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[Guidance Overview] Will the Illinois Payroll Deduction IRA Plan Be Pre-empted by ERISA?
"[T]here is an open question whether a state law requiring employers to participate in a state-run payroll deduction IRA program is preempted by Section 514(a) of ERISA, which generally overrides state laws that 'relate' to employee benefit plans.... Section 95 of the Act requires the board to request in writing an opinion or ruling from the DOL regarding the applicability of ERISA.... [P]ayroll deduction IRAs established by employers under the program may fall under a regulatory safe harbor that applies to certain individual account plans in which an employer's participation is minimal.... There is a substantial question whether employers who establish payroll deduction IRAs in compliance with the Act can also satisfy the requirements of the Safe Harbor and thereby avoid the application of ERISA.... The Act contains some internal inconsistencies and ambiguities." (Steptoe & Johnson LLP)
When a Roth IRA May Be a Terrible Asset to Inherit
"If the beneficiary's tax rates are higher, it's clearly beneficial for the current IRA owner to go ahead and convert the IRA, paying the taxes now at current rates, and leaving the (high income) beneficiary a tax-free account. However, if the reality is that the beneficiary's tax rates are actually lower -- perhaps because the original IRA owner's wealth is being spread across multiple beneficiaries, because the beneficiary simply has less income and assets, or maybe just due to the fact that the beneficiary lives in a different state that has a lower tax rate -- then the best thing a (higher-income) IRA owner can do is simply to leave a traditional IRA to the beneficiary and let the beneficiary pay the taxes at his/her own lower tax rates!" (Michael Kitces in Nerd's Eye View)
Retirement Plans for Young People: Know Your Choices
"The first choice to consider is an employer-sponsored cash-or-deferred plan (such as a 401(k) plan) where the employer matches some or all of the employee's contribution.... The next best retirement plan for younger people is undoubtedly the Roth IRA.... The worst type of plan for the young person is the traditional IRA." (Morningstar)
[Official Guidance] Text of IRS 2014 Publication 590-A: Contributions to Individual Retirement Arrangements (IRAs) (PDF)
62 pages. Revised January 13, 2015, for use in preparing 2014 returns. "What's New for 2014: Publication 590 split ... Modified AGI limit for traditional IRA contributions increased.... Modified AGI limit for Roth IRA contributions increased.... What's New for 2015: Modified AGI limit for traditional IRA contributions increased.... Modified AGI limit for Roth IRA contributions increased.... Application of one-rollover-per-year limitation.... Airline Payments." (Internal Revenue Service [IRS])
[Official Guidance] Text of IRS Publication 590-B: Distributions from Individual Retirement Arrangements (IRAs), for Use in Preparing 2014 Returns (PDF)
60 pages. "Publication 590 has been split into two separate publications ... Publication 590-A covers contributions to traditional IRAs as well as Roth IRAs. This publication will include the rules for rollover and conversion contributions. Publication 590-B covers distributions from traditional IRAs as well as Roth IRAs. This publication will include the rules for required minimum distributions and IRA beneficiaries.... What's New for 2015: Application of one-rollover-per-year limitation." (Internal Revenue Service [IRS])
The Case For and Against Taking Your RMD Early in the Year
"Reasons to Consider Taking Your [2015] RMD Now: [1] You don't have to worry about the 50% penalty ... [2] Don't leave beneficiaries with a tight window ... [3] You can convert or rollover the remainder of the account ... Reasons to Wait Until Later This Year to Take Your RMD: [1] Giving up tax deferral ... [2] No [qualified charitable distribution] provision currently in place ... for 2015(.]" (Slott Report)
[Guidance Overview] Allocating Pretax and After-Tax Amounts to Multiple Destinations; Tracking After-Tax Amounts in Traditional IRAs (PDF)
"[IRS Notice 2014-54] presents a middle-of-the-road approach that incorporates Sections 72(e)(8) and 402(c)(2) and provides new planning opportunities for participants with after-tax amounts who want to arrange a multiple destination distribution.... When a 401(k) participant has after-tax dollars in his or her account, the plan administrator tracks the amounts and, upon distribution, reports them appropriately on Form 1099-R. But when there are after-tax amounts in a traditional individual retirement account (IRA), they are generally not tracked by the institution holding the IRA. Instead, the IRA owner is responsible for keeping track of after-tax amounts." (Pentegra Retirement Services)
Plan Sponsors Need to Take Advantage of Regulators' IRA Rollover Scrutiny (PDF)
