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Three Things to Check on a Beneficiary Form -- Besides the Beneficiaries
"[1] Does the beneficiary form work on a per stripes or per capita basis? ... [2] Are there any restrictions on whom you can name as a beneficiary? ... Some beneficiary forms ... may not allow a trust to be named as a beneficiary. Others may limit the number of primary or contingent beneficiaries you can name.... [3] Does the beneficiary form allow the stretch? ... [A] retirement account may require that any beneficiary -- designated or not -- empty an inherited account within 5 years." (The Slott Report)
All-Time High: Fidelity's Average Annual IRA Contribution Climbs to Over $4,000
"The findings ... show investors 50 years of age and over continue to save the most in Traditional and Roth IRAs. Younger investors, those in their 20s, 30s and 40s, are adopting strong savings behaviors and have made strong increases with overall average contributions -- 3.9 percent, 6.7 percent and 6.2 percent, respectively from 2012 tax year to 2013 tax year. Additionally, average contributions to Roth IRAs continue to outpace average Traditional IRA contributions on both ends of the age spectrum." (Fidelity)
IRA Withdrawals in the 'Crossover Zone' Can Trigger the Section 1411 Net Investment Income Tax
"[B]ecause the tax only applies to investment income above certain income thresholds, it's possible for 'non'-investment income like retirement distributions to cause the surtax on other investment income by pushing it over the line. The end result: even types of income not directly subject to the tax end out indirectly causing the 3.8% surtax after all! Given this dynamic, investors whose investment income is in the 'crossover zone' and straddles the income threshold -- such that only a portion of their investment income is subject to the surtax -- have a unique planning opportunity to shift income into other years where they do not face the crossover zone." (Michael Kitces in Nerd's Eye View)
Does the Supreme Court's Bankruptcy Decision Affect IRAs Inherited by Spouses?
"Many experts believe that the Heffron-Clark decision will not apply to spouses who inherit an IRA. There are a number of special rules for spousal beneficiaries under the Tax Code that create a clear distinction between spouse and nonspouse beneficiaries. Another possibility, however, is that a spouse inheriting an IRA will be unable to claim an exemption for it. If so, it will make no difference from a bankruptcy perspective whether the client keeps the account as an inherited IRA or does a spousal rollover. Either way, the funds could be considered part of the surviving spouse's bankruptcy estate." (On Wall Street)
How State Auto-IRA Legislation May Affect Employers
"These proposals generally do not cover employers who already have a plan. But, depending on how they deal with uncovered groups and uncovered employees (e.g., part-time or seasonal employees) and minimum standards for 'what is a plan,' they may wind up applying even to large plan sponsors. [This article reviews] three such initiatives: the National Conference on Public Employee Retirement Systems (NCPERS) Secure Choice Pension (SCP) proposal, the California Secure Choice Retirement Savings Trust Act and the Illinois Secure Choice Savings Program Act." (October Three Consulting)
Aggregating Inherited IRAs
"In all of these scenarios the RMD will have to be calculated and distributed separately for each IRA. You can never take the RMD for an inherited IRA from an IRA that you own or vice versa. IRAs inherited by non-spouse beneficiaries have RMDs beginning in the year after the death of the account owner regardless of the age of the beneficiary." (The Slott Report)
Stock Market's Rise Lifts Retirement Balances to a Record High
"At the end of the second quarter ... For those employees who have been active in a workplace 401(k) retirement plan for a full 10 years, their average balance rose 15.0% per year over the past decade to $246,200.... The quarterly average 401(k) balance, which includes all employees at various stages of their careers including just starting a job to nearing retirement, rose 12.9% to $91,000, a record high, up from $80,600 at the end of the second quarter 2013.... Impact of the stock market remains significant with 77% of the one-year 401(k) balance increase due to the equity markets and 23% due to employee and employer contributions." (Fidelity)
