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Distributions - rollovers

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[Discussion] Why Make a Plan-to-Plan Transfer?
"An employee terminates from Employer A and starts working for Employer B. They are unrelated employers. Both plans allow Plan-to-Plan transfers into and out of the plans. What is the benefit of this participant doing such transfer instead of a rollover?" (BenefitsLink Message Boards)
Rollover Roulette: Rollover, Direct Rollover, Direct Payment, Direct Transfer or Transfer (Part 2: Potential Horrible Consequences)
"The only way that a beneficiary may move inherited eligible retirement plan monies to an inherited IRA is through a 'direct trustee-to-trustee transfer.' ... A 'direct rollover' is available only to plan participants (and their surviving spouses) and requires that the monies be paid directly to the plan participant's new employer's eligible retirement plan or IRA. A 'direct rollover' is not subject to the 60-day rule.... An IRA owner can also run into trouble if he or she confuses a 'rollover' with a 'transfer' and, as a result, does more than one rollover between IRAs in a 12-month period." (Morgan Lewis)
Rollover Roulette: Rollover, Direct Rollover, Direct Payment, Direct Transfer, or Transfer (Part 1: The Terminology)
"Using one 'rollover' term when you really mean another can result in horrible federal income tax consequences to a plan participant or IRA owner and ... Plan sponsors, plan administrators, human resources personnel, trustees, custodians, investment advisors, and anyone else who deals with retirement plans and IRAs need to be careful with the words used in plan and IRA materials (particularly distribution forms, summary plan descriptions, and IRA disclosure statements) and when these terms come up in conversations with plan participants or IRA owners." (Morgan Lewis)
[Guidance Overview] Interesting Angles on the DOL's Fiduciary Rule, Part 39
"Even though the DOL fiduciary rule is being delayed, other regulators have indicated their interests in protecting participants from inappropriate recommendations to take plan distributions and roll over to IRAs.... The regulators appear to be harmonizing around the type of analysis and investigation required to make a suitable or prudent recommendation." (
Thinking Beyond Retirement: Your Plan as a Destination
"[F]or sponsors looking to help employees save and spend retirement wealth within the plan, here are five plan design options for you to consider: [1] Remove age restrictions.... [2] Consider greater withdrawal flexibility.... [3] Allow for incoming rollovers.... [4] Offer investment options for retirees.... [5] Offer retirement advice and education." (Vanguard)
[Guidance Overview] Interesting Angles on the DOL's Fiduciary Rule, Part 38
"Combining the language in the Risk Alert with the language in the footnote, the [SEC's Office of Compliance Inspections and Examinations (OCIE)] is saying that recommendations to participants to take distributions from plans ... and rolling over to an IRA ... will be scrutinized. It also suggests that the OCIE favorably views FINRA's analysis in Regulatory Notice 13-45." (
IRA Rollovers: Does Your Due Diligence Meet Regulatory Requirements?
