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Distributions - misc

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New Tax Law Creates Uncertainty for Some Hardship Distributions
"One option is to deny a hardship request for repair to a primary residence if the loss occurs on or after January 1, 2018 and is outside of a federally declared disaster area. To account for this change, a plan may need to modify the instructions provided as part of hardship request materials as well as the guidelines used for reviewing and approving hardship requests. Alternatively, a plan could opt to ignore the section 165 amendment -- and maintain the status quo -- when determining hardship eligibility, unless and until the IRS issues guidance to the contrary." (Conduent)
Budget Bill Affects Retirement Plans and Retirees -- Plan Amendments Expected
"[T]he Bipartisan Budget Act of 2018 ... provides expanded tax relief for victims of natural disasters, relaxes the rules for hardship distributions from employer plans, makes slight changes to portability rules, and requires the IRS to create a simplified tax return for filers age 65 or older." (Ascensus)
[Guidance Overview] Impact of Recent Legislation on 401(k) Hardship Withdrawals
"When a plan document specifically cross references deductibility under Section 165, permitting a withdrawal for expenses that result from an isolated incident could now be contrary to the plan's terms.... It isn't clear whether Congress intended to narrow the circumstances in which a hardship withdrawal may be taken when enacting the change to Section 165, and it's possible that the IRS will publish guidance obviating the need to impose the Federally-declared disaster requirement in the hardship context." (Mayer Brown)
[Guidance Overview] Liberalized Hardship Withdrawals and California Wildfire Relief in Budget Act
"The Bipartisan Budget Act of 2018, which President Trump signed into law [February 9], makes several changes affecting retirement plans.... [E]limination of six-month suspension following hardship withdrawals.... Elimination of requirement to take available loans before a hardship withdrawal.... Expansion of amounts available for hardship withdrawals.... Participants affected by recent wildfires in California [have] greater access to retirement funds.... Tax-favored withdrawals.... Repayment for home purchases.... Loan relief.... Extended amendment deadline." (Mazursky Constantine LLC)
Should Increasing Your Investment Risk Increase Your Current Spending Budget?
"If future experience is more favorable than assumed in the budget calculations, future spending budgets determined under the Actuarial Approach will increase relative to current spending budgets. If future experience is less favorable than assumed, future spending budgets will decrease relative to current spending budgets." (Ken Steiner, FSA Retired)
[Official Guidance] Text of IRS Notice 2018-14: Guidance on Withholding Rules (PDF)
10 pages. "This Notice ... provides that, for 2018, withholding under section 3405(a)(4) on periodic payments when no withholding certificate is in effect is based on treating the payee as a married individual claiming three withholding allowances." (Internal Revenue Service [IRS])
[Official Guidance] Text of 2017 IRS Publication 721: Tax Guide to U.S. Civil Service Retirement Benefits (PDF)
33 pages, Jan. 25, 2018. "This publication explains how the federal income tax rules apply to civil service retirement benefits received by retired federal employees (including those disabled) or their survivors. These benefits are paid primarily under the Civil Service Retirement System (CSRS) or the Federal Employees' Retirement System (FERS)." (Internal Revenue Service [IRS])
Stanford Center for Longevity Proposes New Strategy for Retirement Income
"For the solutions they analyzed, the solutions using the [IRS] required minimum distribution and fixed index annuities did the best job of keeping up with inflation. The analyses also show retirement income solutions with a high withdrawal percentage -- 7% -- naturally spend down savings more quickly than a 3% withdrawal rate." (planadviser)
[Official Guidance] IRS FAQs on Recharacterization of Roth Rollovers and Conversions
"A Roth IRA conversion made in 2017 may be recharacterized as a contribution to a traditional IRA if the recharacterization is made by October 15, 2018. A Roth IRA conversion made on or after January 1, 2018, cannot be recharacterized." [Updated Jan. 18, 2018 to clarify effective date of the Tax Cuts and Jobs Act.] (Internal Revenue Service [IRS])
How to 'Pensionize' Any IRA or 401(k) Plan (PDF)