How the 'Annuities Should Never Go in an IRA' Rule Has Become a Myth
"While in some limited cases, deferred variable annuities actually are making a resurgence for pure tax deferral purposes -- in which case, there's once again little reason to purchase them with retirement assets -- most annuities continue to be purchased for their guarantees and investment characteristics, not their tax preferences. Given these changes, it is perhaps time to abolish the 'annuities should never go into an IRA' rule and recognize that it has become more a myth and remnant of old than proper advice in today's environment." (Michael Kitces in Nerd's Eye View)
IRS Expected to Require Aggregating IRA Types for Rollover Limitation
"Based on new communications with the IRS, it now appears the IRS has reconsidered that position and believes that aggregating Traditional, Roth, and SIMPLE IRAs into a combined one-rollover limitation better reflects Congress' intended safeguards against abusive use of IRA assets as de facto lending instruments." (Ascensus)
What NOT to Do When a Trust is the IRA Beneficiary
"While there are many good reasons to name a trust as the beneficiary of an IRA, the main reason is for control. If the IRA owner wants to control how the funds are paid out after he dies, a trust can do that.... Trusts by themselves are complicated. The IRA required minimum distributions rules are complicated too. When you mix the two by naming a trust as the IRA beneficiary, problems often occur. Below are some common mistakes that are made after an IRA owner dies with a trust as the beneficiary." (The Slott Report)
Ins and Outs of Taking Required Minimum Distributions from Multiple IRAs and Retirement Plans
"Generally speaking each retirement plan or account must distribute its own RMD, and you cannot take a distribution from one plan that counts toward your RMD from another plan.... With IRAs, there is more flexibility: Generally you can take your IRA distributions from whichever IRA you want ... But that flexibility does not extend to inherited IRAs. If you are holding an IRA as beneficiary, you must take RMDs attributable to that inherited IRA from that account." (Natalie Choate for Morningstar Advisor)
What a Younger Spouse Should Do When Inheriting an IRA
"A beneficiary does not have to pay the 10% early distribution penalty on amounts withdrawn from the inherited IRA.... A spouse beneficiary does not have required minimum distributions (RMDs) until the deceased account owner would have been 70-1/2 ... Diane should be sure to make the funds her own before the year Richard would have been 70-1/2 [which is 18 years from now]. Here's why." (The Slott Report)
[Official Guidance] Text of IRS Partial Withdrawal of Proposed Regs which Had Allowed More Than One IRA Rollover Per Year
"As of [July 11, 2014], the proposed amendment to Section 1.408-4(b)(4)(ii), published Tuesday, July 14, 1981 (46 FR 36198), is withdrawn ... The IRS intends to follow the [Tax Court] opinion in Bobrow and, accordingly, is withdrawing paragraph (b)(4)(ii) of Section 1.408-4 of the proposed regulations and will revise Publication 590. This interpretation of the rollover rules under section 408(d)(1)(B) does not affect the ability of an IRA owner to transfer funds from one IRA trustee or custodian directly to another, because such a transfer is not a rollover and, therefore, is not subject to the one-rollover-per-year limitation of section 408(d)(3)(B).... [T]he IRS will not apply the Bobrow interpretation of section 408(d)(3)(B) to any rollover that involves a distribution occurring before January 1, 2015." (Internal Revenue Service [IRS])
No Gender Gap in IRA Contributions (PDF)
"[A]ccounts owned by males received only slightly higher average annual contributions ($4,023) than did those owned by females ($3,995), although males had higher individual average and median balances than females ($139,467 and $36,949 for males, respectively, vs. $81,700 and $25,969 for females), and were more likely to have an IRA." (Employee Benefit Research Institute [EBRI])
[Guidance Overview] New Treasury Rules Enable Longevity Annuity Purchases Through Qualified Plans and IRAs
"Rules governing required minimum distribution (RMD) at age 70-1/2 have been revised so that the value of a qualifying longevity annuity contract (QLAC) is not included in the determination of a minimum annual payment. Aggregate premium payments to the contract cannot exceed the lesser of $125,000 or 25% of the participant's account balance. In earlier proposed regulations, the Treasury set the limit at $100,000.... Section 403(b) plans may purchase QLACs under the same rules that apply to employer-sponsored tax qualified plans." (J.P. Morgan Asset Management)