"While financial institutions will bear the brunt of expanded regulatory scrutiny of IRAs, it is important that employer plan sponsors be aware of financial institution practices regarding these accounts. Having knowledge of current guidance about IRAs also can be of use when highly compensated employees in the plan seek direction from the benefits office on decisions about their outside retirement savings." (ERISAdiagnostics via Thompson Pension Plan Fix-It Handbook)
IRA under SIMPLE Plan Held to Be Protected by State Anti-Garnishment Law
"The state anti-garnishment law would unquestionably protect a run-of-the-mill IRA. The creditor contended that this IRA was different, because; [1] it was the funding vehicle for a SIMPLE (IRC Section 408(p)); [2] SIMPLEs are employee benefit plans subject to ERISA; and [3] the state anti-garnishment law was therefore preempted by ERISA. The court agreed that the SIMPLE funded by the IRA was an ERISA-covered plan.... [T]he reasoning of VFS Financing is open to challenge, although its outcome -- the consistent application of a state anti-garnishment law to all IRAs, regardless of their origin -- has the effect of closing an apparent 'gap' in anti-alienation creditor protection for SEPs and SIMPLEs." [VFS Financing, Inc. v. Elias-Savion-Fox LLC, No. 12-Civ-2853 (S.D.N.Y. Dec. 1, 2014)] (Steptoe & Johnson LLP, via Lexology)
2015 Resolution: Avoid 60-Day Rollovers
"Should clients attempt a second rollover, the problem cannot be fixed. The IRS does not have the authority to help correct the situation. This could end an IRA, for example, if clients were moving their entire IRA balance to a new custodian or a new adviser. It can get worse. If clients do a second 60-day rollover, it's now not only taxable but an excess IRA contribution subject to a 6% penalty each year the ineligible rollover funds remain in the account." (InvestmentNews)
[Guidance Overview] Treasury Softly Launches myRA Program
"While certain employers (reportedly including the U.S. Office of Personnel Management) will formally participate in a pilot initiative, the myRA program apparently is open to any employer that will accommodate payroll direct deposit for employees who open an account. No formal action on the part of the employer appears required, except as necessary for the transmittal of payroll deductions to employees' myRA accounts. Even for employers participating in the pilot initiative, the program appears primarily employee-driven at this time." (Sutherland Asbill & Brennan LLP)
[Official Guidance] Text of IRS 2015 Draft Instructions for Forms 1099-R and 5498: Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., and IRA Contribution Information (PDF)
24 pages. "What's New: FATCA filing requirements of certain foreign financial institutions (FFIs). Beginning in 2014, an FFI with a chapter 4 requirement to report a cash value insurance contract or annuity contract that is a U.S. account held by a specified U.S. person with the FFI may satisfy this requirement by electing to report the account in a manner similar to that required under section 6047(d). Form 1099-R is to be used for such reporting. See Regulations section 1.1471-4(d)(5)(i)(B) for this election. Also see Regulations section 1.1471-4(d)(2)(iii)(A) for how a U.S. payor may satisfy its chapter 4 reporting requirements by reporting on Form(s) 1099." (Internal Revenue Service [IRS])
Seven Reasons to Beg Your Employer to Offer a Roth 401(k)
"[1] Tax-Free Withdrawals in Retirement ... [2] Income Tax Diversification ... [3] If You're In a Low Tax Bracket Right Now ... [4] You'll Probably Still Get the Employer Match ... [5] No Required Minimum Distributions ... [6] More Flexibility for Your Life in Retirement ... [7] Advance Protection From Widely Anticipated Income Tax Increases." (DailyFinance)
[Guidance Overview] 2014 Legislative and Regulatory Update (PDF)
49 presentation slides provide an overview of: [1] IRS and DOL guidance; [2] COLA limits and the Bipartisan Budget Act of 2013; [3] HATFA and pension smoothing; [4] Charitable donation of an IRA; [5] Ending of the SSA letter forwarding program; [6] Changes at IRS TE/GE; [7] IRS compliance tools; [8] Qualified Longevity Annuity Contract final regulations; [9] The myRA; [10] U.S. v. Windsor: impact on qualified plans; [11] FAB 2014-1: updated guidance on handling missing participants under a terminating DC plan; and [12] Form 5500 series. (McKay Hochman)
myRAs Are an ERISA-Free Zone
"Now that the federal government has officially rolled out the myRA retirement savings program, has it also left participating employers open to possible fiduciary liability? The answer is no -- employers who decide to help enroll workers in these new accounts need not fear marauding bands of fiduciary-violation-seeking plaintiffs' attorneys." (BenefitsPro)
[Guidance Overview] IRS Releases 2015 Form 5498 With Little Change
"The IRS has released the 2015 Form 5498, IRA Contribution Information. This form is used to report IRA contributions, rollovers, conversions, recharacterizations, fair market value, and certain other information. The only changes from the 2014 version of Form 5498 are year and deadline changes; no box or information changes appear in the updated form." (Ascensus)
Think Your Taxes Will Be Lower in Retirement?