"This memorandum suggests a process for information data gathering for a QRP-to-IRA rollover, or an IRA-to-IRA rollover, under the DOL's Best Interest Contract Exemption (BICE)... This analysis incorporates requirements imposed by other sources of law. The suggested process could be adapted to other regulatory regimes, although the requirements imposed upon financial advisors under other regulatory regimes are usually less strict than those applied under BICE." (Ron A. Rhoades, JD, CFP)
Planning to Keep Your 401(k)? Be Careful When You Reach Age 70-1/2
"With IRAs, RMDs must be calculated separately for each account, but the amounts can then be added together and distributed by any one of the IRAs.... In the case of an employer-sponsored plan such as a 401(k), the RMD must be calculated separately and distributed separately from each plan.... Employer-sponsored Roth accounts are subject to RMDs.... If you're still contributing to your employer-sponsored plan, you may be able to delay taking RMDs." (Vanguard)
[Guidance Overview] Breaking Down the Three Key Elements of the DOL Fiduciary Rule
"All three elements described in [ERISA] section 3(21)(A)(ii) -- [1] a fiduciary [2] that renders (non-discretionary) investment advice [3] for compensation -- must be present in order for the Rule to apply to an advisor communicating with a plan participant or an IRA owner.... [The Rule] broadens the definition of 'investment advice.' More precisely, 'retirement investment advice' that's rendered to [1] participants in ERISA plans such as 401(k) plans, profit-sharing plans, money purchase pension plans, and defined benefit plans, as well as [2] owners of IRAs and participants in non-ERISA plans. Note that the Rule does not pertain to investment advice rendered to those investing in taxable accounts and non-retirement accounts. That retail environment remains within the purview of the SEC." (Morningstar Advisor)
Why the New Fiduciary Rule Spells Opportunity for RIAs
"When the new rule takes effect next April, the DOL will extend to IRAs the kind of best interest protections that have long governed 401(k)s and other workplace-sponsored retirement plans.... These changes, which come as tens of millions of retiring baby boomers face the decision of what they will do with their retirement plan nest eggs, could result in some important benefits for RIAs.... Recent regulatory changes favor RIAs.... RIAs can attract a greater share of 401(k) plan business.... RIAs can capture more IRA rollovers from 401(k) clients.... Advisers can gain other business from plan participants.... Deeper relationships create a competitive advantage." (Financial Planning)
Rollover Relief Will Come with IRS Scrutiny in 2017
"Proceed with caution if you are using the new self-certification procedure. You should be aware that self-certification is not the same as a waiver of the 60-day rule. You are not necessarily completely off the hook. When you file your taxes, you may report your contribution as a valid rollover on your tax return, but the story does not end there. The IRS can still later audit your return and determine that a rollover was not appropriate." (Slott Report)
[Guidance Overview] Interesting Angles on the DOL's Fiduciary Rule, Part 29
"What are the relevant factors for evaluating whether a participant should take a distribution? In other words, what information does an adviser need to gather and review? In BICE, the DOL identifies three specific types of relevant information about the retirement plan.... Those factors, and other relevant matters about the plan, need to be evaluated. Of course, that means that information needs to be obtained." (
To Roll or Not to Roll: A Framework for Implementing the DOL's New Fiduciary Rule for IRA Rollovers
22 pages. "Little research explores what should be considered when determining whether a rollover is in the best interests of an investor.... [This article outlines] a framework to make this decision, with a focus on the potential decision to roll retirement savings into an IRA managed by a financial advisor. Fees, the quality and scope of investments offered, the quality and scope of services being provided (e.g., financial planning), as well as other unique considerations should all be considered." (Morningstar)
Are HR Employees 'Investment Advisors' under the DOL Fiduciary Rule?