Offsetting the Income Taxes from an Inherited 401(k)
"The terms of the inherited retirement account specified that the couple had to draw it down in equal installments over five years.... That additional income meant they'd owe at least another $6,500 per year in taxes.... [Their advisor] suggested that each of them contribute the maximum $22,000 to their 401(k)s each year. Those combined tax-deferred contributions of $44,000 would offset the $40,000 in annual income from the inherited 401(k), reducing their tax bill and preventing them from moving into a higher tax bracket." (The Wall Street Journal; subscription may be required)
[Guidance Overview] IRS Regulations Create New Type of Retirement Income Annuity
"You will be able to exclude the value of a [qualifying longevity annuity contract (QLAC)] from your RMD calculations, allowing you to keep a greater portion of your IRA (or other retirement account) intact longer. Payments from QLACs will have to begin no later than the first day of the month after you turn 85. You will be limited as to how much of your retirement savings you can invest in a QLAC.... The limits will apply separately to each spouse when each spouse has their own retirement accounts. QLACs cannot be variable or equity-indexed annuity contracts, though insurance may offer contracts with cost-of-living adjustments. QLACs cannot offer any cash surrender value." (The Slott Report)
Roth IRAs Most Often Created by Contributions, Not Rollovers
"In 2012, more than seven in 10 new Roth IRAs were opened exclusively with contributions -- in sharp contrast to traditional IRAs, which largely are created through rollovers from employer-sponsored retirement plans." (Investment Company Institute [ICI])
Roth IRA Investor Activity, 2007-2012 (PDF)
"[F]orty-three percent of consistent Roth IRA investors contributed to their Roth IRAs between tax year 2008 and tax year 2012, and more than three-quarters of them contributed in multiple years.... Withdrawal rates rose slightly between 2008 and 2012, but still only a very small fraction of Roth IRA investors took money out of their Roth IRAs.... On average, in recent years, nearly $20 billion of contributions flowed into Roth IRAs per year. In tax year 2012, 30.3 percent of Roth IRA investors aged 18 or older contributed to their Roth IRAs, and more than four in 10 of these contributors did so at the legal limit." (Investment Company Institute [ICI])
Senate Postpones Markup of Bill with Provision to Accelerate IRA Death Benefit Payouts
"The Senate Finance Committee was scheduled to consider a bill this week that includes a revenue raising provision to accelerate certain beneficiary payouts in retirement accounts. Markup of the bill has been postponed until after the Senate recess." (Ascensus)
Text of JCT Description of Proposed Modification to the 'Preserving America's Transit and Highways Act of 2014'
Includes changes to proposed modifications of required beginning dates for 5% owners and for rollovers from governmental and collectively bargained plans, as well as a proposal to modify the definition of normal retirement age for in-service distributions in DB plans. JCT cost estimate is also available. (U.S. Congress, Joint Committee on Taxation [JCT])
Ten (Not So) Simple Steps to Claiming a Deduction for a Roth IRA Loss
"If you've actually made it [through the preceding 9 steps] and are one of the lucky -- or perhaps, not so lucky -- few who can claim a deduction for a Roth IRA loss, then take a complete distribution of all your Roth IRAs. Note that while this must be done in order to take a deduction for a Roth IRA loss, it also means the end of your Roth IRA accounts. You will be giving up any tax-free appreciation that may have occurred in later years in the Roth, so just be sure that you weigh the pros and the cons of this move before you take any action." (The Slott Report)
Estate as Beneficiary: IRA vs. Qualified Plan
"When retirement benefits are payable to the estate, the family loses the option of a 'stretch' (life expectancy) payout. The life expectancy payout is available only to 'designated beneficiaries', meaning individuals or see-through trusts. The estate is not and cannot be a 'designated beneficiary' because it is not an individual, and (unlike with trusts) the IRS has no 'see-through rule' for estates." (Natalie Choate for Morningstar Advisor)