"Since everyone would like to pay less income tax in retirement, the tax-free withdrawals from Roth IRAs are very attractive.... Certain tax years can prove optimal for a Roth conversion ... If you have both kinds of IRAs, you have the option to vary the amount and source of your IRA distributions in light of whether income tax rates have increased or decreased." (North Bay Business Journal)
[Official Guidance] IRS Employee Plans News, December 23, 2014: Rollovers of After-Tax Contributions in Retirement Plans
"The Service has received a number of questions following the issuance of Notice 2014-54. The following FAQs are provided to assist taxpayers in applying the notice. [1] Can I roll over just the after-tax amounts in my account to a Roth IRA and leave the remaining amounts in the plan (i.e., take a partial distribution of just the after-tax amounts)? No.... [2] I want to roll over my after-tax contributions to a Roth IRA and roll over earnings on my after-tax contributions to a traditional IRA. Can I do that? Yes...." (Internal Revenue Service [IRS])
The 2014 Charitable IRA Rollover: Who Might Benefit, and When Must Action Be Taken?
"On the surface, you may think it is a 'wash' if a taxpayer includes an RMD in income, and then deducts it after contributing the same amount to charity. But there are many instances in which this is not so. For example, some taxpayers do not itemize; some are subject to limitations on itemized deductions because they have high income; and some find that increased income causes other adverse tax consequences that cannot be wiped out by a charitable contribution (such as a higher percentage of social security benefits becoming taxable, and a higher threshold for deduction of medical expenses)." (Holland & Knight)
Comerica Chosen as myRA Custodian
"Comerica will serve as custodian for the Treasury Department's upcoming 'myRA' retirement savings bond program, which is being rolled out in phases.... Comerica was chosen through a competitive bid process managed by Treasury's Bureau of the Fiscal Service. Comerica and its partner, Fidelity National Information Services, will administer the accounts, a Treasury spokesman said." (Pensions & Investments)
[Guidance Overview] Tax-Free Transfers to Charities Available Through December 31 for IRA Owners 70-1/2 or Older; Rollovers This Month Can Still Count for 2014
"IRA owners age 70-1/2 or older have until Wednesday, Dec. 31 to make a direct transfer of part or all of their IRA distributions to an eligible charity. The Tax Increase Prevention Act, enacted Dec. 19, extended for 2014 the provision authorizing these qualified charitable distributions (QCDs). The provision had expired at the end of 2013. With this retroactive renewal, any eligible IRA distribution during 2014 properly transferred to a qualified charity counts as a QCD." (Internal Revenue Service [IRS])
[Guidance Overview] New Illinois Law Will Require Employers to Enroll Private Sector Employees in State-Run Payroll Deduction IRAs
"The Act requires private sector employers that do not already maintain a retirement plan to enroll their employees in automatic 'payroll deposit retirement savings arrangements' and to remit after-tax payroll deductions to a separate trust fund (State Fund or Fund) established by a state-run board.... [T]he Program will not be implemented if 'the IRA arrangements offered under the Program fail to qualify for the favorable federal income tax treatment ordinarily accorded to IRAs under the [Internal Revenue Code] or if it is determined that the Program is an employee benefit plan and state or employer liability is established under [ERISA].' ... An IRA for this purpose is defined under the Act as 'a Roth IRA under Section 408A' of the Code." (Steptoe & Johnson LLP)
FSI to Fight Rollout of State-Sponsored Auto IRAs
"Having states involved in retirement savings squeezes out financial advisers, said David Bellaire, executive vice president and general counsel at the [Financial Services Institute (FSI)]. 'We see this as unnecessary, unwise competition against small [financial advisers] that are working hard to address these needs,' Mr. Bellaire said. 'There's significant research that shows that investors, particularly those that are planning for retirement, have better outcomes when they work with financial advisers.' " (InvestmentNews)
Treasury Finalizes Rules for New Retirement Savings Account: The myRA
"[T]he new regulations state that the myRA is going to be treated as a Roth IRA. This means all of the interest growth inside the myRA on the new electronic savings bond will come out tax free if certain holding period and trigger events are satisfied. By treating the myRA as a Roth IRA, the Treasury Department also helped exclude myRA account balances from required minimum distribution requirements after age 70-1/2. This could be a big benefit for some individuals looking for tax and investment class diversification." (Forbes)
[Guidance Overview] Tax Extenders Reinstated Temporarily
