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Distributions - misc


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Headlines

Update on Hardship Distribution Regs

"The IRS guidance on the timing of the amendments has been confusing. For 401(k) plans, the IRS clarified the deadline a bit better in the final regulations, but further guidance is welcomed.... [T]he deadline for amending 401(k) plans is no later than the due date of the employer's 2020 tax return (plus extensions), even though some of the provisions may have been effective in the 2019 plan year. At this time, it is not clear when 403(b) plan documents must be updated. "

(TRI-AD)
Splitting an IRA with a 72(t) Plan in Divorce Without Penalty

"[T]he IRS has issued several Private Letter Rulings ... [which] have been rather accommodating to both ex-spouses. Transferor ex-spouses have been given the option to decrease future 72(t) distributions proportionally to the amount that was transferred out of the account. Meanwhile, transferee ex-spouses have not been required to continue to take 72(t) distributions, though they have been allowed to choose to do so if desired!"

(Nerd's Eye View)
When Annuities Are a Better Deal for Women Than Men

"When it comes to retirement, women often have it worse than men. They typically have higher poverty rates, lower Social Security benefits, and less saved in 401(k)s. But women do have a leg up on one aspect of retirement: When buying an income annuity through a workplace retirement plan, they can expect higher benefits relative to their male counterparts."

(The Wall Street Journal; subscription may be required)
Actuarial Observations on Retiree Income Approaches (PDF)

"Lifetime income planning requires [1] sound assumptions for life expectancy and investment return, [2] consideration of possible risk mitigation relating to life expectancy and investment returns, and [3] a sound approach for determining available income. A steady income can be derived through one of several approaches for structured withdrawals from investment income, an annuity that provides a lifetime income, or some combination of the two."

(American Academy of Actuaries)
How Much Would People Take Out of Retirement Accounts If Left on Their Own?

"The time has come when the first cohort of workers will retire entirely reliant on the accumulations in their 401(k) and IRA accounts (mostly rollovers from 401(k) plans) to supplement their Social Security benefit.... [S]everal recent studies suggest that people will not draw down their accumulations for fear that they will exhaust their money and be unable to cover end-of-life health care costs.... [A] new study provides further evidence on this reluctance to spend by showing that much of the withdrawals occur only because of the IRS required minimum distribution (RMD) rules."

(Alicia Munnell, via MarketWatch)
Developing a Reasonable Spending Budget: Monte Carlo Modeling vs. the Actuarial Approach

"[D]eterministic models tend to provide specific outcomes, and Monte Carlo models tend to provide outcome ranges and probabilities of achieving specified objectives. Deterministic approaches also enable a user to consider more complicated calculations within the model.... [One] process under the Actuarial Approach involves periodic stress testing of assumptions to assess risks. This will generally involve more worst-case 'what-if' analysis than anticipated under a Monte Carlo model."

(Ken Steiner, FSA Retired)
How Do Retirees' Spending Patterns Change Over Time?

"Housing is the largest spending category for every age group ... On average, households spent less on food as they grew older ... [O]lder households allocated a larger share of their budgets to gifts and contributions. The share of health care costs in households' budgets increased with age."

(Employee Benefit Research Institute [EBRI])
[Guidance Overview] IRS Changes 401(k) and 403(b) Hardship Withdrawal Rules

"The final regulations apply a more flexible standard for determining whether a participant has an immediate and heavy need. The regulations also expand the available sources of hardship withdrawals.... [T]he new regulations permit 401(k) and 403(b) plans to authorize hardship withdrawals from QNECs, QMACs, and their investment earnings on elective deferrals.... The new regulations apply to all hardship withdrawals made on or after January 1, 2020."

(Ballard Spahr LLP)
[Guidance Overview] IRS Finalizes Changes in Hardship Distribution Rules

"Plan amendments will be needed to reflect the hardship changes under the final regulations ... Sponsors of pre-approved plan programs will also need to adopt interim amendments to address the hardship distribution changes ... For 403(b) plans, the current remedial amendment period is applicable, such that any amendments reflecting the changes in the final regulations are due by March 31, 2020."