An Inherited IRA Is Not a 'Retirement' Account for Purposes of Bankruptcy Protection
"From a proactive planning perspective, the Clark decision will likely make it far more appealing for spousal beneficiaries to roll over inherited retirement accounts rather than leaving them as inherited IRAs, and non-spouse beneficiaries may increasingly prefer to inherit retirement accounts via a trust on their behalf, taking advantage of the 'see-through' trust regulations to ensure the inherited IRA can still stretch its distributions to the trust itself. On the other hand, the acknowledgment by the Supreme Court that a retirement account effectively ceases to be a preferential account (for asset protection purposes at least) after the death of the original owner also raises the question of whether Congress' recent proposals to curtail the use of stretch IRAs altogether and force most beneficiaries to use the 5-year rule may soon come to pass as well!" (Michael Kitces in Nerd's Eye View)
[Opinion] Five Reasons Why Bloomberg is Right to Blast 401(k) Rollovers
"Rolling a 401(k) account into an IRA is generally a really bad idea, for the following reasons: Higher fees.... Not only higher fees, but more fees.... No advice.... Bad advice.... Loss of protection from creditors.... [T]here are very few compelling reasons to remove 401(k) balances from qualified retirement plan accounts." (Lawton Retirement Plan Consultants)
[Guidance Overview] Supreme Court: Inherited IRAs are NOT 'Retirement Accounts' ... and What This Means For You
"The question for many now is, 'How can I keep my hard-earned money away from my children's (or other beneficiaries') creditors after I'm gone?' For some, state law may provide protection.... If -- and this is a big if -- a trust is drafted properly, certain requirements are met and the trust contains appropriate spendthrift language, it can help shield the trust assets (like an inherited IRA) from your trust beneficiaries' creditors while still allowing the trust to stretch distributions from the inherited IRA out over the oldest applicable trust beneficiary's life expectancy. There are a lot of potential downsides to consider when naming a trust as your IRA beneficiary, though." [Clark v. Rameker, No. 13-299 (S. Ct. June 12, 2014)] (The Slott Report)
Supreme Court Decision Impacts Inherited IRAs (PDF)
"[Clark v. Rameker] involves a daughter's inheritance of her mother's IRA. The rules differ when the person inheriting the IRA is a spouse.... Thus, it may be reasonable to conclude that a spouse's recharacterized IRA could be excluded from the bankruptcy estate as an exempt 'retirement fund' even after Clark. A spouse who inherits an IRA should consider making the election to recharacterize it if bankruptcy is a possibility." [Clark v. Rameker, No. 13-299 (S. Ct. June 12, 2014)] (Steptoe & Johnson LLP)
Estate as Beneficiary: IRA vs. Qualified Plan
"Even though the 'minimum distribution rules' are almost exactly the same for individual retirement accounts (IRAs) and for 'qualified plans' such as 401(k) plans, the practicalities can be quite different. The differences are especially significant when the participant's estate is beneficiary." (Natalie Choate, for Morningstar Advisor)
[Guidance Overview] Using the Retirement Plan Life Expectancy Tables
"There are three life expectancy tables used by IRA and employer plan account owners and beneficiaries. These tables were last updated by IRS for optional use in 2002 and were mandatory in 2003. You cannot choose which table you would like to use. Each one must be used in certain situations." (The Slott Report)
Supreme Court Holds Inherited IRAs Do Not Qualify for 'Retirement Funds' Exemption under Federal Bankruptcy Law
"The Court rejected the debtor's argument that, because the account was originally a retirement account when the debtor's mother created it, it retained that character after it was inherited. According to the Court, the use of the term '"retirement funds" implies that the funds are currently in an account set aside for retirement, not that they were set aside for that purpose at some prior date by an entirely different person.'" [Clark v. Rameker, No. 13-299 (S. Ct. June 12, 2014)] (Journal of Accountancy)
Supreme Court Allows Creditors to Tap Into Inherited IRA Money