"So long as an employee receives no additional compensation for the advice-related activities above and beyond his or her normal salary, an HR employee should be able to explain plan options to participants without incurring ERISA fiduciary liability.... On the other hand, an employee whose job description included assisting plan participants in selecting investment options in a self-directed 401(k) plan probably would be considered an ERISA fiduciary." (Thompson Coburn)
Interesting Angles on the DOL's Fiduciary Rule, Part 28
"Under the DOL's fiduciary regulation, the recommendation of a plan distribution and IRA rollover will be fiduciary advice, subject to the best interest standard of care and the prohibited transaction rules. But, what if a participant takes a distribution and rolls over into an IRA with an adviser ... without a recommendation by the adviser?" (
[Guidance Overview] FAQs on New Fiduciary Rule Issued
"Discretionary 'level fee' advisers will be required to comply with the 'streamlined' BICE requirements in connection with any rollover recommendation ... Firms may charge higher fees for complex products that require, for example, greater due diligence, training and closer supervision, but will need to justify the basis for the increased costs and monitor recommendations between categories.... Variable back-end awards, bonuses and similar back-end incentives are not permitted under the BICE and cannot be offered on or after October 27, 2016 (the date the FAQs were issued)." (Warner Norcross & Judd LLP)
[Guidance Overview] DOL Issues First Guidance on Fiduciary Rule
"The FAQs address a number of important topics: ... Scope of BIC Exemption ... What Constitutes Unreasonable Compensation? ... Incentive Compensation for FAs ... Recruitment Bonuses ... Level Fee Fiduciaries ... Bank Networking Arrangements ... Effective Date." (Morrison & Foerster LLP, via Lexology)
From EBSA Secretary Phyllis Borzi: Your Conflicts of Interest Questions Answered
"Earlier this year, we announced new protections to ensure that Americans who are saving for retirement will have access to financial advice in their best interest.... One of the first and most important efforts on this front is the publication of FAQs based on the input we've received from the financial services industry and others. These questions are an important part of the regulatory process as they allow the department to clarify important parts of the rule, and head off misunderstandings that could lead to bad results for retirement savers, or financial services professionals.... Our initial focus has been, and remains, broad compliance with the rule." (U.S. Department of Labor [DOL] Blog)
[Official Guidance] Text of DOL FAQs on Conflict of Interest Exemptions (PDF)
24 pages. 34 Q&As, including: "Is compliance with the BIC Exemption required as a condition of executing a transaction, such as a rollover, at the direction of a client in the absence of an investment recommendation? ...Is the BIC Exemption available for advisers who act as discretionary fiduciaries to retirement plans and then provide investment advice to a participant to roll over assets to an IRA for which the adviser will provide advice? ... Is the BIC Exemption available for recommendations to roll over assets to an IRA to be managed on a going- forward basis by a discretionary investment manager? ... Is 'robo-advice' covered by the BIC Exemption or other exemption? ... Does the full BIC Exemption prohibit a financial institution or adviser from discounting prices paid by customers for services? ... Under the BIC Exemption, who are 'level fee fiduciaries' and what prohibited transaction relief is available to them? ... Can an adviser and financial institution rely on the level fee provisions of the BIC Exemption for investment advice to roll over from an existing plan to an IRA if the adviser does not have reliable information about the existing plan's expenses and features? ... Can a financial institution and adviser rely on the level fee provisions in the BIC Exemption to recommend a rollover from an employee benefit plan to an IRA if the adviser will become a discretionary manager with respect to the IRA assets after the rollover? ... Can insurance companies rely on independent insurance agents to sell fixed rate and fixed indexed annuities to retirement investors after the applicability date of the Rule? ... What is the role of insurance intermediaries, such as independent marketing organizations (IMOs), in the sale of annuity contracts to retirement investors after the applicability date of the Rule? Can they receive compensation such as commissions and override payments? ...Is there a way to get an exemption for advice to engage in principal transactions involving assets that are not specifically covered by the Principal Transactions Exemption? ... Does PTE 84- 24 cover rollovers into an annuity? ... The wording of PTE 84-24's reasonable compensation standard differs from the reasonable compensation standard used in the BIC Exemption. Does the Department intend to interpret them differently? ... How will the Department approach implementation of the new rule and exemptions during the period when financial institutions and advisers are coming into compliance?" (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