19 pages. "This research provides a framework for assessing different retirement income generators (RIGs) and navigating the many tradeoffs that older workers face when making retirement income decisions.... [This] project examined 292 different retirement income strategies[.]" (Stanford Center on Longevity)
House Approves Retirement Plan Tax Relief for California Wildfire Victims
"The Senate did not consider the legislation before adjourning for the year. In general, the legislation provides relief from the 10% early withdrawal penalty for qualified distributions up to $100,000 made on or after Oct. 8, 2017, and before Jan. 1, 2019. Distributions must be made by an individual whose principal place of residence was in a wildfire disaster area and who sustained an economic loss due to the wildfires." (National Association of Plan Advisors [NAPA])
It's Time to Perform Your Annual Actuarial Valuation
"The purposes of this exercise are to: [1] Review how well you did in 2017; [2] Develop 2018 spending budget 'data points'; [3] Finalize your 2018 calendar year spending budget (or spending/savings budget for pre-retirees); [4] Document the assumptions, data and adjustments used to determine your final 2018 spending budget; and [5] Collect and save information that may be useful for your future actuarial valuations." (Ken Steiner, FSA Retired)
IRAs, SEPs, SIMPLEs and Qualified Charitable Distributions
"Aside from the philanthropical aspect of making a [qualified charitable contribution (QCD)], a QCD is excludable from taxable income, plus it may count towards the individual's required minimum distribution (RMD) for the year, and may lower taxable income enough for the person to avoid paying additional Medicare premiums.... Where an individual has made nondeductible contributions to his or her traditional IRAs, a special rule treats amounts distributed to charities as coming first from taxable funds, instead of proportionately from taxable and nontaxable funds, as would be the case with regular distributions." (National Association of Plan Advisors [NAPA])
Navigating Pension and Annuity Payments: General Rule and Taxation Guidelines
76-slide PowerPoint presentation. Topics: [1] sources of distributions (employer contributions, employee deferrals, Roths, after-tax contributions, and rollovers); [2] restrictions on how early and how late distributions can be taken; [3] penalties on early withdrawals; [4] taxation of lump sum distributions; [5] taxation of withdrawals and partial distributions; [6] taxation of annuities and other periodic payments; [7] plan withholding and reporting; and [8] participant reporting. (Venable LLP)
Recreate the Certainty of a Pension in a 401(k) World
"[R]etirees that crave certainty may want to consider a fixed return portfolio combined with a variable withdrawal, rather than a fixed annual withdrawal.... The benefit in choosing a variable annual withdrawal (based on a percentage of the portfolio's value at the end of each year) is that you will still have money remaining after 40 years.... The real key is, how much money do you need each year? If withdrawing 4% of the portfolio balance will be sufficient, then a diversified, multi-asset variable return portfolio is very compelling." (Financial Planning)
Qualified Plan Beneficiary Rules, Part 3
"[A] surviving spouse has the option of rolling the funds into his or her own IRA or to a qualified plan, if the qualified plan accepts rollovers. However, many factors determine how and when the rollover should occur." (PenChecks)
Why IRA Holders Need to Scrutinize IRS Form 5498
"The major of piece of information to review on Form 5498 is the prior year-end 'fair market value' of the account (Box 5). If you are subject to taking required minimum distributions ... this is the value the IRS would look at first to figure out whether you took your full RMD.... The trouble is, Form 5498 may not arrive until after you've already filed your tax return." (Morningstar)
Tax Reform: Comparison of Current Law with House-Passed and Senate-Passed Versions (PDF)
9-page chart compares current employee benefits and executive comp law with provisions included in House and Senate bills. (Groom Law Group)
Senate Approves Tax Reform with Differences from House Version (PDF)
"On December 2, the Senate narrowly approved its own version of the Tax Cuts and Jobs Act. Earlier, the House approved a different version of this legislation ... The House has adopted a resolution to send the bills to a conference committee of members of both the House and Senate to resolve differences between the two versions." [7-page chart has side-by-side comparison of current law with the provisions of each bill, with comments.] (Mazursky Constantine LLC)
Spending in Retirement ... or Not?