(Groom Law Group)
Half of Retirees Afraid to Use Savings

"A 2009 study estimated that by the time middle-income retirees are in their 80s, they still had not touched about three-fourths of their savings, and 2016 research found that retirees with substantial assets are the most reluctant spenders. Vanguard recently reported that retirees with very modest savings turn around and reinvest a third of the money they’re required to withdraw under IRS rules after age 70-1/2. People saved all of their lives to make sure they will enjoy retirement. So why are they so reluctant to spend the money for the purpose it was intended?"

(Squared Away Blog, by the Center for Retirement Research at Boston College)
[Guidance Overview] Final Hardship Regs Published: Administrative Compliance Required January 1, 2020

"The final regulations provide that the limitation imposed on this deduction under the Tax Cuts and Jobs Act of 2017 (TCJA) -- that the deduction for personal casualty loss generally is available for taxable years 2018 through 2025 only to the extent the loss is attributable to a federally declared disaster -- does not apply in the context of hardship distributions. This effectively restores the pre-TCJA treatment of this expense."

(Sidley Austin LLP)
[Guidance Overview] IRS and Treasury Department Release Final Regs on Hardship Distributions

"[P]lan administrators do not have an obligation to inquire into the financial condition of employees who request a hardship distribution; however, if the plan administrator already has sufficiently accurate information contrary to an employee’s representation, then the financial need for a hardship distribution is not satisfied."

(Winston & Strawn LLP)
[Official Guidance] 2018 IRS Form 4972: Tax on Lump-Sum Distributions from Qualified Plans of Participants Born Before January 2, 1936 (PDF)

"Use Form 4972 to figure the tax on a qualified lump-sum distribution (defined below) you received in 2019 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])
[Guidance Overview] IRS Finalizes Revised Hardship Regs

"Only expenses and losses of an employee who lived or worked in the disaster area qualify under the new safe harbor expense category.... [T]here is no specific deadline following the disaster during which a hardship distribution must be requested under the revised regulations.... The IRS does not anticipate issuing any further disaster-relief announcements in regards to hardship distributions."

(Bradley)
DOL Issues Final Regs on Hardship Distributions for 401(k) Plans

"The final regulations: [1] expand the safe harbor list of expenses deemed to be made on account of an immediate and heavy financial need; [2] modify the rule for determining whether a distribution is necessary to satisfy an immediate and heavy financial need; [3] allow beneficiaries to apply for hardship distributions; [4] modify the rules for determining sources available for distribution; and [5] clarify that the new hardship distribution of elective contributions rules generally apply to section 403(b) plans."

(RSM US)
[Guidance Overview] Hardship Regs are Finally Final

"[B]eginning in 2020, an employee can make a representation that he or she has insufficient cash or other liquid assets reasonably available to satisfy a financial need, even if the employee does have cash or other liquid assets on hand, provided that those assets are earmarked to pay an obligation in the near future... Employee representations may be made over the phone, provided that the call is recorded.... [T]he plan administrator may rely on the employee's representation, unless the plan administrator has actual knowledge of the contrary.... [T]his could be an administrative minefield for plan sponsors."

(Cammack Retirement Group)
IRS Issues Final Hardship Regs

"The agencies characterize the final regulations [as] 'substantially similar to the proposed regulations,' and perhaps more importantly announce that, 'plans that complied with the proposed regulations will satisfy the final regulations.' ... [1] Eligible expenses ... [2] Verbal representations OK ... [3] Contribution suspensions ... [4] 403(b) plans ... [5] Effective dates."

(American Society of Pension Professionals & Actuaries [ASPPA])
How Savings and Retirement Benefit Distributions May Prudently Be Used to Make Charitable Gifts

"[D]istributions from individual retirement accounts or annuities may be eligible for the favorable tax treatment applicable to qualified charitable distributions (QCDs). This article explains the QCD requirements. The article also discusses when it is prudent to use those provisions ... when it is prudent to do otherwise if savings or retirement benefits fund charitable contributions, and when it is prudent to use other funding sources ... for charitable contributions."