[Guidance Overview] Self-Certification for Waiver of 60-Day Rollover Requirement (PDF)
"This new guidance encourages taxpayers to roll over their qualified plan or IRA distributions to preserve their retirement savings. For plan administrators and IRA trustees, it provides specific guidance that will allow them to make a determination as to whether a rollover contribution should be accepted after the 60-day deadline has been missed. This helps to avoid the acceptance of an invalid rollover." (VOYA Financial)
[Guidance Overview] Reasonableness Prevails: New IRS Procedure Allows Self-Certification for Late Rollovers
"[A] plan administrator or an IRA trustee may not rely on the self-certification ... if the administrator has actual knowledge that the information in the self-certification is not true.... [T]he IRS has not elaborated on what constitutes 'actual knowledge' that the self-certification is not true, or how a plan administrator would obtain or rely on such information. This could require the implementation of a new administrative process or monitoring by plan administrators." (Trucker Huss)
[Guidance Overview] IRS Allows Self-Certification for Late Rollover Contributions
"Retirement plan administrators may accept late rollover contributions from taxpayers who self-certify that they qualify for a waiver of the 60-day rule. Plan sponsors may need to update their communications about rollovers to reflect the new IRS waiver procedures. The self-certification applies only to the 60-day requirement, not to other requirements for a valid rollover." (Willis Towers Watson)
Interesting Angles on the DOL's Fiduciary Rule, Part 22
"Based on the wording of the new fiduciary rule, if a bank employee recommends that an IRA invest in a certificate of deposit, and is compensated directly or indirectly for that recommendation, it is a fiduciary act for compensation. (The bonus, or bonus credit, is the compensation.) Since the bank employee is being paid compensation that is not stated and level, the payment is a prohibited transaction." (
DOL Rule Could Reduce IRA Rollovers
"Nearly half of projected [IRA] rollover assets are 'at-risk' of remaining in the defined contribution plan-sponsor market once the [DOL's] fiduciary rule goes into effect, a new report claims. Assets that don't roll over into retail IRA accounts, a transaction considered a big cross-selling opportunity for retirement advisors, would cut into revenues generated by financial advisors since fewer dollars are 'in motion.' +" (
Why You Should Roll Your 401(k) to Your New Employer
"Many 401(k) plans offer participants access to institutional share class mutual funds and very low cost index funds, especially those sponsored by large employers.... Balances in retirement plans, such as 401(ks), are protected against civil judgments and bankruptcy.... [D]epending on where you live, your state may not extend that protection to IRAs.... Many 401(k) plans permit participants to borrow from their plan assets at a very low rate of interest." (Financial Finesse)
[Guidance Overview] Missed a 60-Day Rollover? Try Self-Certification
"Plan administrators and IRA custodians are not required to accept the self-certification and ... many of the larger institutions [may] continue to insist upon a private letter ruling.... [T]he IRS itself has cautioned that self-certification is not the equivalent of a waiver of the 60-day requirement." (Fox Rothschild LLP)
[Opinion] Auto-Portability: Default IRA Boon or Bust?
"Auto-portability is a clever concept. But ... what's to prevent misinformed or fraudulent efforts, especially on account balances under $5,000, that many plan sponsors would prefer to get off their books? Furthermore, one has to wonder by what authority is either side entitled to carry on such a search, and whether there might be some fiduciary concerns -- such as the sharing of confidential social security numbers. And what if the participant is enrolled in a non-401(k) plan where individualized records are recorded differently, or a 401(k) plan that does not offer investment choices to its participants?" (PenChecks)
[Guidance Overview] I Know My Rollover is Late, but It's Okay -- Trust Me.
"For employers, this ruling may result in some questions from their third party administrators.... For example, if an employee comes forward with a self-certification that does not clearly fit into the list, but is close, the TPA may request that the plan administrator (which may be the employer or someone there) make a decision about whether the certification is sufficient. Practically, however, certifications outside this specific list should not be accepted." (Benefits Bryan Cave)
[Guidance Overview] New Rollover Self-Certification Opportunity: 'Buyer Beware'?
