Headlines about "Distributions - misc"

Gathered from the web by the editors at BenefitsLink.com.
Be Careful if ROBS is Your Business Financing Strategy
"A recent tax court opinion highlights the importance of meeting all legal requirements with these arrangements.... The business owed money to the seller of the assets used in the business and the individual IRA owners had personally guaranteed that debt. The individuals later converted their IRAs from traditional IRAs to Roth IRAs. The business was sold a few years later and the individuals assumed that the gain on the sale would be tax free when received by the Roth IRAs and tax free when distributed to the individuals who owned the Roth IRAs.... The IRS [claimed] that the personal guarantees by the IRA owners of the note to the seller constituted an indirect loan to the IRA itself.... The tax court noted that the owners did not discuss the personal guarantees with the advisor and in any case the advisor was the promoter of the arrangement so was not an independent advisor upon whose advice the owners could rely to avoid penalties." [Peek v. IRS and Fleck v. IRS, Nos. 5951-11, 6481-11 (U.S.T.C. May 9, 2013)] (Leonard, Street and Deinard)

[Opinion] Pension Predators in New York
"By insisting that they are making advances, not loans, these firms elude state supervision, including usury laws, licensing regulations and the federal Truth in Lending Act, which requires lenders to disclose borrowing costs. These and other subterfuges have enabled the companies to ambush pensioners with 'advance' loans that carry interest charges ranging ... from 27 percent to 106 percent. This is clearly illegal in New York[.]" (The New York Times)

How to Reduce Employee Cravings for 401(k) Loans
"Plan sponsors should consider some options to limit the amounts of loans while still offering them: 1. Allow only one outstanding loan at a time.... 2. Limit participant loans for hardship reasons only." (Employee Benefit News)

IRA Withdrawals: How Much, When, and Other Saving Behavior
"The bottom-income quartile of [households between ages 61 and 70] had a very high percentage (48 percent) of households that made an IRA withdrawal, and their average annual percentage of account balance withdrawn (17.4 percent) was higher than the rest of the income distribution. Among households between ages 71 and 80 that are subject to RMDs, those that have a withdrawal exceeding the RMD amount had average withdrawal amounts that were more than double the amounts taken by those that withdrew only the RMD amount." (EBRI)

Plan Sponsors: Check Your Plan Loan Administration
"[P]lan sponsors should check their loan practices and procedures to make sure that appropriate evidence (beyond a participant representation) is being obtained in connection with residential loans.... [T]he plan sponsor should monitor the administrator periodically to ensure that the policies and procedures are actually being followed." (DrinkerBiddle via Mondaq; free registration required)

GAO Report Finds 401(k) Companies Often Mislead Account Holders
"Money management firms frequently offer workers misleading and self-serving information about how to handle their retirement savings when they change jobs ... Departing workers are often encouraged to roll their accounts into individual retirement accounts, or IRAs, run by the firms that already manage their retirement money, even when it would be best for employees to keep the money in a 401(k), the GAO investigation concluded. Having workers move their money into IRAs typically allows money management companies to harvest bigger fees for handling the retirement money, the report said." (The Washington Post)

Text of GAO Report: DOL and IRS Could Improve the Rollover Process for Participants
"GAO found that service providers' call center representatives encouraged rolling 401(k) plan savings into an IRA even with only minimal knowledge of a caller's financial situation. Participants may also interpret information about their plans' service providers' retail investment products contained in their plans' educational materials as suggestions to choose those products. Labor's current requirements do not sufficiently assist participants in understanding the financial interests that service providers may have in participants' distribution and investment decisions.... GAO recommends that Labor and IRS should take certain steps to reduce obstacles and disincentives to plan-to-plan rollovers." [Editor's note: The report includes seven specific recommendations for DOL and Treasury actions, including "finalize the agency's initiative to clarify the [ERISA] definition of fiduciary" and "develop a concise written summary explaining a participant's four distribution options and listing key factors a participant should consider when comparing possible investments, and require sponsors to provide that summary."] (U.S. Government Accountability Office)