"In an unanimous ruling written by Justice Sonia Sotomayor, the court said inherited IRA money not received from a spouse isn't protected in bankruptcy proceedings. Most types of retirement accounts can't be accessed by creditors in a bankruptcy case ... The ruling clarified instructions in the U.S. Bankruptcy Code, as millions of aging baby-boomers begin to leave behind unspent IRA money to others." [Clark v. Rameker Trustee, No. 13-299 (S. Ct. June 12, 2014)] (The Wall Street Journal; subscription may be required)
Roth IRAs: Who Is Contributing, and How Much? (PDF)
"3 percent of Roth owners ages 25-29 contributed to their Roth in 2012, compared with 21 percent of Roth owners ages 60-64. Just over a quarter (25.1 percent) of Roth IRA owners made a contribution to that account in 2012, compared with 6.6 percent of traditional IRA owners. Nearly half (49.0 percent) of Roth IRA owners contributed the maximum, compared with 57.9 percent of those contributing to a traditional IRA." (Employee Benefit Research Institute)
Text of Supreme Court Opinion: Funds Held in Inherited IRAs Are Not 'Retirement Funds' Exempt from Bankruptcy Estate (PDF)
"Three legal characteristics of inherited IRAs provide objective evidence that they do not contain such funds. First, the holder of an inherited IRA may never invest additional money in the account. Second, holders of inherited IRAs are required to withdraw money from the accounts, no matter how far they are from retirement. Finally, the holder of an inherited IRA may withdraw the entire balance of the account at any time -- and use it for any purpose -- without penalty." [Clark v. Rameker, Trustee, No. 13-299 (S. Ct. June 12, 2014)] (Supreme Court of the United States)
Should You Split a Roth Conversion Into Multiple Accounts to Isolate Investments for Strategic Recharacterization?
"[O]ne significant caveat of Roth recharacterizations ... is that [they] must allocate gains/losses across the account on a pro-rata basis. As a result, one cannot simply 'cherry pick' the worst performing investments from a Roth conversion to subsequently recharacterize, and trying to do so can accidentally shift originally-Roth investments into a traditional IRA in the process! Fortunately, though, a special rule allows Roth recharacterizations to occur on a standalone basis, as long as the conversion is placed in a separate account in the first place." (Michael Kitces in Nerd's Eye View)
IRA Rollover Advice May Be 'Hot Button Issue' In DOL's Re-Proposed Fiduciary Rule
"[T]he re-proposal may include guidance on how far advisers can go when recommending to participants that they take a distribution from their retirement plan and roll it over into an IRA before they become fiduciaries to that plan. It is possible the DOL will mimic guidance issued by [FINRA] in December 2013 that said a firm's recommendation that investors roll over their retirement plan assets to an IRA involves securities recommendations subject to FINRA rules[.]" (Bloomberg BNA)
401(k) Contributions Will Be Cash-Flow Negative in 2016
"[Cerulli Associates] estimates ... that $300 billion flowed into the system in 2012 while $276 billion flowed out as cash, as retirees made withdrawals or rolled over funds into IRAs. By 2016, inflows will increase to $364 billion, but outflows will increase to $366 billion Fund managers will face greater competition as workers role 401(k) funds into IRAs." (NewsMax MoneyNews)
Take it or Leave it? What Older Workers Do with Their 401(k) Balances (PDF)
"[L]eaving money in the prior employer plan was the most common option, cited by 27.4 percent of respondents in 2010. Among those not already receiving benefits, an IRA rollover was the next-most common option cited (24.9 percent) by 2010 survey respondents, while withdrawals accounted for 15.6 percent and 17.5 percent of all outcomes in 2008 and 2010, respectively." (Employee Benefit Research Institute [EBRI])
$640 Billion in 401(k) Assets Ripe for a Rollover
"Nearly one-fifth (22%) of the $2.9 trillion in total assets held in large 401(k) plans is held by retirees or pre-retirees who have yet to roll it into other plans ... [This study] analyzed the number of retirees still receiving benefits from or entitled to receive benefits from 14,508 401(k) plans with at least 100 participants. The 7.4 million people in that group, out of a total of 62 million participants covered in the study, held an estimated $640 billion in assets in their 401(k) plans." (ThinkAdvisor)