"The most sure and certain of its positive effects is to grant protection to IRA custodians and trustees, and plan administrators, who ... may rely on the representations of the taxpayer providing the certification, unless they have actual knowledge that the reason is invalid. The real ambiguity is faced by the taxpayer himself.... Missing are details to help a taxpayer be certain that he or she meets some of these less-than-straightforward conditions for self-certification." (Ascensus)
Almost Half of Projected IRA Rollover Assets 'At-Risk' Post-DOL Conflict of Interest Rule
"New research ... suggests more assets in the retirement industry will remain in employer-sponsored DC plans following implementation of the rule.... 29% of respondents said they rolled over their retirement savings from an employer-sponsored account into an IRA because of advice from a financial professional. Another 29% consolidated their retirement savings into an existing IRA." (planadviser)
Ten Important Facts About IRAs (PDF)
14 pages. "[1] IRAs are the largest pool of assets in the U.S. retirement market.... [2] The incidence of IRA ownership increases with age.... [3] IRAs are predominantly held by moderate-income households.... [4] IRA balances tend to rise with length of ownership.... [5] Equity holdings figure prominently in traditional IRA investments.... [6] Although few traditional IRA investors make contributions, those who do display persistence.... [7] Rollovers from employer-sponsored retirement plans have fueled growth in IRAs.... [8] A large majority of individuals consult a financial professional when rolling over assets to a traditional IRA from a former employer's retirement plan.... [9] Most IRA owners consult a financial professional when creating a retirement strategy.... [10] IRA withdrawals are infrequent and mostly retirement related[.]" (Investment Company Institute [ICI])
IRS Provides for Late Rollover Relief, But Is It Good Enough?
"Because the self-certification does not serve as an automatic waiver upon which the taxpayer can rely should the IRS later open up an examination and assert interest and penalties, some taxpayers may feel more comfortable directly applying for a waiver ruling request. For example, what exactly does it mean to be 'seriously ill' enough for the IRS to grant a waiver? Does this encompass mental as well as physical illnesses?" (Bloomberg BNA)
[Guidance Overview] IRS Allows 'Self-Service' 60-Day Rollover Waivers for Retirement Plan Distributions (PDF)
"If an indirect rollover does not occur within the required 60-day timeframe, IRS will now allow the affected individual to self-certify that they meet a 'hardship waiver' exception to the 60-day rule in a broad array of circumstances. Plan administrators and IRA trustees can then rely on the self-certification in deciding whether to accept a rollover contribution after the 60-day period ends." (Xerox HR Services)
[Guidance Overview] Text of IRS PMTA 2016-10: Limitations on Coverdell ESA Rollovers (PDF)
"There is no published guidance interpreting the Section 530(d)(5) limitation on rollovers. However, Publication 970, Tax Benefits for Education, states that only one rollover per Coverdell ESA is allowed during a 12-month period. In light of the similarity of the language of Sections 408(d)(3)(B) and 530(d)(5), we believe that, with respect to rollovers described in Section 530(d)(5), only one rollover per individual per year is permitted." [Program Manager Technical Advice, Dec. 14, 2015; published online Aug. 31, 2016] (Internal Revenue Service [IRS])
IRS Eases Rules for Fixing IRA 60-Day Rollover Mistakes
"Ultimately, the new process won't resolve every possible scenario where an IRA rollover might be late, most notably where the taxpayer just botches the timing by not paying attention, due to aggressively using the rollover as a temporary personal loan, or due to bad advice from a financial advisor. Nonetheless, for what are likely the overwhelming majority of scenarios, the new self-certification process will make it fast and easy for most individuals to fix legitimately innocent rollover mistakes -- though the IRS still reserves the right to evaluate the situation after the fact, and make an adjustment if the individual was not forthright in the process!" (Michael Kitces in Nerd's Eye View)
[Guidance Overview] Retirement Plan Rollover Rules Relaxed: The 'I Lost It' Excuse May Actually Work