"In its final form, the legislation 'patches' the tax extenders for one year, retroactively reinstating a wide range of provisions that technically lapsed at the end of 2013, to now be available for the current 2014 tax year. This includes the popular rule allowed those over age 70-1/2 to make a qualified charitable distribution (QCD) from an IRA, satisfying the current year's required minimum distributions while simultaneously completing a charitable bequest and excluding the IRA distribution from income entirely for tax purposes, with just enough time left to complete a QCD before year end." (Michael Kitces in Nerd's Eye View)
[Official Guidance] Text of Treasury Department Final Regs Governing Retirement Savings Bonds for Use by myRA Accounts
"The United States Department of the Treasury, Bureau of the Fiscal Service, offers a new nonmarketable, electronic retirement savings bond for Treasury's new retirement savings program. The bonds will be issued to a designated custodian for Roth individual retirement accounts established under Treasury's program. This new savings bond is only available to participants in the retirement savings program and will protect the principal contributed while earning interest at a rate previously available only to federal employees invested in the Government Securities Investment Fund (G Fund) of their Thrift Savings Plan." (U.S. Department of the Treasury)
[Official Guidance] Text of DOL Information Letter: myRA Accounts Facilitated by Employers Would Not Be Covered Under Title I of ERISA
"[We] do not believe Congress intended in enacting ERISA that a federal government retirement savings program created and operated by the U.S. Department of the Treasury would be subject to the extensive reporting, disclosure, fiduciary duty, or other requirements of ERISA, which were established to ensure against the possibility that employees' expectation of a promised benefit would be defeated through poor management by the plan sponsor and other plan fiduciaries.... Thus, given the character of the program, including its voluntary nature, its establishment, sponsorship, and administration by the federal government, and the absence of any employer funding or role in its administration or design, ... an employer would not be establishing or maintaining an 'employee pension benefit plan' within the meaning of section 3(2) of ERISA based solely on the facts that employees participate through payroll withholding contributions and that the employer distributes information, facilitates employee enrollment, and otherwise encourages employees to make deposits to myRA accounts owned and controlled by employees." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
Three Options for Taking Your RMD When Your IRA Holds an Illiquid Asset
"[1] RMDs from IRAs can be aggregated.... You cannot aggregate your owned IRAs with those of your spouse or with IRAs that you have inherited. [2] You can satisfy an RMD by taking a distribution in-kind of a portion of the asset that is equal to or more than your RMD amount....[3] You can skip the RMD." (Slott Report)
[Guidance Overview] Understanding the New Once-per-Year 60-Day Rollover Rules for IRAs and the Exclusion for Trustee-To-Trustee Transfers
"The IRS has declared that it will begin to enforce the new aggregation-based IRA rollover rules in 2015, with a special transition rule that will still allow old 2014 rollovers to cause a 1-year waiting period for just the accounts that were involved and not all IRAs. Nonetheless, going forward advisors and their clients will need to be more cautious than ever not to run afoul of the rules when engaging in multiple 60-day rollovers over time -- or better yet, simply ensure that IRA funds are only moved as a trustee-to-trustee transfer to avoid the rules altogether!" (Michael Kitces in Nerd's Eye View)
Your RMD Must Come Out of Employer Plan Before Moving Funds to an IRA
"An RMD amount cannot be rolled out of a plan and go to an IRA.... [W]hen the plan sends the entire plan balance to you or to an IRA account without sending you a check for the RMD, what you end up with is an excess contribution in the IRA. You can't fix this by just taking out the RMD amount. You must tell your IRA custodian that you are removing an excess contribution. In order to remove an excess contribution, you must also remove the earnings attributable to the excess contribution." (Slott Report)
[Guidance Overview] IRS Releases Guidance on After-Tax Rollovers -- Part 2: New Rules
"The new rules are effective for distributions after December 31, 2014. A plan can choose to operate under the new rules (or the old rules) for periods prior to that date, but the new rules cannot apply to distributions from a designated Roth account prior to September 18, 2014. The IRS has issued a proposed regulation to delete from the Roth 401(k) regulations the sentence requiring separate distribution treatment, and will later issue revised special tax notices. Seldom, if ever, would there be a need for a plan amendment to implement the new rules." (SunGard Relius)