Using Retirement Plan Assets for a First-Time Home Purchase
"Who qualifies as a first-time homebuyer? ... What are the tax benefits of using a traditional IRA for a first-time home purchase? ... Does it make a difference if I use a Roth IRA? ... Do I get the same benefits with an employer-sponsored retirement plan? ... Is it a good idea to use retirement assets to purchase a home?" (Financial Finesse)
The Disposition of DC Accounts: Who Rolls Over into an IRA? Who Leaves Money in the Plan? Who Withdraws Cash?
"This study documents the outcome of DC plans using a nationally representative survey ... and [analyzes] how the disposition decisions correlate with a number of demographic and financial variables. The goal is to provide insight for plan administrators, investment managers, and policy makers to help plan participants make better decisions." (Employee Benefit Research Institute [EBRI])
Roth IRAs Growing Twice as Fast as Traditional IRAs
"Roth conversions continued in 2011 and 2012 and still today even without the 2-year deal, but the rush in 2010 was the big push and made people think more about paying tax now to build a tax-free retirement fund. The sweetener worked and created awareness of the Roth IRA benefits. It also filled the government coffers with much needed revenues so it was a win-win -- a rarity for taxpayers and Uncle Sam." (The Slott Report)
[Guidance Overview] Plan-to-Plan Rollover Guidance Issued by IRS
"Rev. Rul. 2014-9 may simplify the direct rollover process for some participants and sponsors. The processes outlined in it are simpler than current practice for some plans. A fundamental problem, however, remains: qualified plan sponsors have to make a determination with respect to incoming rollovers -- that they represent only qualified plan money -- that does not have to be made with respect to a rollover to an IRA." (October Three Consulting)
IRA Balances, Contributions, and Rollovers, 2012 (PDF)
"The average IRA account balance in 2012 was $81,660, while the average IRA individual balance (all accounts from the same person combined) was $105,001.... Rollovers overwhelmingly outweighed new contributions in dollar terms. While almost 2.4 million accounts received contributions, compared with the 1.3 million accounts that received rollovers in 2012, 10 times the amount of dollars were added to IRAs th rough rollovers than from contributions. The average individual IRA balance increased with age for owners ages 25 or older, from $11,009 for those ages 25-29 to $192,961 for those ages 70 or older." (Employee Benefit Research Institute [EBRI])
[Opinion] More Musings on the New IRA Rollover Limitation
"Many were predictably upset that the Tax Court ruled as it did, reversing a long-held tradition and contradicting an oft-stated and oft-published IRS position. Perhaps more upsetting was the fact the IRS brought this case in the first place and didn't give credence to their own published guidance. Regardless of this, the statutory reference to rollovers in the Internal Revenue Code has not changed since 1978, and a plain-language reading of it -- while somewhat ambiguous -- can in all honesty be read as the Tax Court did, limiting rollovers to one per-taxpayer per year. The Tax Court took the position that our lawmakers intended to make access to IRA funds possible, but not so easy as to encourage abuses." (Todd Berghuis, for Ascensus)
Ric Edelman Answers Child IRA Question and Reveals Today's Investors' Biggest Question
"You can't establish an IRA unless you have earned income, which most children lack. IRA rules also limit the amount you can contribute; there is no limit for the RIC-E Trust. And most importantly, the 'Child IRA' does not prevent the child from accessing the money prior to retirement. This is the most important element ... an irrevocable trust, meaning the child cannot touch the money. All financial advisors know that if the child is permitted to have access to the account, he or she will do so." (Fiduciary News)
The Top Ten Roth Conversion Mistakes
"[1] Making a contribution when you are not eligible ... [2] Contributing more than the annual limit... [3] Funds being moved from an IRA to an IRA get put into a Roth IRA instead ... [4] Doing a 'back-door' Roth conversion and not using the pro-rata rule ... [5] Incorrect valuation of assets." (The Slott Report)
Where Should You Convert -- Roth IRA or Roth 401(k)?