"An automatic waiver is of limited application as it only applies in a direct rollover scenario where the new plan or financial institution receives the funds before the end of the 60-day rollover period but fails to deposit them into a plan or IRA within the 60-day period due to no error of the participant. In this situation, the funds must actually be deposited into the plan or IRA within one year from the beginning of the 60-day rollover period.... Apparently appreciating the commonplace issues that arise with rollovers and seeking to avoid unintended 'leakage' of retirement plan assets from retirement vehicles for those that do not have the time or financial resources to pursue a PLR ... [Rev. Proc. 2016-47] provides taxpayers with a new mechanism to facilitate a rollover, even if a technical failure to comply with the 60-day rule has occurred." (Michael Best & Friedrich LLP)
[Guidance Overview] IRS Eases Procedure for Late Rollovers
"[T]he potential to miss the deadline can be easily and entirely avoided by making a direct trustee-to-trustee transfer of the funds.... [T]axpayers are allowed to make only one nontaxable 60-day rollover within each one-year period even if the rollovers involve different IRAs. This once-a-year limitation does not apply to direct trustee-to-trustee transfers." (Baker Newman Noyes)
[Official Guidance] Text of IRS FAQs Relating to Waivers of the 60-Day Rollover Requirement
Updated Aug. 24, 2016, to reflect Rev. Proc. 2016-47. "Assuming other requirements are satisfied, you have 60 days from the date you receive a distribution from an IRA or retirement plan to roll it over to another plan or IRA.... The IRS may waive the 60-day rollover requirement in certain situations if you missed the deadline because of circumstances beyond your control. These frequently asked questions address when the 60-day rollover requirement may be waived." (Internal Revenue Service [IRS])
[Guidance Overview] Accepting Late Rollover Contributions
"Plans and IRA trustees can rely on the self-certification only for the purpose of accepting a rollover that doesn't meet the 60-day requirement and not as to whether the contribution satisfies other requirements for a valid rollover. Plans and IRA trustees may also provide the Model Letter to their clients seeking to self-certify a late rollover." (Internal Revenue Service [IRS])
[Guidance Overview] Simplified Process for Obtaining a Waiver of the 60-Day Rollover Limitation (PDF)
"The IRS intends to change the instructions for IRS Form 5498, IRA Contribution Information, to require financial organizations to report a rollover contribution accepted after the 60-day deadline. Individuals using the certification process can report the rollover as a valid rollover unless later informed otherwise by the IRS." (Ascensus)
[Guidance Overview] New IRS Self-Certification Procedure Eases Complexity of Obtaining Waiver of 60-Day Time Limit on Rollovers
"[T]he IRS reserves the right, in the course of examining the individual's tax return, to consider whether the requirements for a waiver have been met. Importantly, the IRS states that it may conclude that the reason cited in the self-certification for missing the rollover 'did not prevent the taxpayer from completing the rollover within 60 days following receipt' of the distribution. In that event, the individual would be treated by the IRS as taxable on the distribution and could face the assessment of interest and penalties." (Blank Rome LLP)
2014 Update of the EBRI IRA Database: IRA Balances, Contributions, Rollovers, Withdrawals, and Asset Allocation (PDF)
"The average IRA account balance in the database was slightly more than $100,000 and the average IRA individual balance was $127,583, but the balances varied significantly by the IRA type: Roth IRAs had the lowest average balance, while Traditional IRAs had the highest average balance.... Roth IRAs were more likely to receive a contribution than Traditional IRAs (25.9 percent vs. 6.4 percent).... Almost 24 percent of individuals owning a Traditional or Roth IRA took a withdrawal in 2014, including 27.2 percent of Traditional IRA owners." (Employee Benefit Research Institute [EBRI])
[Guidance Overview] IRS Releases Self-Certification Procedure for Late IRA Rollovers
"In many cases, taxpayers should consider using a direct rollover from an employer plan or trustee-to-trustee transfer from an IRA to avoid any chance for missing the 60-day rollover window and to avoid withholding on the distribution. In addition, taxpayers should note that self-certification is not an automatic waiver of the 60-day window from the IRS; the issue may still be adjusted upon an IRS audit if the IRS finds incorrect information or disagrees with the facts supplied in the self-certification statement." (RSM US)