"Something unexpected has been the shared experience for our most recent generation of retirees. The vast majority haven't been spending their retirement savings -- leaving nest eggs mostly untouched and living on ready sources of income instead. However, future retirees may be less fortunate." (BlackRock)
Modeling Deviations from Assumed Future Experience
"[A] reasonable amount of risk assessment and risk mitigation can be helpful in facilitating achievement of your long-term financial goals.... In addition to making assumptions about the future and periodically balancing your assets with your spending liabilities, ... periodically stress-test important planning assumptions ... so that you can possibly mitigate negative outcomes if actual future experience punches you in the mouth." (Ken Steiner, FSA Retired)
[Guidance Overview] Puerto Rico Treasury Department Issues Post-Hurricane Rules for Qualified Retirement Plan and IRA Distributions and Loans
"As a result of [Administrative Determination No. 17-29], employers must decide whether to amend their plans to incorporate these special rules. Notably, in the event that the employer decides to amend the plan accordingly, AD 17-29 is silent as to which procedure a participant must followed to receive a favorable tax treatment, in the event he/she has already received Eligible Distributions within the Eligible Period prior to the effective date of AD 17-29." (Littler)
New Tax Reform Bill: Major Changes to Executive Compensation Lead Impact on Benefits and Compensation Practices (PDF)
9 pages. "Employers that have used nonqualified deferred compensation plans to attract and retain highly compensated employees ... would need to consider alternatives to achieve their goals ... With the possible exception of incentive stock options, there would appear to be no reason for employers to grant stock options or stock appreciation rights.... [R]ule changes would ease the ability of employees to take hardship withdrawals and would reduce some of the complexity in administering hardship withdrawals.... As a taxable contribution, [Dependent Care FSAs] would be effectively eliminated as they would have no value to employees.... The Tax Bill does not eliminate Health Care Flexible Spending Accounts." (Mazursky Constantine LLC)
[Opinion] Common Misperceptions About Using the Actuarial Approach for Personal Financial Planning
"[The authors] have concerns about stochastic models that promise higher levels of spending without properly quantifying the additional risk. [They] also have concerns about blindly relying on the results of these models, particularly over extended periods of time without adjustment. And while no one knows what future investments will earn, we do know how much insurance companies are currently charging to provide income for life based on life annuity quotes.... [T]his 'known' market pricing information can be useful in developing a low-investment-risk Actuarial Budget Benchmark that you can use in combination with the other approaches you are using to make better financial decisions." (Ken Steiner, FSA Retired)
Structuring Your Retirement Portfolio for Your Income Needs
"The first aspect of [a] three-pronged approach to generating retirement income is creating a plan.... [Y]our next step should be to determine your portfolio allocation. Lastly, you'll make a plan for withdrawing from your portfolio in retirement. The portfolio allocation step is all about choosing the right mix of investments. Here's a guide for how to approach it." (Charles Schwab)
Bob Kaufman Retires After 20 Years of Writing Railroad Retirement Benefits Q&A Column
"Since December 1, 1997, I have posted more than 1,000 Q&A's in my Q&A column on BenefitsLink, and an estimated 5,000 questions I've answered by direct e-mail. Times have changed, and the Railroad Retirement Board has developed an excellent web site, which you can use to find answers to questions about the Railroad Retirement System. I just turned 78. I think it's time to enjoy my retirement and my six grandchildren!" [Send Bob a note of thanks or congratulations! -- Editor] (Robert S. Kaufman on BenefitsLink)
Spousal Rollover Rules for Inherited Roth and Traditional IRAs
"Ultimately, the good news is that spousal beneficiaries have the option to make either choice, and even have flexibility about the timing -- allowing a decision to maintain an inherited stretch IRA for the spouse initially, and completing a spousal rollover later (after he/she turns age 59-1/2). Nonetheless, it's important to carefully consider the choices and trade-offs... especially since a spousal rollover, once completed, is irrevocable and cannot be undone after the fact!" (Nerd's Eye View)
Workers Want Lifetime Income But Aren't Sure How to Get It
"When it comes to retirement income, 62 percent of Americans say they would pick $2,700 a month for the rest of their lives and 30 percent say they would prefer $500,000 all at once... [O]nly 16 percent say they're very familiar with annuities and 51 percent say they're not familiar with them.... Employers offering retirement plans should be aware of this disparity and try to use it to inform how they talk about saving for retirement and spending money in retirement[.]" (Bloomberg BNA)