Complexity as a Barrier to Annuitization: Do Consumers Know How to Value Annuities?
"[I]ndividuals have difficulty valuing annuities, and this difficulty -- rather than a preference for lump sums -- can help explain observed low levels of annuity purchases. Although the median price at which people are willing to sell an annuity is close to median actuarial values, ... people are willing to pay substantially less to buy a larger annuity, a result not due to liquidity constraints or endowment effects. Strikingly, [the authors] also learn that individual responses to the buy versus sell decisions are negatively correlated, an effect that is stronger for the less financially sophisticated[.]" (Pension Research Council, Wharton School of the University of Pennsylvania; free registration required)

Rethinking Your Retirement Withdrawal Rate
"It's easy to overlook a key principle of retirement planning: it may not matter how much money you retire with if you don't have a carefully thought out withdrawal strategy to see you through retirement.... The '4% rule' is a general rule of thumb, and it may not provide you the retirement income you need over the long term. Its 30-year projection is based largely on the assumption that future portfolio returns will be in line with historical averages. But, if you were to underperform the market, the annual 4% withdrawals may potentially result in a portfolio that is depleted much quicker than expected." (Smart401k.com)

Why to Dollar-Cost Average Rather Than Invest Your Lump Sum
"Here are some reasons it makes more sense for some people to invest periodically instead: Markets are volatile.... The difference between investing the lump sum and dollar-cost averaging periodically, say once a month for a year, is going to be small.... Investing periodically will keep you more interested in investing advice.... The extra time will allow you to become more comfortable with the markets and your asset allocation.... Spreading out your investments will give you more opportunities to tax-loss harvest." (U.S.News and World Report)

Making a 'Backdoor' Roth IRA Contribution
"[If] a taxpayer rolls over a distribution from his or her IRA to an eligible retirement plan ... and the amount rolled over equals only the sum of deductible contributions and earnings on all contributions ... but not any nondeductible contributions, the entire amount rolled over will not be taxed at the time of rollover.... The taxpayer's remaining IRA balance after the rollover should equal its basis, so the taxpayer could immediately withdraw that remaining balance tax free or convert it to a Roth IRA tax free." (Journal of Accountancy)

401(k) Loans Usually Not Taken Out Frivolously, Senators Told
"Evidence shows that workers aren't dipping into their 401(k)s to cover frivolous purchases.... [L]ast year, only 2% of participants took a hardship withdrawal and the great majority of those workers did so for sound reasons: In 54% of the cases, workers were trying to avert eviction or foreclosure. Medical expenses were the second most common reason for the withdrawals (15%), while paying educational expenses came in third." (Investment News; free registration required)

[Opinion] ASPPA Applauds Introduction of the SEAL Act
"The Shrinking Emergency Account Losses in 401(k) Savings Act of 2013 (SEAL Act), contains provisions that reduce the loss of savings from early hardship withdrawals and 401(k) plan loans outstanding when employment is terminated.... The SEAL Act proposes simple changes that will lessen the loss of retirement savings when an employee terminates employment with an outstanding loan balance, and reduce the long-term impact of hardship withdrawals.... These provisions are sensible improvements to current law that will allow many Americans to keep more of their retirement savings working for them." (American Society of Pension Professionals & Actuaries)

Rethinking a Tax Break on Lump Sums
"Taking advantage of the special tax break for net unrealized appreciation [NUA] on lump-sum distributions from a retirement plan most often was a fairly simple decision ... [The American Taxpayer Relief Act of 2012] changed both ordinary income tax and long-term capital gains rates. Plus, the additional 3.8% health care surtax on net investment income, which includes capital gains, took effect at the start of the year.... [F]inancial advisers should take a fresh look at the NUA strategy to see which of their clients may be affected by these changes and whether NUA may continue to make sense as part of a client's overall plan." (Investment News; free registration required)