(Law Offices of Albert Feuer, via SSRN)
Heirs Can Use NUA Tax Break for Inherited 401(k)s

"If the heir rolls assets from the 401(k) to an inherited IRA, she can split off the appreciated employer stock and roll that into a taxable brokerage account. The heir will owe ordinary income tax on the original cost basis. When she later sells the appreciated stock from the taxable account, the NUA -- the difference between the cost basis and the current market value of the employer stock -- will be taxed at long-term capital-gains tax rates."

(Kiplinger)
[Opinion] Statement of Investment Company Institute to ERISA Advisory Council on Permissive Transfers of Uncashed Checks from ERISA Plans to State Unclaimed Property Funds (PDF)

15 pages. "[ICI believes that] expansion of the PBGC program generally offers a more optimal solution to the issue of missing participants, including the problems associated with uncashed distribution checks.  Until the adoption of that inter-agency solution ... [ICI] recommend[s] that the [DOL] issue guidance facilitating the use of state unclaimed property funds as one of several permissible options for the handling of uncashed distribution checks[.]"

(Investment Company Institute [ICI])
[Guidance Overview] DOL Issues Final Prohibited Transaction Exemption for the Consolidation of Small Retirement Accounts When Workers Change Jobs

"Before authorizing a plan's participation in the Program, a plan fiduciary who is independent of RCH must review the terms of the Program, and determine that the plan's participation in the Program is prudent. All fees that RCH receives in connection with the Program must be approved by the plan fiduciary of the prior employer plan.... The DOL further concluded that neither the plan sponsor of the former employer nor the new employer would be acting as a fiduciary in connection with a decision to transfer the individual's default IRA into the new employer's plan."

(King & Spalding)
[Opinion] Statement of Pension Rights Center to ERISA Advisory Council on Permissive Transfers of Uncashed Checks from ERISA Plans to State Unclaimed Property Funds (PDF)

"[A]lthough State unclaimed property programs are very helpful to individuals who have lost track of non-retirement assets, they are not the best arrangement for people who have earned 401(k), pension, profit sharing and other retirement plan benefits. A far better approach would be if a federal agency were designated as the repository for uncashed checks. The PBGC is the logical choice since the agency already has extensive experience managing its successful programs for terminating plans and has a website that is very user friendly."

(Pension Rights Center)
[Guidance Overview] An Uncashed Check is Taxable

"The situation described in [Rev. Rul. 2019-19] is one in which the plan is required to make a distribution and the participant receives the distribution.... [It] seems reasonable that the consequences of a participant failing to cash a distribution check ... would also apply to a situation in which the participant requests a distribution. And, it seems reasonable that a plan administrator may assume that a check for a requested (or required) distribution is received by the participant, absent the check being returned as undeliverable, in the year in which the distribution is made."

(Spencer Fane)
Is $1 Million in Retirement Savings Enough?

"[T]here is no simple answer to the question of how much you will need in order to feel financially secure.... [Y]ou should make assumptions about the future and crunch your numbers based on your best estimates, your specific circumstances and your retirement goals.... [We] believe the Actuarial Approach, with its separate consideration of recurring and non-recurring expenses in retirement, is a powerful and effective tool for developing a spending budget and for making other financial decisions."

(Ken Steiner, FSA Retired)
IRS Addresses Tax and Reporting Consequences of Failure to Cash a Qualified Plan Distribution Check

"Allowing individuals to delay income by simply ignoring a distribution check would give them unfettered discretion to delay their taxable income, a consequence that the IRS has clearly denied elsewhere ... And allowing individuals’ handling of distribution checks -- beyond the control and typically beyond the knowledge of the plan administrator -- to alter the tax withholding and reporting obligations of the plan administrator would invite chaos. If there is anything curious about the ruling, it is why the IRS thought the ruling was needed now."

(Thomson Reuters / EBIA)
[Official Guidance] Text of IRS Rev. Rul. 2019-19: Failure to Cash a Distribution Check from a Qualified Retirement Plan (PDF)

"Under Section 402(a), the amount of the designated distribution is actually distributed from Plan X to Individual A in 2019. Because Individual A has no investment in the contract within the meaning of Section 72 and no exception to Section 402(a) applies, the amount of the designated distribution is includible in her gross income in 2019. Individual A's failure to cash the distribution check she received in 2019 does not permit her to exclude the amount of the designated distribution from her gross income in that year under Section 402(a)."