Five Important Ages for Retirement Planning
"At age 50, your employees will become eligible to save more the standard amount in their 401(k) and IRA accounts ... By waiting until the age of 59-1/2 to take a withdrawal, your employees will get to keep an additional 10% of their money.... Your employees will be able to sign up for Medicare during a seven-month period starting three months prior to their 65th birthday.... Baby boomers born between 1943 and 1954 will be eligible to begin claiming the full Social Security benefit they've earned at age 66.... Whether it's needed or not, they'll be required to take distributions from their traditional IRAs, traditional 401(k)s and Roth 401(k)s after age 70-1/2." (Voya)
Over a Quarter of Seniors Say Retirement Is Worse Than Expected
"The good news is that the reasons people gave for being unhappy with retirement were largely financial -- and therefore preventable. Of the 28% percent of retirees who are unhappy, 78% cited income as a reason, and 76% blamed an increased cost of living.... [T]here's a disconnect between expectations and reality for many unhappy retirees, particularly because they overestimate how much they'll receive in Social Security benefits and underestimate how much they'll pay in healthcare costs." (Motley Fool)
Funding Your Retirement
"When it's time to tap savings, some use the income their portfolio generates to support spending, or don't have a plan to use all sources of return and to use their assets in a coordinated way to generate the cash flow desired. That brings us to the final step of retirement planning--distribution.... Aim to cover essentials with predictable income sources ... Fund discretionary expenses with fluctuating income ... Generate cash flow when you rebalance your portfolio." (Charles Schwab)
[Guidance Overview] New Law Provides Additional Relief for Hurricane Victims (PDF)
"[W]hile the Act increased the limit on nontaxable loans to $100,000 or 100% of the participant's vested account balance, it did not similarly increase the ERISA loan limit. As a result, a plan loan equal to 100% of a participant's vested account balance would not be considered a taxable distribution but could be a prohibited transaction, if the plan administrator does not obtain additional security for the loan outside the plan." (Prudential)
A Tax-Advantaged Way to Distribute Employer Stock from Retirement Plans
"[T]he net unrealized appreciation distribution strategy ... allows for capital gains treatment of any embedded appreciation, rather than having it taxed as ordinary income.... A key requirement here is that the distribution must be considered a lump-sum distribution." (Morningstar Advisor)
[Guidance Overview] Hurricane Legislation Grants Retirement Plan Relief
"Plan sponsors must inform participants of their options under the hurricane relief provisions. IRA and employer plan service providers should evaluate forms, systems, and workflow processes to support qualified hurricane distributions, loan exceptions, and potential repayment and rollovers. For example, the legislation states that the [notice] given to recipients of eligible rollover distributions need not be provided with a hurricane-related distribution but other distribution consent and notice requirements still apply." (Ascensus)
Better Budgeting with the IRS RMD Table?
"[W]hile the IRS RMD [strategic withdrawal plan (SWP) may be a tad simpler than the Actuarial Approach, ... the more exact actuarial calculations is definitely worthwhile and can improve retirement outcomes even more.... [1] The IRS RMD SWP is quite conservative; [2] SWPs frequently do not coordinate well with other sources of retirement income; [3] SWPs generally do not adequately recognize non-recurring expenses in retirement and do not anticipate different rates of increase in future recurring expenses; [4] SWPs generally don't permit 'budget shaping' to meet individual retirement goals, and [5] SWPs generally don't do a particularly good job of helping you with pre-retirement planning." (Ken Steiner, FSA Retired)
[Official Guidance] Text of 2017 IRS Form 4972: Tax on Lump-Sum Distributions (PDF)
"Use Form 4972 to figure the tax on a qualified lump-sum distribution you received in 2017 using the 20% capital gain election, the 10-year tax option, or both. These are special formulas used to figure a separate tax on the distribution that may result in a smaller tax than if you reported the taxable amount of the distribution as ordinary income." (Internal Revenue Service [IRS])
[Discussion] Actuarial Adjustment of QPSA Benefit Due to Missed Payments
"We have a plan that has not been able to locate the surviving spouse of a deceased terminated-vested participant for a number of years. The TV participant would have turned 65 in 2015 (when QPSA payments would have started) and we are wanting to begin distribution of the QPSA for the spouse soon. The plan does not allow for retroactive payments. Would the QPSA benefit due to the spouse be actuarially increased to 2017 based on the participant's lifetime or the spouse's lifetime?" (BenefitsLink Message Boards)
[Official Guidance] Text of Federal Retirement Thrift Investment Board Announcement Relaxing Hardship Withdrawal Rules to Help Victims of Hurricane Irma (PDF)