401(k) 'Leakage' Slows as Economy Recovers
"From 2008 to 2012: The share of employers who reported an increase among plan participants taking hardship withdrawals during the prior 12-month period fell from 43 percent to 25 percent. The share of employers who reported an increase among plan participants taking loans against their 401(k) accounts fell from 49 percent to 37 percent." (Society for Human Resource Management)

Will Regulations to Reduce IRA Fees Work?
"Due to 401(k) rollovers, IRAs have become the biggest form of retirement savings. But IRAs tend to have higher fees, partly because commissions -- such as 12b-1 fees -- encourage broker-dealers to sell more expensive mutual funds. 12b-1 fees would have been eliminated under a 2010 Department of Labor reform proposal ... [which] would produce only modest benefits and, despite industry concerns, would create little harm. Bolder reforms merit consideration, such as keeping savings in 401(k)s, extending 401(k) protections to rollover IRAs, and limiting fees in both accounts." (Center for Retirement Research at Boston College)

Low Bond Yields and Safe Portfolio Withdrawal Rates (PDF)
"Yields on government bonds are well below historical averages [which] will have a significant impact for retirees, who tend to invest heavily in bonds ... [This paper examines] a model that takes into account current bond yields and allows them to 'drift' toward a higher value during retirement ... [A] retiree who wants a 90% probability of achieving a retirement income goal with a 30-year time horizon and a 40% equity portfolio would only have an initial withdrawal rate of 2.8%. Such a low withdrawal rate would require 42.9% more savings if the retiree wanted to pull the same dollar value out of the portfolio annually as he or she would get with a 4% withdrawal rate from a smaller portfolio." (Morningstar Investment Management)

The Truth about 401(k) Loans and Withdrawals
"The percent of our participants taking a new loan has declined by 3.5 percent since 2010 and is nearing pre-recession levels. At the highest point, new loans represented only 7.2 percent of participants and just barely over one-percent of total retirement plan assets. It's key to point out that the majority of loans are paid back -- into the participant's account, with interest." (The Principal Blog)

Solving the Annuity Puzzle: Low Use of Lifetime Distributions
"In retirement plans, one of the more intransigent concerns for policy makers, providers, and plan sponsors alike is what has been called the 'annuity puzzle' -- the reluctance of American workers to embrace annuities as a distribution option for their retirement savings. What economists call 'rational choice theory' suggests that at the onset of retirement individuals will be drawn to annuities, because they provide a steady stream of income, and address the risk of outliving their income. And yet, given a choice, the vast majority don't." (Nevin Adams via EBRI)

[Guidance Overview] Puerto Rico Treasury Clarifies Taxation of Distributions from Retirement Plans (PDF)
"Reg. 8324 now provides when plan participants will be required to include as gross income the value of the contributions made by the employer to a plan if: (1) the plan is tax qualified; (2) the plan is not tax qualified; (3) the plan is not tax qualified when the contributions were made but secured such qualification thereafter; and (4) the plan is tax qualified when the contributions were made but is disqualified at some point thereafter. It also provides when the beneficiaries of a plan participant will be required to include as gross income the benefit received from the plan: (1) upon the death of the plan participant; (2) as alimony; (3) as child support; or (4) as the share of the participant's former spouse in the marital properties." (McConnell Valdes)

2012 Reporting of 2010 Roth Rollovers and Conversions
An informational page for taxpayers, describing the various rules that depend upon whether distributions were received in 2010, 2011 or 2012. "In 2010, did you: [1] convert (transfer) amounts from a non-Roth IRA to a Roth IRA, [2] roll over eligible distributions from a retirement plan (other than an IRA-based plan) to a Roth IRA, or [3] do an in-plan Roth rollover (after September 27, 2010)? If yes, you were required to report half of the taxable amount of your 2010 Roth rollovers and conversions on your 2011 tax return and now must report the remaining half on your 2012 return, unless ..." (Internal Revenue Service)