[Official Guidance] Text of IRS Announcement 2014-34: Realignment of Technical Work Between the Tax Exempt and Government Entities Division and Office of Associate Chief Counsel (Tax Exempt and Government Entities) (PDF)
"On January 2, 2015, the authority to prepare revenue rulings, revenue procedures, announcements, and notices, and to issue technical advice (including technical advice memoranda (TAMs)), certain letter rulings, and certain information letters on matters involving exempt organizations, qualified retirement plans, and IRAs will be shifted to TEGE Counsel. TEGE Counsel will be responsible for the issuance of letter rulings except for the letter rulings listed [in this announcement]. In addition, TEGE Counsel will be responsible for ruling on issues involving employer deductions for contributions to welfare benefit funds.... The Employee Plans office of TE/GE (Employee Plans) will retain the authority to issue determination letters and the Exempt Organizations office of TE/GE (Exempt Organizations) will retain the authority to issue determination letters, including determination letters on the exempt status of organizations under Sections 501(c) and 521." (Internal Revenue Service [IRS])
Don't Miss Taking a Distribution From Your Inherited IRA by Year-End
"If the IRA owner died before his required beginning date (RBD), which is April 1 of the year after he turned age 70-1/2, then generally you have two options: [1] The 5-year-rule; [2] The single life option (a.k.a. the 'stretch IRA'). In most cases, you're better off choosing the stretch IRA because you can take the funds out over your single life expectancy starting the year after the IRA owner died." (Slott Report)
[Guidance Overview] IRS Updates Special Tax Notice for Retirement Plans
"[T]he new model notices include the following modifications: [1] Provide for the rollover of automatic contributions that are withdrawn upon the request of the employee within 90 days of enrollment; [2] Provide for the penalty-free distribution of amounts rolled over to an IRA to pay for certain health insurance premiums; [3] Update the summary of the tax treatment of rolled-over after-tax contributions; and [4] Update the summary of the tax treatment of rollovers to Roth IRAs." (Bradley Arant Boult Cummings LLP)
Don't Try to Take a Lump-Sum Distribution from a Qualified Plan After Thanksgiving
"Lump-sum distributions from a qualified retirement plan may be eligible for special tax breaks. The special tax breaks include net unrealized appreciation on company stock that's highly appreciated in value over the years it's been in your plan.... To qualify as a lump-sum distribution, the distribution must occur in one tax year and your account balance must be zero by the end of that year." (Slott Report)
[Guidance Overview] Changes Issued for Tax Notices Required to Be Provided to Persons Entitled to Receive a Retirement Plan Distribution
"The changes not only reflect the change in the rollover rules but also discuss the In-Plan Roth Rollover tax treatment. The changes include a clarification that refunds of automatic enrollment contributions are not eligible to be rolled over, if your plan has implemented automatic enrollment in salary reduction or deferral contributions of persons when they are first eligible. There is one notice for a plan without a Roth account and a separate notice for a plan with a Roth Account." (Winstead PC)
[Guidance Overview] IRS Clarifies Key Rollover Question
"One of the most hotly debated issues in the retirement planning community has been whether a client with pretax and after-tax employer-plan money can roll it over in two parts -- moving that after-tax cash to a Roth IRA tax-free, that is, while also directly moving the pretax money into a traditional IRA.... [A] new IRS notice provides an emphatic answer: Yes, they can.... Although the notice says it will generally apply to distributions taken in 2015 or later, it also says taxpayers can apply a reasonable interpretation of the existing rules. Practically speaking, the guidance is effective immediately." (Ed Slott, in Financial Planning)
Chart of Self-Directed IRA and 401(k) Prohibited Transaction Disqualified Persons
"Often times, a disqualified person is generically referred to as a family member. While that definition can be accurate, it really can cause problems when applied as some family members are disqualified (e.g. spouse of plan owner) while others are not (e.g. brother of plan owner).... [The author has] created a disqualified person diagram to help sort out the details. If a party is in red, that means they are a disqualified person and that your retirement plan cannot transact with them. If the party is green, that means they are NOT disqualified and your retirement plan may transact with them." (Mat Sorensen)
Reforming Roth Provisions May Be Key to Improving Retirement Saving Rates for Millennials