"Beginning today, the [Thrift Savings Plan] will treat any Financial Hardship In-Service Withdrawal Request received until January 24, 2018 as qualifying for a hardship withdrawal if the participant writes 'Hurricane Irma' at the top of the form and checks the block on the form for personal casualty on page 2, Item 18 of the form. The distributions must occur before January 31, 2018 to qualify for this treatment." (Federal Retirement Thrift Investment Board [FRTIB])
[Guidance Overview] Hardship and Loan Relief Extended to Hurricane Irma, Along with Relief for Single Employer DB Plans
"[E]mployers who sponsor 401(k), 403(b) and 457(b) plans may receive these requests [for hardship withdrawals] and can choose to provide this relief even though the employer and its plan are not located in one of the affected areas, because the relief is extended to employees and former employees who have lineal ascendants... who had a principal residence or place of employment in one of the designated counties. For a hardship distribution provided under this relief, the employer is not required to stop the employee receiving the hardship distribution from making elective deferrals for six months as is required for other hardship withdrawals." (Winstead PC)
[Guidance Overview] Retirement Plan-Related Relief for Victims of Hurricane Irma
"The Internal Revenue Code and IRS regulations impose significant limitations on when participants may access assets from retirement plan accounts through loans and distributions while actively employed. In addition, many plans provide for additional limitations. The IRS has provided limited relief from these restrictions for certain participants affected by Hurricane Irma.... It is important to note that the IRS relief does not provide relief from the additional 10% tax on early distributions for eligible individuals who obtain distributions." (Mazursky Constantine LLC)
[Official Guidance] Text of IRS Announcement 2017-13: Relief for Victims of Hurricane Irma (PDF)
"This announcement provides relief to taxpayers who have been adversely affected by Hurricane Irma and who have retirement assets in qualified employer plans that they would like to use to alleviate hardships caused by Hurricane Irma. 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 [DOL] has advised Treasury and the IRS that it will not treat any person as having violated the provisions of [ERISA] solely because that person complied with the provisions of this announcement." (Internal Revenue Service [IRS])
IRA Balances, Contributions, Rollovers, Withdrawals, and Asset Allocation: 2015 Update of the EBRI IRA Database (PDF)
44 pages. "The average IRA account balance in the database was $99,017 at year-end 2015 and the average IRA individual balance (combining all accounts owned by the individual) was $125,045.... The overall IRA withdrawal percentage was largely driven by activity among individuals ages 70-1/2 or older owning a Traditional IRA -- the group required to make withdrawals under the required minimum distribution (RMD) rules.... [A]mong owners under age 60, fewer than 12 percent of any age group had a withdrawal." (Employee Benefit Research Institute [EBRI])
[Discussion] When Do the Restrictions of Treas. Reg. 1.401(a)(4)-5 Apply?
"Treas. Reg. section 1.401(a)(4)-5(b)(3) provides that benefits otherwise payable to restricted employees (generally the 25 HCEs with the highest compensation) under a defined benefit plan are limited if the plan is not at least 110% funded after the distribution; further, if the value of the benefit is less than 1% of the plan's current liabilities, the restrictions do not apply. Is the 1% exemption only applicable at benefit commencement date or (like the 110% Test) is the 1% exemption applied at every payment date, so that the full amount can be paid once the value falls below 1%?" (BenefitsLink Message Boards)
Replace the Stretch IRA?
"[M]ost IRA owners and beneficiaries do not benefit from the 'stretch,' because: [1] The life expectancy payout is available only if the deceased IRA owner named the individual as his 'designated beneficiary.' Many participants flub this step, causing their retirement benefits to pass to their estate rather than directly to family members.... [2] A trust named as beneficiary can qualify for the life expectancy payout under IRS rules -- but only if it meets stringent IRS requirements.... [3] [It] is actually rare for an IRA to be left to a young individual who would qualify for a multidecade payout. [4] Even when the stretch payout is an option, many beneficiaries prefer an immediate cashout over a deferred payout." (Morningstar Advisor)
[Discussion] Amount Available for Hardship Distribution Following a Loan
"Plan allows loans and hardship distribution only from employee deferrals (no gains). Employee contributes $10,000, balance is $12,000. Then receives a loan for 50% vested balance ($6,000 total). In the employee's situation, he would qualify for up to $10,000. But I believe the employee can receive no more than $6,000 as a hardship distribution. Agree?" (BenefitsLink Message Boards)
[Discussion] Different Distribution Options for Differently Invested Money?