Road Map to Buying an Annuity
"Before you buy an annuity, [Anna Rappaport, chair of the Committee on Post-Retirement Needs and Risk for the Society of Actuaries,] emphasizes taking these initial steps. [1] Set aside a robust emergency fund.... [2] Consider Social Security as an annuity replacement.... [3] Pay off your mortgage." (Bankrate.com)

Preretirement 401(k) Breaches on the Rise
"[T]he report advises against further prohibiting distribution options for participants. 'Nearly all households that breach are financially unhealthy even after they receive distributions from their retirement savings,' the authors point out. Prohibiting access to retirement funds, in these cases, would 'exacerbate the basic money-management problems that are strongly associated with breaching in the first place'." (Society for Human Resource Management)

[Opinion] Why the Alarm Over 401(k) Withdrawals and Loans?
"[A recent Washington Post] article incorrectly states that 'in 1980, four out of five private-sector workers were covered by traditional pensions;' in fact, only about half that many actually were at that point ... The article notes that the 'most common way Americans tap their retirement funds is through loans, although U.S. Department of Labor data indicate that loan amounts tend to be a negligible portion of plan assets and that very little is converted into deemed distributions in any given year." (Nevin Adams via EBRI)

The Return of Qualified Charitable Distributions
"One special rule allows a QCD to be taken this month and have it count for 2012.... The second special rule ... allows clients who took a 'regular' IRA distribution last month to treat that distribution as a QCD for 2012. To do so, clients must act quickly, as this is a limited-time offer that requires action by Jan. 31." (Investment News; free registration required)

Annuity and Lump-Sum Decisions in DB Plans: The Role of Plan Rules
"[A]nnuitization rates vary significantly across these different plan types, which makes any attempt to combine the annuitization rates across these different plan types uninformative. Combining all the plans across the years 2005-2010, workers who made their payout decision between ages 50 and 75 had a minimum job tenure of five years, a minimum account balance of $5,000, and had an annuitization rate of 65.8 percent. But within this group of workers, those who had no plan restrictions on a lump-sum distribution had an annuitization rate of only 27.3 percent." (EBRI)

Annuity Choice Driven by Pension Plan Rules
"Why do some retiring workers with a pension choose to take a stream of lifetime income, while others cash out their entire benefit in a lump-sum distribution? Amidst growing concerns about workers outliving their retirement savings, this has emerged as a key issue -- and it depends to a large extent on whether the individual pension plan allows or restricts lump-sum distributions ... A better understanding of these decisions stands to shed light not only on the outcomes for traditional pensions, but also for defined contribution plans, where [lump-sum distributions] are the rule rather than the exception." (Employee Benefit Research Institute)

In a Low-Yield World, the 4% Annual Withdrawal Rule is No Longer Safe
"The safety of a 4% initial withdrawal strategy depends on asset return assumptions....Calibrating bond returns to the January 2013 real yields offered on 5-year TIPS, while maintaining the historical equity premium, causes the projected failure rate for retirement account withdrawals to jump to 57%.... [F]ailure rates if today's bond rates return to their historical average after either 5 or 10 years ... are much higher (18% and 32%, respectively for a 50% stock allocation) than many retirees may be willing to accept." (Michael Finke, Wade Pfau, and David Blanchett)

Retirement Income Products: Which One Is Right for Your Plan? (PDF)
"For plan sponsors, understanding the different types of products available is the first step toward selecting the right retirement income product for their participants. Although it will likely be the first time most plan sponsors have considered an option that involves guarantees and annuity features, many of the points in the process are the same as in the selection of a mutual fund option for the plan. The sponsor must follow the prudent steps necessary in the selection of any option and, of course, the process must be well documented." (Institutional Retirement Income Council)

[Guidance Overview] IRS Reminds IRA Owners of January 31 Deadline for Tax-Free Transfers to Charity for 2012
"Certain owners of individual retirement arrangements (IRAs) have a limited time to make tax-free transfers to eligible charities and have them count for tax-year 2012, the Internal Revenue Service said today. IRA owners age 70-1/2 or older have until Thursday, Jan. 31, to make a direct transfer, or alternatively, if they received IRA distributions during December 2012, to contribute, in cash, part or all of the amounts received to an eligible charity." (Internal Revenue Service)