"[The author proposes] the following two changes to the Roth provision, effective for all 401k plans: [1] Roth accounts should be required for all sponsors offering a 401k plan.... [2] Roth contributions should be tax deductible up to a $10,000 per year limit, and a lifetime limit of $100,000.... Younger workers would benefit the most, as they would have the longest investment horizon. With these changes, the new objective in retirement saving would be maxing out the $100K as soon as possible in an employee's working life." (Employee Fiduciary)
How One Executive Ended Up With $196 Million in an IRA
"Wealthy individuals can get around the annual IRA contribution limit of $5,500 for 2014 ... Company founders can fill retirement accounts with stock that isn't publicly traded. They use low values to stay technically under the contribution limit. After the stock rises in value, they can convert it into something more liquid. The GAO report said IRAs were designed as a retirement savings vehicle, not as a way to shield wealth." (Bloomberg)
Individual Account Retirement Plans: An Analysis of the 2013 Survey of Consumer Finances
"The percentage of all families with an employment-based retirement plan from a current employer decreased from 38.8 percent in 1992 to 36.2 percent in 2013 ... [T]he percentage of family heads who were eligible for [DC] plans and chose to participate held essentially stable at 78.2 percent in 2010 to 78.7 percent in 2013. The percentage of families owning [IRAs] or Keoghs was also unchanged from 2010 (28.0 percent) to 2013 (28.1 percent).... [T]he median (mid-point) account balance of those families owning an individual account retirement plan increased in 2013: The value was $22,992 in 1992, reached $38,608 in 2001, and increased to $59,000 in 2013." (Employee Benefit Research Institute [EBRI])
GAO Report on Individual Retirement Accounts: IRS Could Bolster Enforcement on Multimillion Dollar Accounts, But More Direction from Congress Is Needed
"This report [1] describes IRA balances in terms of reported FMV aggregated by taxpayers; [2] examines how IRA balances can become large; and [3] assesses how IRS ensures that taxpayers comply with IRA tax laws.... Congress should consider revisiting its legislative vision for the use of IRAs. GAO makes five recommendations to IRS, including approving plans to fully compile and digitize new data on nonpublicly traded IRA assets and seeking to extend the statute of limitations for IRA noncompliance. IRS generally agreed with GAO's recommendations." (U.S. Government Accountability Office [GAO])
[Guidance Overview] IRS Chart of Rollover-Eligible Retirement Plans and IRA Combinations, Updated November 2014 (PDF)
BenefitsLink came across this handy unofficial chart on the IRS web site. It's a one-page summary in the form of a table, listing the eight kinds of plans and IRAs that can make rollover-eligible distributions, and the corresponding eight kinds of plans and IRAs into which those distributions can (or cannot) be rolled over. Updated Nov. 17, 2014, to reflect revised rollover rules. (Internal Revenue Service [IRS])
2014 Year-End Retirement and Distribution Planning for IRA Owners and Small Businesses
"If you turned age 70-1/2 before 2014, or hold an inherited retirement plan ... Review your records and make sure you take the full required distribution before the end of the year to avoid a 50% penalty.... If you turn age 70-1/2 in 2014 and you own an IRA: You also have a required minimum distribution due for the year 2014, but you have a choice: This first year's distribution can be postponed until as late as April 1, 2015.... Multiple individual beneficiaries of a 2013 decedent have until Dec. 31, 2014, to divide up their inherited IRA into multiple inherited IRAs, one payable to each beneficiary." (Natalie Choate, in Morningstar Advisor; free registration required)
[Guidance Overview] New IRS Rules on Direct Rollovers of Taxable and Non-Taxable Amounts Require Changes to DC Plan Administration by January 1, 2015
"[P]lan sponsors should review their rollover election forms to ensure that participants are able to clearly indicate where they wish the taxable and non-taxable portions of their distributions to be sent. Sponsors also should work with record-keepers and trustees to revise their Form 1099-R processes to allow separate Forms 1099-R for allocated amounts to different retirement accounts. In addition, plan sponsors, whose plans do not permit separate accounting for after-tax contributions, should consider altering their record-keeping practices to allow more rollover flexibility for participants." (McDermott Will & Emery)
Aging Boomers and Rollovers to IRAs
"As large numbers of 401(k) and 403(b) participants approach retirement, regulators are becoming increasingly aware that they will be moving from a plan environment where they are 'bubble wrapped' by plan fiduciaries -- and have the benefit of being able to select from investments that have been vetted by the fiduciaries and that are, as a result, good quality and relatively low-cost investments.... The regulators are asking, 'Does it make sense for participants to leave the protected environment of retirement plans and go into the retail environment of IRAs?' " (