"We have a 457(b) Plan (tax-exempt, not governmental) in which the plan sponsor wants a terminating participant's fixed-rate fund account to be distributable in certain ways but the mutual fund account to be distributable in several additional ways. Is this OK?" (BenefitsLink Message Boards)
[Discussion] 10-Year Period Certain Annuity But Both the Participant and the Beneficiary Have Died
"Unmarried participant elected to receive DB Plan benefits in this form, and named a beneficiary to receive any further payments after her death, but did not provide for the contingency that the beneficiary would die inside of 10 years. Participant died with the 10 years after payment commenced, then beneficiary died, also inside within the 10 years. Who should get the remaining payments?" (BenefitsLink Message Boards)
[Guidance Overview] Retirement Plan Relief for Hurricane Harvey
"[IRS Announcement TX-2017-09] provides ... relief postponing numerous deadlines to January 31, 2019.... Announcement 2017-11 simplifies and streamlines loans and hardship distributions in the wake of Harvey.... The relief related to hardship distributions applies to plans that the law allows to provide for hardship distributions.... The documentation relief applies to all types of plans eligible to make plan loans, including qualified plans, 403(b) plans, and governmental 457(b) plans.... The Announcement does not provide any relief for 457(b) plans sponsored by tax-exempt organizations. While the Announcement does not expressly mention 409A plans, it is likely that the IRS would find that Harvey is an unforeseeable emergency permitting distributions under those plans.... The DOL issued a press release outlining several points relating to Hurricane Harvey[.]" (S. Derrin Watson, via ERISApedia)
[Discussion] How to Move Money from Employer's Old 457(b) Plan to Employer's New 457(b) Plan?
"We have an employer who wants to freeze their current 457(b) plan and start a new 457(b) plan. The employer also wants to allow participants to roll their account balances from the current 457(b) plan into the new one. The employer is tax exempt (not governmental) and the plan-to-plan transfer rules in 1.457-10(5) require that 'the participant has had a severance from employment with the transferring employer and is performing services for the entity maintaining the receiving plan.' This would seem to ruin our client's plans. Any other way?" (BenefitsLink Message Boards)
[Official Guidance] Text of IRS Announcement 2017-11: Retirement Plans Can Make Loans, Hardship Distributions to Victims of Hurricane Harvey (PDF)
The relief provided under this announcement is in addition to the relief already provided by the [IRS] ... for victims of Hurricane Harvey.... [A] qualified employer plan will not be treated as failing to satisfy any requirement under the Code or regulations merely because the plan makes a loan, or a hardship distribution for a need arising from Hurricane Harvey, to an employee or former employee whose principal residence on August 23, 2017, was located in one of the Texas counties identified for individual assistance by [FEMA] because of the devastation caused by Hurricane Harvey or whose place of employment was located in one of these counties on that applicable date or whose lineal ascendant or descendant, dependent, or spouse had a principal residence or place of employment in one of these counties on that date.... [A] retirement plan will not be treated as failing to follow procedural requirements for plan loans (in the case of retirement plans other than IRAs) or distributions (in the case of all retirement plans, including IRAs) imposed by the terms of the plan merely because those requirements are disregarded for any period beginning on or after August 23, 2017, and continuing through January 31, 2018, with respect to loans or distributions to individuals described in [this Announcement] above, provided the plan administrator (or financial institution in the case of distributions from IRAs) makes a good-faith diligent effort under the circumstances to comply with those requirements." (Internal Revenue Service [IRS])
[Official Guidance] IRS Publication 1220: Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G for Tax Year 2017 (PDF)
150 pages, August 2017 revision date. Includes a "First Time Filers Quick Reference Guide" with information about Form 4419, Application for Filing Information Returns Electronically (FIRE), which is used to request authorization to file Forms 1097, 1098 Series, 1099 Series, 3921, 3922, 5498 Series, 8027, 8955-SSA, 1042-S, and W-2G electronically through the Filing Information Returns Electronically (FIRE) System. Excerpt: "Allow a 45-day processing timeframe prior to the earliest information return due date." (Internal Revenue Service [IRS])
[Discussion] ROBS and Bankruptcy
"I have a client who did a ROBS (rollover business start up). His entire retirement savings is now invested in a company that is on the brink of bankruptcy. If the company files for bankruptcy, what happens?" (BenefitsLink Message Boards)
[Discussion] Terminating Plan with Unresponsive Beneficiary
"Terminating plan includes a deceased participant's account in the 5-figure range. Beneficiary designation names his spouse, but she isn't responding to requests for distribution instructions. Plan requires distribution within 5 years of the death. Recordkeeper says IRS regs prohibit a force-out of the account of a death beneficiary and that the plan must stay open until the beneficiary decides to withdraw the balance. Is that true?" (BenefitsLink Message Boards)
Are You Overestimating Your Future Retirement Spending Needs?