(Internal Revenue Service [IRS])
Can a Pre-Tax 401(k) Account Be Converted to a Roth Account?

"There are Roth conversions and Roth transfers. Conversions are only permitted when a participant otherwise has a reason to take money out of the plan. That could be on termination of employment or attainment of age 59-1/2. Transfers, on the other hand, are not restricted to those types of events, so any participant can take advantage of them."

(DWC)
Have an IRA or 401(k)? The New SECURE Act Will Change Your Estate Planning

"Under the previous rules, we could ‘stretch’ IRA distributions to non-spouse beneficiaries, which allowed for a potentially significant income tax savings to the children of IRA owners.... Coupled with the fact that inherited IRAs are subject to the claims of the beneficiary’s creditors, many IRA owners created ‘IRA Conduit Trusts’ or other mechanisms to make sure beneficiaries could take only the Required Minimum Distributions and assets in the IRA would be protected. SECURE changes that paradigm."

(Forbes)
Better Budgeting with 'Actuarial Budget Buckets'
"When selecting assumptions for future increases in your recurring expenses, it may be reasonable to assume, for example, that: [1] your current recurring essential non-health expenses will increase by assumed inflation in the future; [2] your current recurring essential health expenses will increase by a rate greater than assumed inflation; and [3] your current recurring discretionary expenses will increase by a rate lower than assumed inflation." (Ken Steiner, FSA Retired)
[Opinion] Three Policy Ideas for Turning Individual Account Balances Into Retirement Security (PDF)
"Crafting the ideal retirement spending program requires an alchemistic blend of the retiree's life expectancy, future investment returns, inflation, emergency spending needs, bequest motives, and ever-changing tax law and Social Security benefits. Annuities would be an obvious solution for many, but few retirees are willing to turn over a large sum of money for a seemingly small monthly payment.... [T]hree relatively new and promising ideas [are]: a voluntary Social Security buy-in; tontine -- a kind of mortality risk sharing pool; and a new kind of Treasury bond called a SeLFIE." (K&L Gates, via Benefits Law Journal)
[Guidance Overview] IRS Issue Snapshot: Hardship Distributions from 401(k) Plans
"This Snapshot examines the criteria for hardship distributions. Different restrictions apply to hardship distributions made from elective deferrals that were contributed prior to 1989. A discussion of those rules is beyond the scope of this Snapshot. The Bipartisan Budget Act of 2018 made several changes to the requirements for hardship distributions from 401(k) plans. Those changes are summarized[.]" (Internal Revenue Service [IRS])
Debt Close to Retirement and Its Implications for Retirement Well-Being
"The most financially-knowledgeable older adults are the least likely to report that they hold too much debt or that they are financially fragile. Older people with higher incomes and more education people tend to hold long-term debt, such as mortgages, while those with lower incomes and less education tend to carry high-cost debt, such as payday loans." (TIAA Institute)
[Opinion] Establishing Dedicated Asset Reserves to Fund Different Types of Retirement Expenses
"[The authors believe] that it would be beneficial for these two types of expenses to be further segmented into recurring and non-recurring core/adaptive expenses, and [also] believe using present values to develop the required reserves for these expense categories (and other expected expenses) is superior to using variations of the 4% Rule proposed by [Michael Kitces]." (Ken Steiner, FSA Retired)
Segmenting Retirement Expenses Into Core vs. Adaptive Buckets
"[W]hat defines more flexible 'discretionary' spending to fund wants (rather than needs) isn't just a function of certain categories of expenses, or funding solely the expenses necessary to ensure base-level safety and survival needs. Instead, retirees can upgrade their lifestyle across any number of traditionally 'essential' spending categories as well ... as long as there's a clear resource bucket to show how long that spending can be sustained, and when the retiree really may have to adapt!" (Nerd's Eye View)
[Official Guidance] Text of IRS Proposed Regs: Withholding on Certain Distributions under Section 3405(a) and (b)
15 pages. "[S]takeholders have requested clarification regarding the application of Notice 87-7 and section 3405(e)(13)(A) in the following situations: [1] The payee provides the payor with an Army Post Office (APO), Fleet Post Office (FPO), or Diplomatic Post Office (DPO) address. [2] The payee provides the payor with a residence address located within the United States but provides payment instructions that request delivery of the designated distribution to a financial institution or other person located outside of the United States. The proposed regulation includes rules that would address these situations[.]" (Internal Revenue Service [IRS])