"While on the surface these two types of accounts are very similar -- they both, for example, offer the prospects of tax-free growth and future distributions -- there are a number of subtle, and not so subtle, differences that may make one type of conversion far more beneficial for you than the other.... [H]ere is a summary of some of the most important factors to consider when making this decision[.]" (The Slott Report)
Tax Court Declines to Revisit Bobrow
"The U.S. Tax Court has declined to revisit its decision in Bobrow v. Commissioner, which found that a taxpayer could make only one nontaxable rollover contribution within each one-year period regardless of how many IRAs the taxpayer maintained." (Wolters Kluwer Law & Business)
Fiscal Year 2015 Revenue Proposals Affecting Retirement Plans and IRAs
"The Administration has released its Revenue Proposals for Fiscal Year 2015. Five of them affect retirement plans and individual retirement accounts. Two are relief provisions, two would substantially reduce the benefits of retirement plans and IRAs and one would limit the extent to which participants and IRA owners could take advantage of retirement plans and IRAs." (
Rollover Rule Change Will Cause Trouble
"The once-per-year rule is a trap for the unwary. For one thing, it's not always clear what a 'distribution' is -- if you request a cashout of your IRA and the IRA provider sends you two separate checks a month apart, is that one distribution or two? Also, consider 'Granny' who has her IRA in six-month CDs. Most banks treat each CD as a separate new IRA, which they then close and distribute when the CD matures. If Granny has multiple CDs in IRAs that close out within 12 months of each other, she won't be able to roll over any but the first one. The way to avoid getting into trouble with this rule is to always use direct IRA-to-IRA transfers instead of '60-day rollovers.'" (Natalie Choate, for Morningstar Advisor)
[Guidance Overview] A Plan Administrator's 'Due Diligence' Obligations for Rollover Contributions
"The IRS recently released Rev. Rul. 2014-9 which essentially describes certain new factual situations under which it is appropriate for a plan administrator to assume that a rollover contribution amount it receives is tax-qualified and, therefore, will not result in a compliance defect for the recipient plan.... The Guidance focuses on two specific factual situations ... In one situation, the rollover emanates from another employer's retirement plan while, in the other, the rollover emanates from an IRA." (Legacy Retirement Solutions)
IRS Inbound Rollover Guidance May Both Help and Hinder
"In the IRS's own words the agency states that 'These procedures are generally sufficient.' Are they not always sufficient? Are they a new minimum standard? How much latitude and judgment do plan administrators now have in determining rollover eligibility? The unintended consequence may be more uncertainty, rather than less." (Todd Berghuis, for Ascensus)
The Key to the Uncashed Checks Dilemma (PDF)
10 pages. Excerpt: "Many plan distribution checks are not received or acknowledged by the former employee ... These uncashed checks represent plan assets and are consequently an ongoing burden for plan sponsors. Uncashed checks ... increase plan costs, complicate plan administration and prevent fiduciary responsibilities from being fulfilled. Automatic rollover IRAs provide a simple, effective solution to this problem." (Millennium Trust Company)
Reasons to Wait Until You Retire to Make a Roth Conversion
"[Y]ou can contribute to an IRA, 401(k) or other retirement plan while you are working in a high-income-tax-state, possibly getting a deduction (check your state rules) and allow that money to grow tax-deferred until you retire. Then, when it's time to take the money out -- or make a Roth IRA conversion -- you can be in a low or no tax state and minimize your tax liability. This can be such a big deal that [some people move] to a state just so they wouldn't have to pay income taxes on large Roth IRA conversions." (The Slott Report)