Optimal Distribution Rules for DC Plans: What Can the United States Learn from Other Countries?
"[T]his article discusses the current rules governing benefit distributions from defined contribution plans in the United States and other countries ... [and] considers how distribution rules and regulations can be used to encourage retirees to take their defined contribution plan distributions in the form of annuities or other lifetime income products.... Today, relatively few countries have distribution rules that encourage retirees to take their defined contribution plan distributions in the form of annuities or alternate lifetime income products. Ultimately, this article seeks to identify the optimal set of distribution rules to encourage individuals to select lifetime retirement income products that can insure against longevity risk." (New York University Review of Employee Benefits and Compensation)

[Official Guidance] IRS Explanation of Rules for Making Charitable Donations from IRAs for 2012 and 2013
"The American Taxpayer Relief Act of 2012 (ATRA) extended the qualified charitable distribution (QCD) provisions for 2012 and 2013. Several special transition rules were included in ATRA to enable taxpayers to have a donation made before February 1, 2013, treated as a 2012 QCD." [Note: This IRS page describes various transition rules and reporting requirements.] (Internal Revenue Service)

The $180,000 Mistake Hidden In Your $450,000 IRA
"You could have the best investment approach ever designed, but without the right distribution strategy the government potentially becomes the biggest benefactor. So, if you've accumulated a significant amount of wealth in your tax-deferred retirement accounts here are three critical factors you must be aware of to set your IRAs or 401(k) up as a lasting legacy: [1] Backup beneficiaries.... [2] Prudent investment strategies.... [3] Correct custodial and trust documents." (U.S. News & World Report)

[Guidance Overview] 2012 Q&As: DOL Meeting with ABA Joint Committee on Employee Benefits, May 9, 2012 (PDF)
32 pages. Topics addressed include 403(b) Distributions; Deferred Annuities in Defined Contribution Plans; Medicare; Electronic Delivery; Health Savings Accounts; and Participant Investment Directions. "The responses reflect only unofficial, nonbinding staff views as of the time of the discussion, and do not necessarily represent the official position of the DOL. Further, this report on the discussions was prepared by JCEB representatives, based on their notes and recollections of the meeting." (Joint Committee on Employee Benefits, American Bar Association)

Retirement Plans at Heart of Senate Fiscal Cliff Agreement
"[The bill] lifts restrictions on converting 401(k)s to Roth plans, which is a taxable event.... Currently, 401(k) plan participants can only roll their money into a Roth 401(k) after three qualifying events: changing jobs, retirement, or reaching age 59-1/2. But under the Senate plan, workers with 401(k)s, 403(b)s and similar defined contribution plans would be able to convert to a Roth 401(k) designated in their benefit plan at any time. Lawmakers believe that easing restrictions on the conversions will produce federal funds because participants must pay tax on the money when they put it into the plan. Disbursements paid during their retirement years are made tax-free." (Investment News; free registration required)

Hurricane Sandy Tax Relief Legislation Is Introduced
"The Hurricane Sandy Tax Relief Act (H.R. 6683) has been introduced in the House of Representatives, modeled after 2005 legislation enacted in the wake of Hurricane Katrina in the Gulf.... [Among other provisions, the] Act proposes the following for qualifying victims of Hurricane Sandy: [1] Up to $100,000 could be withdrawn without penalty from IRAs and employer-sponsored retirement plans. [2] 20 percent withholding would not apply to such distributions. [3] Such amounts could be recontributed within a three-year period. [4] Three-year ratable taxation (if not repaid) would apply to such distributions, unless otherwise elected." (Ascensus)