Forecasting Future Investment Returns
"Research has shown that the current level of equity market P/E ratios appears to be a more important factor in predicting future equity returns than historical return data.... If you or your financial advisor are using a Monte Carlo model to help you develop your spending budget ... make sure that expected equity returns assumed in the model are consistent with today's market P/E ratio and are not based solely on historical averages." (Ken Steiner, FSA Retired)
Crunching the Numbers on Pension Lump Sums, Part 2
"For a retiree, or someone close to retirement, the decision to take a lump sum or a life annuity form of payment from a pension plan is a classic example of ... the decision of how much of one's assets should be allocated to the less-risky floor portfolio to fund essential expenses and how much should be allocated to the more-risky upside portfolio to fund non-essential expenses." (Ken Steiner, FSA Retired)
Investing for Income in Retirement
"[1] Set aside 12 months' worth of expenses, after accounting for other non-portfolio income sources, in a liquid cash account ... [2] Keep an additional two to four years' worth of expenses in short-term bonds or bond funds in case of a market downturn.... [3] [C]onsider investing the remainder of your portfolio in assets that have greater potential for investment income and growth ... [4] [A] total return approach allows you to harvest some of your portfolio's gains -- including price appreciation -- for income as needed." (Charles Schwab)
Combining the IRA Rollover Rules for Surviving Spouses with the Separate Account Rules
"If an IRA account has multiple beneficiaries, and that account is not split by December 31st of the year after death, then all beneficiaries are stuck using the life expectancy of the oldest among them. That treatment lasts until the account is emptied. For non-spouse beneficiaries, all post-death beneficiary Required Minimum Distributions (RMDs) must also begin by December 31st of the year after death. On the other hand, spousal beneficiaries can roll over inherited amounts to their own IRA accounts, essentially changing when RMDs begin. Spouses also get favorable treatment when calculating those RMDs." (Slott Report)
Generating Income During Retirement
"After you've determined a reasonable portfolio withdrawal rate ... [1] Set aside a cash cushion ... [2] Manage your retirement portfolio sensibly ... [3] Boost your potential returns by investing tax-efficiently ... [T]he next question is: Where should the money come from? ... Dividends and interest versus selling shares.... Bonds maturing in the coming year.... Which investments should you sell? ... Required minimum distributions.... Tax bracket ramifications.... Securities held for slightly less than a year." (Charles Schwab)
How to Manage Withdrawals When You Retire During a Bear Market
"[T]hree different strategies ... that can allow you to still retire when you want to without the market fluctuations (or downturn) affecting your plans or causing you to run out of money sooner than you originally projected ... [1] The bucket strategy ... [2] Essential vs. discretionary ... [3] Structured systematic withdrawals." (Financial Finesse)
[Official Guidance] Text of 2018 IRS Publication 575: Pension and Annuity Income (PDF)
49 pages; Feb. 26, 2019. "What's New: Extended rollover period for qualified plan loan offsets in 2018 or later. For distributions made in tax years beginning after December 31, 2017, you have until the due date (including extensions) for your tax return for the tax year in which the offset occurs to roll over a qualified plan loan offset amount." (Internal Revenue Service [IRS])
Winning the Retirement Game: Be Flexible and Have a Plan
"Our inability to predict the future ... hasn't stopped individuals from coming up with approaches that they believe can 'safely' be used to spend down retirement savings which are significantly invested in risky assets. The 4% Rule is a classic example of such an approach.... [Dynamic approaches] require periodic (typically annual) 'actuarial valuations' to keep spending on track and consistent with a retiree's spending goals.... [R]eturns on risky assets will fluctuate from year to year and these fluctuations may increase or decrease how much we can afford to spend." (Ken Steiner, FSA Retired)
[Guidance Overview] Implementing the New Hardship Withdrawal Regs
