroll deduction IRA programs administered by a state, over those administered by private sector providers outside a state program. This appears particularly illogical to some because it fails to take advantage of the private sector's substantial experience in administering and distributing IRA products, and infrastructure it already has in place to meet both the state's and the DOL's goal of encouraging wide-spread and greater savings for retirement." (Trucker Huss)
Senate Finance Committee Approves Bipartisan Pension Bills (PDF)
"[The Retirement Enhancement and Savings Act of 2016 (RESA) would].... [1] permit unrelated employers ... to pool their resources by participating in a new type of multiple employer plan, provided certain conditions are met.... [2] require employers to provide defined contribution plan participants with an estimate of the amount of monthly annuity income the participant's balance could produce in retirement ... . [3] create a new fiduciary safe harbor for employers who opt to include a lifetime income investment option in their defined contribution plan.... [4] allow earnings on elective deferrals, qualified non-elective contributions and qualified matching contributions under a 401(k) plan to be distributed on account of hardship.... [5] increase the penalties for failing to file a Form 5500 and failing to provide a required withholding notice to $100 per day[.]" (Groom Law Group)
DOL Rule Could Reduce IRA Rollovers
"Nearly half of projected [IRA] rollover assets are 'at-risk' of remaining in the defined contribution plan-sponsor market once the [DOL's] fiduciary rule goes into effect, a new report claims. Assets that don't roll over into retail IRA accounts, a transaction considered a big cross-selling opportunity for retirement advisors, would cut into revenues generated by financial advisors since fewer dollars are 'in motion.' +" (InsuranceNewsNet.com)
[Guidance Overview] Interesting Angles on the DOL's Fiduciary Rule, Part 21
"[T]he DOL has historically taken the position that a prudent process for advice to retirement plans must be documented. That could easily be extended to advice to IRAs as well. In fact, there is a specific documentation retention requirement under BICE. Second, there is an argument that, if a fiduciary adviser cannot obtain -- through the investigation -- enough information to formulate a prudent recommendation, the adviser needs to abstain from making a recommendation." (FredReish.com)
Reality Sets In: How New Fiduciary Rule Impacts 401(k)/IRA Providers and Retirement Savers
"For many, especially those already leading with the fiduciary mantle, the new Rule also offers new opportunities. This could add considerable value to retirement savers impacted by the Rule. For all the disquiet associated with changed providers, they may end up in a far better situation than when they started, according to those practitioners who responded to our interview queries." (Fiduciary News)
Will the DOL Fiduciary Rule Be the End of Solicitor Arrangements?
"IRA assets held by a Broker-Dealer (B-D) range between 40 and 80% of B-D total assets. However, many of these [financial advisors] know very little about ERISA fiduciary standard of conduct. This lack of knowledge increases B-D litigation risk as tens of thousands of misguided fiduciary missiles seek to secure new engagements or service existing clients. B-Ds will have to establish new training protocols in conjunction with compliance oversight to mitigate this risk." (Fiduciary Matters Blog)
Retirement Assets Total $24.5 Trillion in Second Quarter 2016
"Retirement assets accounted for 34 percent of all household financial assets in the United States at the end of the second quarter of 2016.... Assets in individual retirement accounts (IRAs) totaled $7.5 trillion at the end of the second quarter of 2016, an increase of 1.7 percent from the end of the first quarter. Defined contribution (DC) plan assets rose 2.1 percent in the second quarter of 2016 to $7.0 trillion." (Investment Company Institute [ICI])
[Guidance Overview] Charity is Exception to 'Contingent Right', Making Trust a 'Qualified Beneficiary'
"When a trust is named as the beneficiary of an IRA, it must a qualified 'see-through' trust (qualified trust) in order to allow for extended distributions based on the trust beneficiary's life expectancy. Despite best efforts, some trusts fail to meet the requirements to be a qualified trust; and even experts in the field sometimes make incorrect determinations as to the qualified status of a trust." (Appleby Retirement Dictionary)
Unintended Tax Consequences from Mishandling of an Inherited IRA: A Case Study
"Ultimately, retirement account owners will be responsible for paying any income tax due on distributions that they take from their retirement accounts, whether or not those distributions are shared with others.... For those who want to share inherited accounts with others, strategies can be implemented to ensure that any tax burden is also shared." (Appleby Retirement Dictionary)

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