Caution: New IRS Rules for IRA Rollovers Come with Risks for Advisers
"The Internal Revenue Service has published further guidance on its new one-IRA-rollover-per-year rule, but financial advisers beware: You must ask clients key questions on where their money has been or risk a snafu that could sever that relationship.... Though rollovers completed through the remainder of the year are acceptable, financial advisers need to go over the regulation and talk to their clients and prospects about its implications." (InvestmentNews)
When Splitting IRA Money in a Divorce, Be Careful
"IRAs ... are split according to the divorce agreement, not a QDRO. A copy of the divorce decree or separation agreement is given to the IRA custodian. When an IRA is split in a divorce, transferring the portion of the IRA that goes to the former spouse via a direct trustee-to-trustee transfer to an IRA in the name of the former spouse is the best way to move the funds. QDROs only apply to company retirement plans such as a 401(k). They do not apply to IRAs." (Slott Report)
[Official Guidance] Text of IRS Announcement 2014-32: Application of One-Per-Year Limit on IRA Rollovers (PDF)
"This announcement is intended to address certain concerns that have arisen since the release of Announcement 2014-15. The IRS will apply the Bobrow interpretation of Section 408(d)(3)(B) for distributions that occur on or after January 1, 2015. This means that an individual receiving an IRA distribution on or after January 1, 2015, cannot roll over any portion of the distribution into an IRA if the individual has received a distribution from any IRA in the preceding 1-year period that was rolled over into an IRA. However, as a transition rule for distributions in 2015, a distribution occurring in 2014 that was rolled over is disregarded for purposes of determining whether a 2015 distribution can be rolled over under Section 408(d)(3)(A)(i), provided that the 2015 distribution is from a different IRA that neither made nor received the 2014 distribution. In other words, the Bobrow aggregation rule, which takes into account all distributions and rollovers among an individual's IRAs, will apply to distributions from different IRAs only if each of the distributions occurs after 2014.... [A] rollover between an individual's Roth IRAs would preclude a separate rollover within the 1-year period between the individual's traditional IRAs, and vice versa.... The one-rollover-per-year limitation also does not apply to a rollover to or from a qualified plan (and such a rollover is disregarded in applying the one-rollover-per-year limitation to other rollovers), nor does it apply to trustee-to-otrustee transfers.... IRA trustees are encouraged to offer IRA owners requesting a distribution for rollover the option of a trustee-to-trustee transfer from one IRA to another IRA." (Internal Revenue Service [IRS])
[Guidance Overview] IRS Clarifies Application of One-Per-Year Limit on IRA Rollovers, Allows Owners of Multiple IRAs a Fresh Start in 2015 (PDF)
"In Announcement 2014-32, posted [November 10, 2014] the IRS made clear that the new interpretation will apply beginning Jan. 1, 2015, and said that a distribution from an IRA received during 2014 and properly rolled over (normally within 60 days) to another IRA, will have no impact on any distributions and rollovers during 2015 involving any other IRAs owned by the same individual. This will give IRA owners a fresh start in 2015 when applying the one-per-year rollover limit to multiple IRAs. Although an eligible IRA distribution received on or after Jan. 1, 2015 and properly rolled over to another IRA will still get tax-free treatment, subsequent distributions from any of the individual's IRAs (including traditional and Roth IRAs) received within one year after that distribution will not get tax-free rollover treatment. As [this] guidance makes clear, a rollover between an individual's Roth IRAs will preclude a separate tax-free rollover within the 1-year period between the individual's traditional IRAs, and vice versa." (Internal Revenue Service [IRS])
IRA Rollovers Under Increasing Scrutiny
"In recent years, federal regulatory bodies have placed IRAs generally, and rollovers specifically, under increased scrutiny.... The cascade of rule making has also brought attention to the nature of communication between financial professionals and investors about retirement savings options, and created some anxiety among advisers about the processes they use to consolidate retirement assets. Now is the time to reset the bar on how you communicate with investors about IRAs and how you document those communications." (InvestmentNews)
Fidelity's Quarterly Retirement Snapshot: Average Balances Increase Year-Over-Year, Record Contributions