2012 Year-End Tax-Free Charitable Distributions From IRAs Uncertain
"As 2012 draws to a close and Congress' primary focus is avoiding the fiscal cliff of automatic tax increases and federal spending cuts, the extension of some 60 expiring tax provisions has become a back burner issue. Included in these expiring tax provisions is the IRA qualified charitable distribution (QCD) option, which allows taxpayers age 70-1/2 or older to contribute up to $100,000 per year tax-free to qualifying charitable organizations. This tax provision expired the end of 2011, but is among the tax provision extensions being considered by Congress this year." (Ascensus)

Non-Taxable Pension Amounts Under Code Section 72(d) (PDF)
"Generally, annuity payments from tax-qualified retirement plans are taxed by the federal government as ordinary income when the payments are received. However, a portion of the payment, representing the recipient's 'investment in contract,' is excludable from taxation. In a public-sector retirement plan, the investment in contract is usually the principal amount of a member's after-tax contributions." (Gabriel Roeder Smith)

[Guidance Overview] Proposed Regs Exempt Most Retirement Savings Distributions from 3.8% Net Investment Income Tax, But Not All (PDF)
"Taxable plan distributions would be taken into account in determining whether the AGI threshold is met .... Logically, the same result should obtain for most but not all equity-based compensation arrangements. For example, dividends received after a section 83(b) election is made with respect to a restricted stock award may be subject to section 1411.... In contrast, the taxable portion of annuity payments or withdrawals from and surrenders of nonqualified annuity contracts -- i.e., annuity contracts purchased outside of qualified retirement plans, commonly to accumulate retirement savings -- would be 'investment income' for this purpose[.]" (Sutherland)

[Guidance Overview] IRS Issues Proposed Regs on 3.8% Net Investment Income Tax
"Starting in 2013, Sec. 1411(a)(1) imposes a tax equal to 3.8% of the lesser of an individual's net investment income for the tax year or the excess (if any) of the individual's modified adjusted gross income for the tax year over a threshold amount.... The tax also applies to estates and trusts, with different threshold amounts." (Journal of Accountancy)

Bankruptcy Court Rules That Variable Annuity Purchased with 401(k) Rollover Is Exempt from Bankruptcy Estate
"A debtor was authorized under the Bankruptcy Code to exempt a variable annuity contract that had been purchased with funds rolled over from her 401(k) account, a Bankruptcy Court in New Jersey has ruled. The variable annuity constituted a qualified retirement annuity, for purposes of the exemption, because it was designed as an income substitute for wages." [In re Kiceniuk (Bankr. D.N.J. 2012)] (Wolters Kluwer Law & Business)

[Guidance Overview] IRS Handout for Upcoming Phone Forum on Hurricane Sandy Relief (PDF)
12 presentation slides covering relief provided by IRS for hardship distributions and loans to plan participants affected by Hurricane Sandy. The Phone Forum takes place on December 11. (Internal Revenue Service)

December 11 IRS Phone Forum on Relief for Hurricane Sandy Victims
"Announcement 2012-44 and the relief it provides for those affected by Hurricane Sandy will be addressed by Eric Slack, Acting Manager of Employee Plans Technical Guidance. The forum will focus on the announcement and the options available to employees, their families and plan sponsors. Mr. Slack will be answering a number of common questions resulting from the issued announcement. If you have a specific matter that you would like to be addressed, please let [the IRS] know via email at ep.phoneforum@irs.gov on or before December 7, 2012." (Internal Revenue Service)

Out-of-Town Relatives of Hurricane Sandy Victims Can Use Newly Liberalized Rules for Hardship Withdrawals and Plan Loans (PDF)
"It is important to note that, in addition to hardship distributions and loans to affected participants, the Announcement provides potential relief for Sandy-related hardships of lineal ascendants or descendants of plan participants as well as spouses and dependents. In other words, if the plan allows it, a plan participant who lives in another part of the country can assist a son, daughter, parent, grandparent or other dependent who lived or worked in the affected areas by taking out a plan loan or hardship withdrawal under the guidance." (Groom Law Group)