"[W]ith respect to discretionary provisions: [1] Should the plan delete the six-month suspension provisions for hardship withdrawals issued before January 1, 2020? ... [2] Should the plan continue to require a participant to obtain all available plan loans before granting a hardship withdrawal? ... [3] Should the plan expand the portion of a participant's account from which hardship withdrawals can be made? ... [4] When should the changes to the list of safe harbor expenses be effective?" (Thompson Coburn)
Hardship Distributions and Recent IRS Changes
"Under the new rules, a plan sponsor can accept a written statement from the participant where they certify there is a financial need.... [Other changes include:] [1] No plan loan requirement -- although [this change] is not mandatory ... [2] Allow for further contributions ... This mandatory rule is effective January 1, 2020 but can be applied earlier. [3] Investment earnings distribution ... 403(b) plans still prohibit investment earnings to be counted for hardship withdrawals." (PlanPILOT)
'Gap Analysis' for IRA Beneficiaries
"The gap period begins on the date of death of an IRA owner and ends on September 30 of the following year. A significant amount of planning activity can, and should, take place within this window, including: [1] Post-death distributions (i.e. 'cash-outs') ... [2] Account splitting ... [3] Disclaimers." (Slott Report)
[Official Guidance] Text of 2018 Instructions for IRS Form 8915B: Qualified 2017 Disaster Retirement Plan Distributions and Repayments (PDF)
"File 2018 Form 8915B if any of the following apply. [1] You received a qualified 2017 disaster distribution from an eligible retirement plan in 2018. [2] You received a qualified 2017 disaster distribution in 2017 that you are including in income in equal amounts over 3 years. [3] You made a repayment of a qualified 2017 disaster distribution in 2018." (Internal Revenue Service [IRS])
Actuarial Approach for Retiree Spending and Pension Funding Use the Same Basic Actuarial Principles
"These basic actuarial principles include: [1] Making deterministic assumptions about the future; [2] Reflecting the time value of money; [3] Reflecting the concept of probabilities; [4] Reflecting mortality; [5] Use of actuarial present values; [6] Use of a generalized individual model that compares the present value of assets with the present value of liabilities; [7] Periodic gain/loss adjustment to reflect experience different from assumptions (annual valuations), and [8] Conservatism." (Ken Steiner, FSA Retired)
[Official Guidance] Text of 2018 IRS Publication 575: Pension and Annuity Income (PDF)
49 pages. "What's New: Extended rollover period for qualified plan loan offsets in 2018 or later. For distributions made in tax years beginning after December 31, 2017, you have until the due date (including extensions) for your tax return for the tax year in which the offset occurs to roll over a qualified plan loan offset amount." (Internal Revenue Service [IRS])
[Guidance Overview] IRS 401(k) Plan Fix-It Guide: Hardship Distributions Were Not Made Properly
Feb. 11, 2019. "How to avoid the mistake: [1] Review the plan document language ... [2] When you amend your plan document, make certain the language for hardship distributions is in the most recent document. [3] Establish hardship distribution procedures ... [4] Only allow hardship distributions that meet the plan document and IRC Section 401(k) requirements. [5] Look for signs that the hardship distribution program is being abused or badly managed." (Internal Revenue Service [IRS])
[Official Guidance] Text of 2018 IRS Form 8915B: Qualified 2017 Disaster Retirement Plan Distributions and Repayments (PDF)
"Complete this part only if you have qualified 2017 disaster distributions in 2018 and the total of your qualified 2017 disaster distributions in 2017, if any, for the type of qualified 2017 disaster distribution(s) (hurricanes or wildfires) made in 2018 was less than $100,000." (Internal Revenue Service [IRS])
If You Aren't Separately Budgeting for Non-Recurring Expenses, You Probably Don't Have a Robust Retirement Spending Budget
"One of the significant differences between the Actuarial Approach and these other approaches is that it develops separate budgets for your recurring and your non-recurring future expenses.... These new revised workbooks now permit you to input up to three expected non-recurring expenses and will now calculate a recurring spending budget, a non-recurring spending budget and a total spending budget for the current year based on the input items." (Ken Steiner, FSA Retired)
[Guidance Overview] IRS Issues Proposed Regs Modifying Hardship Distribution Rules