"The quarter-end 401(k) balance, which includes all participating employees at various stages of their careers, was $89,100, down 2% from the end of Q2 but an increase of nearly 6% from the same period last year. For employees in a 401(k) plan for 10 years straight, the average balance was $241,800, down 2% from the end of Q2 but up 8% from the same period last year....The average 401(k) contribution reached $6,080 in Q3, up 1% over the last year. The average contribution to a Fidelity IRA is $4,357, up 3% over the same period last year." (Fidelity)
Changes Coming for the 402(f) Rollover Notice to Participants
"The current IRS model 402(f) notice provides that if the participant has after-tax and is making a direct rollover of only a portion of the amount, and a portion is paid to the participant, each of these payments will include an allocable portion of the after-tax contributions. In Notice 2014-54, the IRS states that they will be revising the safe harbor explanations provided in the model 402(f) notice to explain the Notice's new rules." (McKay Hochman)
The Art of Borrowing from Your IRA and Rolling Back in Time to Avoid Income Taxation
"[A] taxpayer may exclude the distribution from gross income if that distribution is returned to an IRA ('rolled over') 'not later than the 60th day after the day on which he receives the payment or distribution.' Even if the taxpayer does not place the entire amount into an IRA by the 60th day, to the extent a partial amount is rolled over, that part is excluded.... The Eighth Circuit [recently] reversed the Tax Court's rather simplistic denial of the taxpayer's partial rollover of distributions he had taken from IRAs in order to lend the monies, on what hopefully would be a very short-term basis, to two companies which were bidding on a governmental contract and which relied on the taxpayer's software in order to conduct their businesses." [Haury v. Comm., No. 13-1780 (8th Cir. May 12, 2014)] (Bloomberg BNA)
Do I Have a Required Distribution From My IRA This Year?
"We are down to the last two months of the year. It is time for those who have required minimum distributions (RMDs) from a retirement plan to make sure that those distributions are taken.... [1] Individuals age 70-1/2 or older by December 31 of the year.... [2] Individuals who have set up a 72(t) distribution plan.... [3] Beneficiaries of all retirement accounts.... [4] Deceased account owners." (Slott Report)
Majority of IRA Owners Hold 'Extreme' Asset Allocations (PDF)
"23.7 percent of IRA owners have less than 10 percent in equities and 35.5 percent have more than 90 percent in equities.... [A]lmost 1 in 5 IRA owners (18.5 percent) had more than 90 percent of their assets in bonds and money." [From an EBRI study entitled 'IRA Asset Allocation, 2012, and Longitudinal Results, 2010-2012.'] (Employee Benefit Research Institute [EBRI])
Roth vs. Regular 401(k): Doing the Math
"From the point of view of plan participants and plan sponsors, Roth math can be a little confusing. For some participants, Roth contributions will produce greater benefits (net of taxes) than regular contributions. For others, they produce smaller benefits. Which outcome applies often depends on the participant's marginal tax rate when the contribution is made and when it is distributed." (October Three Consulting)
'4-Part Harmonization' on Rollovers
"Advisors seeking to capture IRA rollovers face a 'four-part harmonization' of regulatory and other government entities -- that is, SEC, DOL, FINRA and GAO -- in the words of ERISA attorney Fred Reish.... As they look at distributions from DC plans and rollover issues, the four groups are all concerned with conflicts of interest and fees for mutual funds and advice. Reish highlighted the commonalities among the 2013 GAO report, DOL Advisory Opinion 2005-23A and FINRA Regulatory Notice 13-45. And both FINRA and the SEC included IRA rollover practices as an examination priority in 2014." (American Society of Pension Professionals & Actuaries [ASPPA])
The Back Door Roth IRA Contribution: Unintended Tax Consequences
"The back door Roth technique involves making a nondeductible contribution to a traditional IRA and immediately converting it to a Roth IRA. Because the contribution to the traditional IRA is nondeductible, converting those assets to a Roth would result in no income tax upon conversion. An often overlooked aspect of this technique is that IRS rules don't allow a taxpayer to hand select which IRA assets he or she wishes to convert. If an individual has other IRA accounts, there is the potential for a tax surprise[.]" (Baker Newman Noyes)
How Big Is the Problem? The High Cost of Accounts Left Behind (PDF)
"[1] 9.5 million employees change jobs each year. [2] 38 million retirement accounts connected with former employees left with previous employers. [3] $92/year: Average recordkeeping, custody, and administration fee per account. [4] $3.5 billion: Estimated annual cost of DC plan accounts belonging to previous employees. [5] $43.5 billion: Estimated cost of former employees over a 10-year period." (Millennium Trust Company)

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