[Official Guidance] U.S. Department of Labor Issues Compliance Guidance for Employee Benefit Plans in Wake of Hurricane Sandy
"The guidance provided in this statement applies to employee benefit plans, plan sponsors, as well as service providers to such employers, located on October 26, 2012 in one of the counties or Tribal Nations that have been identified as covered disaster areas because of the devastation caused by Hurricane Sandy.... The Department recognizes that some employers and service providers acting on employers' behalf, such as payroll processing services, located in designated affected areas will not be able to forward participant payments and withholdings to employee pension benefit plans within the prescribed timeframe. In such instances, the Department will not, solely on the basis of a failure attributable to Hurricane Sandy, seek to enforce the provisions of title I with respect to a temporary delay in the forwarding of such payments or contributions to an employee pension benefit plan to the extent that affected employers, and service providers, act reasonably, prudently and in the interest of employees to comply as soon as practicable under the circumstances." (Employee Benefits Security Administration)

IRS Announces Plan Loan and Hardship Withdrawal Relief for Hurricane Sandy (PDF)
"The announcement allows withdrawals to be made for any hardship arising from Hurricane Sandy, not just those enumerated in the Code and regulations. For purposes of a governmental 457(b) plan, a distribution for any hardship arising from Hurricane Sandy is considered to be made on account of an 'unforeseeable emergency.' In addition, the announcement permits the withdrawal without the need for a post-distribution contribution restriction such as the 6-month restriction in the 401(k) regulatory safe harbor." (Buck Consultants)

[Guidance Overview] IRS Issues Relief to Assist Victims of Hurricane Sandy
"Under the relaxed rules, a plan loan can be made by making a 'good-faith diligent effort under the circumstances' to comply with the generally-applicable procedural requirements so long as, as soon as practicable, the plan administrator makes a reasonable attempt to assemble any forgone documentation." (Benefits Bryan Cave)

IRS Provides Retirement Plan Relief for Hurricane Sandy Victims (PDF)
"To qualify for such relief, the participant taking the hardship withdrawal or loan (or such participant's child, parent, grandparent, other dependent or spouse) must have had a principal place of residence or employment on October 26, 2012 in one of the geographic locales that has been designated by the Internal Revenue Services as a covered disaster area. These include various counties in New York, New Jersey, Connecticut and Rhode Island." (Chadbourne & Parke LLP)

IRS Provides Relief for Retirement Plan Participants Affected by Hurricane Sandy
"If an eligible plan does not currently provide for in-service distributions, the Announcement still permits loans and hardship distributions to be made from the plan for any hardship arising from Hurricane Sandy, so long as: (1) The distribution is not made from qualified non-elective contributions (QNECs), qualified matching contributions (QMACs) or from earnings on elective contributions. (2) The plan is amended to permit the distribution[.]" (Practical Law Company)

[Official Guidance] Text of IRS Announcement 2012-44: Special Rules for Loans and Distributions From Retirement Plans to Hurricane Sandy Victims(PDF)
"This announcement provides relief to taxpayers who have been adversely affected by Hurricane Sandy and have retirement assets in qualified employer plans they would like to use to alleviate hardships caused by Hurricane Sandy. In addition, this announcement provides relief from certain verification procedures that may be required under retirement plans with respect to loans and hardship distributions. The relief provided under this announcement is in addition to the relief already provided by the Service pursuant to News Release IR-2012-83 under Section 7508A of the Internal Revenue Code for victims of Hurricane Sandy.... For purposes of this announcement, a 'qualified employer plan' means a plan or contract meeting the requirements of Section 401(a), 403(a) or 403(b), and, for purposes of the hardship relief, which could, if it contained enabling language, make hardship distributions. For purposes of this paragraph, a 'qualified employer plan' also means 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 Sandy is treated as an 'unforeseeable emergency' for purposes of distributions from such plans. For example, a profit-sharing or stock bonus plan that currently does not provide for hardship or other in-service distributions may nevertheless make Sandy-related hardship distributions pursuant to this announcement, except from QNEC or QMAC accounts or from earnings on elective contributions[.]" (Internal Revenue Service)