[Guidance Overview] Announcement Clarifies Inconsistency Between IRS and Tax Court Interpretations of 1-Per-Year Rollover Limitation
"This effort [in IRS Announcement 2014-15] to clarify how the 1-rollover-per-year limitation applies may, however, create new uncertainties. Among them is whether the limitation will prevent a taxpayer from taking more than one distribution from any IRA during a calendar year, or only from taking more than one distribution from any single type of IRA. How the IRS resolves this issue will be critical, for example, to taxpayers with access to both traditional and Roth IRAs. Will the IRS interpret the limitation to prevent them from taking one distribution from a traditional IRA, and another distribution from a separate Roth IRA, during a single 12-month period?" (Bloomberg BNA)
More Employers Adding Roth Features to Expand Savings Options
"[H]alf of all companies now offer a Roth account, nearly five times the percentage that did so in 2007 (11 percent).... [An analysis of] more than 3.5 million eligible participants in over 125 defined contribution plans ... found that employee participation in these Roth accounts is also steadily increasing. In 2013, 11 percent of workers saved to a Roth account when it was available in the plan, up from 8 percent in 2011.... Where Roth 401(k) accounts are available, 15 percent of workers in their 20s contributed to a Roth, compared to fewer than 8 percent of workers in their 50s." (Aon Hewitt)
Are There Two Five-Year Roth Clocks?
"Plans that allow for designated Roth contributions and in-plan Roth conversions must track the five-year Roth clock for purposes of determining if the Roth distribution is a 'qualified distribution' and must also track a separate five-year Roth clock for purposes of determining whether in-plan Roth rollover amounts withdrawn from the plan are subject to a recapture tax. Separate five-year clocks must be tracked for each year in which a participant makes an in-plan Roth conversion." (McKay Hochman)
Roth 401(k): Does Switching to One Make Sense?
"Choose to pay your taxes whenever your tax rate will be lower.... If you're early in your career and upbeat about your potential to grow your wealth, your 10% or 15% tax bracket now is almost certainly more appealing than your future. If you're in your peak earnings years and your tax bracket is 33%+, the odds are more likely than your tax rates will be lower in retirement once those wages are no longer part of the picture. In the middle -- the 25% and 28% tax brackets -- you'll have to consider whether you'll be able to accumulate enough ... such that at the margin, your tax rate really will be higher in the future." (The Wall Street Journal; subscription may be required)
Senate's EXPIRE Act Includes IRA Rollover Provision
"The IRA Charitable Rollover provision, which allows donors age 70-1/2 and older to exclude from their taxable income any IRA funds up to $100,000 that have been withdrawn and transferred to a charity ... is one step closer to being reinstated back into law. The rollover provision expired on Dec. 31, 2013. It has been included in the Senate's Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act, a tax extenders package introduced by Sen. Ron Wyden (D-OR), Chair of the Senate Finance Committee ... [T]he provision would be reinstated through Dec. 31, 2015 if the bill is enacted into law." (Association of Fundraising Professionals [AFP])
Why the IRS Wants You to Watch Your IRA Rollovers
"At issue is a sophisticated strategy, allowable under the old rules, aimed at drawing what amounts to an interest-free loan through a series of indirect rollovers. It's usually executed by financial advisers or other financial experts because the penalties for mistakes are severe." (Reuters)

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