"[T]otal mean spending decreases with age.... [M]uch of the decrease in mean spending ... may be explained from spending reductions generally associated with retirement: Reduced FICA taxes; Reduced taxes; and Reduced work-related expenses, including savings for retirement.... [There are] several approaches you can consider (either before or after retirement) to possibly avoid over-estimating your spending needs in retirement ... These approaches are all designed to increase current spending budgets. You should be aware, however, that increasing current spending budgets may also decrease future spending budgets, all things being equal, so these approaches should be considered more as 'Budget Shaping' approaches." (Ken Steiner, FSA Retired)
[Discussion] Money Purchase Merger Into 401(k): Segregation of Investments Required?
"A governmental money purchase plan (which did not permit in-service withdrawals) is merging into a grandfathered 401(k) plan, which permit hardship withdrawals. Following the merger, does the money purchase monies have to be segregated to retain the in-service withdrawal restriction OR can participants take hardship withdrawals of these dollars?" (BenefitsLink Message Boards)
Transferring IRA Money to a Health Savings Account
"People who still qualify to make HSA contributions can make a one-time rollover from an IRA to an HSA, which can be a good way to build up the account if you don't have other cash to contribute. You must currently have an HSA-eligible health insurance policy with a deductible of at least $1,300 for single coverage or $2,600 for family coverage. The amount you can roll over is the same as your annual HSA contribution limit[.]" (Kiplinger)
Close Is Not Enough When It Comes to the 10% Penalty
"There is an exception to the 10% early distribution penalty for IRA distributions due to an IRS levy. The Pritchards said that even though the IRA distribution was not actually due to a levy by the IRS, it was pretty close because the funds were used to pay taxes and, therefore, this exception to the 10% penalty should apply. Basically, the Pritchards argued that close was good enough. The Court disagreed[.]" [David D. Pritchard et ux. v. Comm'r, T.C. Memo. 2017-136 (July 10, 2017)] (Slott Report)
Key Rules for Non-Spouse Beneficiaries
"It is very important to check the terms of the agreement that governs the inherited retirement account to determine if the beneficiary is subject to the five-year rule or the life expectancy rule. In some cases, the beneficiary might be required to make an election by certain deadlines in order to be subject to the rule that he wants to use." (Appleby Retirement Dictionary)
Hardship Distributions: Source Documents vs. Documentation of Self-Certification by Participants
"If the third-party administrator is obtaining a summary of the information contained in the source documents, it should provide a report or other access to this data to the employer at least annually, describing the hardship distributions made during the plan year.... Hardship distributions issued in prior years should be reviewed to ensure that either the old rules or the new rules were followed." (Belfint Lyons & Shuman, CPAs)
Leaving an IRA to Charity
"[O]pening an inherited IRA is not necessarily easy for a charity.... [C]onsider opening a donor-advised fund run by a major financial institution, community foundation, or umbrella charity.... [Another approach is to leave all] assets including the IRA to [a personal] trust. The trust instrument states what percentage of the total trust each beneficiary is to receive and specifies that the IRA shall be used 'first' to fund the charities' shares." (Morningstar Advisor)

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