[Guidance Overview] Retirement Plans Can Make Loans, Hardship Distributions to Sandy Victims
"401(k) plan participants, employees of public schools and tax-exempt organizations with 403(b) tax-sheltered annuities, and 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. Retirement plans can provide this relief to employees and certain members of their families who live or work in the disaster area. To qualify for this relief, hardship withdrawals must be made by Feb. 1, 2013." (Internal Revenue Service)

Handling 401(k) Hardship Withdrawal Requests After a Disaster
"[I]t is certainly possible for a hardship distribution to be obtained to address a need brought about by damage or loss of a residence due to the hurricane. However, it is important to read your plan document to determine if such a provision is included in your plan." (PLANSPONSOR.com)

Outcome of Election Puts Retirement Savings Tax Incentives In Jeopardy
"President Barack Obama's re-election ... has retirement industry experts preparing for further action on the regulatory front.... The top item on that list is a reproposed fiduciary rule from the Department of Labor, followed by a proposed rule on lifetime income projections on plan participant statements." (Pensions & Investments)

Risk Management for the Future: Age, Risk and Choice Architecture
"This study aims to deepen our understanding of how different age groups process choices in relation to future risk and retirement planning in diverse decision-making environments.... [The] findings suggest that much of the difference in financial choices between older and younger decision makers rests in the ability of each age group to override their intuitive and automatic responses to such decisions. At the policy level, ... [these] findings provide potential guidelines for better designing retirement and savings plans, such as the implementation of SMT-style programs and the encouragement of annuity over lump sum retirement benefits." (University of San Diego)

A Fiduciary Approach to Providing Lifetime Income Distributions Under Defined Contribution Plans
"[P]ayments to a retiree may not commence for a number of years and then may be made over a period of several decades. The fiduciary challenge is to select a provider today that will be there in the future to make the payments, and the question is how a fiduciary acts prudently in making that selection.... While the [DOL] has provided a safe harbor regulation under ERISA for the selection of annuity providers, it does not provide a true roadmap for fiduciaries to follow.... [This article offers] a checklist of criteria that we believe constitute best practices in that process." (Drinker Biddle)

Required Minimum Distributions May Be Guide for Retirement Payout Program
"For individuals who have spent decades building a nest egg, crafting a withdrawal strategy is a critical and complicated task. The challenge: anticipating potential swings in the value of investments while providing a relatively predictable level of income." (The Wall Street Journal)

Hurricanes and 401(k) Hardship Distributions: The Post-Sandy Clean-Up
"Generally speaking, hardship distributions may be available to an employee to cover the costs of repair or recovery from a natural disaster, provided the plan permits it and they have no other available financial options. It is not designed to be the first source of money. Instead, it should be the option of last resort. Bear in mind, there can be negative tax implications from the distribution." (Fox Rothschild LLP)

Defined Benefit Pension Plan Distribution Decisions by Public Sector Employees
"[O]ver two-thirds of public sector workers under age 50 separating prior to retirement from public plans in North Carolina left their accounts open and did not request a cash distribution from the pension system within one year of separation. Furthermore, the evidence suggests many separating workers, particularly those with short tenure, may be forgoing important benefits due to lack of knowledge, understanding, or accessibility of benefits. In contrast to prior research in the private sector, we find no evidence of a bias toward cash distributions for public employees in North Carolina." (National Bureau of Economic Research; purchase required)

[Opinion] Sure, Using RMDs as Distribution Method Works on Paper, But Does It Work for the Particular Participant?
"[U]ltimately the biggest shortcoming of the [required minimum distribution] schedule as a basis for withdrawal may be that it fails to take into account how much income is needed, much less when it is needed -- and it's based on a series of assumptions that may or may not apply to an individual's real-life circumstance." (Nevin Adams via EBRI)

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