"Most of the changes made by the [Bipartisan Budget Act] and the proposed regulations apply to the safe harbor rules for hardship distributions, and many plans have adopted those changes because they provide better assurance of compliance with the hardship distribution standards.... [A] plan amendment that relates to the final regulations will be treated as an amendment to correct a disqualifying provision, even if it does not; therefore, all amendments that relate to the final regulations will have the same deadline." (Trucker Huss)
[Guidance Overview] The 403(b) Hardship Distribution That's Not a Hardship Distribution Under the Proposed Regs
"[A] 403(b) QNEC and QMAC distribution ... is made under Reg 1.403(b)-6(b), under which amounts NOT attributable to elective deferrals can be distributed.... This [has] at least four operational effects: [1] [T]hese amounts CAN be rolled over, unlike a 403(b)(11) distribution of elective deferrals ... [2] [T]he plan document language which will need to be amended is NOT the hardship section. Rather, it is the in-service withdrawal section of the plan document.... [3] [T]he 'financial need,' 'deemed hardship' and other rules required of hardship distributions by statute or regulation will not apply as a matter of law, but only as a matter of chosen plan operational rules ... [4] [T]he 402(f) notice needs to properly identify the tax attributes of this type of distribution, that is, that it can be rolled over." (Business of Benefits)
Decumulation Confusion
"[Two recent articles provide] intriguing perspectives on the same issue -- one citing a survey of a seemingly irrational fear among those about to retire, and another stating that while a healthy concern for maintaining one's standard of living is quite valid, obsessing about a bear market -- or investment performance in general -- is the wrong approach to maintaining that standard, and should take a back seat to proper risk management." (Cammack Retirement Group)
[Official Guidance] Text of 2018 IRS Publication 590-B: Distributions from IRAs (PDF)
63 pages. "What's New: [1] No recharacterizations of conversions made in 2018 or later.... [2] No miscellaneous itemized deductions allowed.... [3] 2018 Form 1040 redesigned.... References to Form 1040 and its related schedules have been revised accordingly in this publication. [4] Form 1040A and Form 1040-EZ no longer available." (Internal Revenue Service [IRS])
[Guidance Overview] We're in a New York State of Distributions
"The first $20,000 of a taxpayer's taxable retirement income in each year is exempt from New York State and City income taxation.... [A] New Yorker who takes a $20,000 distribution annually after reaching age 59 1/2 saves as much as $2,500 annually in otherwise eventually payable New York taxes. Note that this is not a deferral but rather complete tax-exemption on these amounts." (Thomson Reuters Practical Law)
Deferred Income Annuities Enhance Retirement Readiness (PDF)
"The study finds an overall improvement in retirement readiness when DIA purchases equal to 5, 10, and 15 percent of the 401(k) balance, and a pre-commencement death benefit, are added to the DIA. When the results are broken out by age at simulated death, there is an overall decrease in retirement readiness for those dying before benefits begin, as well as for those dying soon after benefits begin." (Employee Benefit Research Institute [EBRI])
Is the Partial Government Shutdown Affecting Your Benefit Plans?
"While on leave, employees are not in pay status and, therefore, elective contributions to 401(k) plans and cafeteria plans cannot be made.... A temporary or permanent layoff or a cutback in hours affecting a number of employees can have an impact on nondiscrimination testing.... Employees who are laid off or experience a reduction in hours resulting in loss of health plan coverage must be offered COBRA continuation coverage.... IRS is not publishing the monthly 'applicable interest rate' used in calculating lump sum payments from certain pension plans." (The Wagner Law Group)
New Insights Into Real-World Retirement Spending Behaviors (PDF)
"[C]onventional wisdom about prudent retirement income strategies has typically centered around two much-touted rules of thumb. The first is the 4% rule ... The second is that post-retirement income can be broadly modeled using a fixed, reduced benchmark rate relative to someone's pre-retirement income level.... [R]esearch into real-life retirement spending patterns, however, uncovered three surprising trends that suggest it may be time to re-examine these popular replacement income strategies.... There is a lifetime spending curve. There is a retirement spending surge. There is notable spending volatility at and through retirement." (J.P. Morgan Asset Management)
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