[Guidance Overview] IRS Allows Self-Certification for Late Rollovers of Retirement Plan Funds
"To qualify for this relief, the IRS cannot have previously denied relief to the taxpayer for that rollover, and the taxpayer must have missed the 60-day deadline for one of [11 specified reasons] ... According to the IRS, the taxpayer's self-certification is not a waiver of the 60-day requirement because the IRS can still deny the waiver on audit if it determines the taxpayer did not meet the requirements." (Journal of Accountancy)
[Official Guidance] Text of IRS Rev. Proc. 2016-47: Waiver of 60-Day Rollover Requirement (PDF)
"This revenue procedure provides guidance concerning waivers of the 60-day rollover requirement contained in sections 402(c)(3) and 408(d)(3) of the Internal Revenue Code. Specifically, it provides for a self-certification procedure (subject to verification on audit) that may be used by a taxpayer claiming eligibility for a waiver under Sections 402(c)(3)(B) or 408(d)(3)(I) with respect to a rollover into a plan or individual retirement arrangement (IRA). It provides that a plan administrator, or an IRA trustee, custodian, or issuer ... may rely on the certification in accepting and reporting receipt of a rollover contribution. It also modifies Rev. Proc. 2003-16 ... by providing that the [IRS] may grant a waiver during an examination of the taxpayer's income tax return. An appendix contains a model letter that may be used for self-certification." (Internal Revenue Service [IRS])
[Guidance Overview] Text of IRS News Release: New Procedure Helps People Making IRA and Retirement Plan Rollovers (PDF)
"Normally, an eligible distribution from an IRA or workplace retirement plan can only qualify for tax-free rollover treatment if it is contributed to another IRA or workplace plan by the 60th day after it was received. In most cases, taxpayers who fail to meet the time limit could only obtain a waiver by requesting a private letter ruling from the IRS. A taxpayer who missed the time limit will now ordinarily qualify for a waiver if one or more of 11 circumstances, listed in the revenue procedure, apply to them." (Internal Revenue Service [IRS])
Why You Should Do An IRA Rollover When You Leave Your Job
"If you keep your money in an old employer's 401(k) plan, you will continue to be limited to the 10 to 15 funds it has selected for you. These funds may not be top-performing funds, and they may have higher-than-average fees.... In many 401(k) plans, roughly half of the options available are target-date funds, which can come with extra fees." (NerdWallet, via Nasdaq)
Might 'Auto Portability' Reduce 401(k) 'Leakage'?
"About 37 percent of job-changing workers cash out because they need the money, while the remaining 63 percent who take money out of their retirement accounts do so because 'it's the easiest path available,' despite the penalty and taxes they will have to pay ... The large majority of job changers go to a new employer that also offers a 401(k) plan.... The essence of the auto portability approach ... is to create a mechanism of electronic records-matching for individuals between their former employer's retirement plan and the new employer's plan so that their retirement savings are automatically transferred." (Society for Human Resource Management [SHRM])
12 No-Tax and Low-Tax Retirement Plan Distributions
"[1] Roth plans.... [2] Tax-free rollovers and transfers.... [3] Life insurance proceeds, contracts.... [4] Recovery of basis.... [5] Special averaging for lump-sum distributions.... [6] Net unrealized appreciation of employer securities (NUA).... [7] No tax when annuity contract is passed out.... [8] Return of IRA contribution.... [9] Income tax deduction for certain beneficiaries.... [10] Distribution to charitable entity.... [11] Qualified Health Savings Account Funding Distributions (QHSAFD).... [12] QDROs and divorce-related IRA divisions." (Morningstar Advisor)
Rolling Over a 401(k) Distribution Has Potential Pitfalls
"If you can leave your money in the 401(k), it might make sense to do so. For example, your 401(k) plan might have an excellent investment choice that you cannot buy in your IRA. Or, your new employer might have a 401(k) plan with excellent investment choices and options that you will be able to roll your old 401(k) into. However, your IRA might have more flexible distribution and investment options." (Union Leader)
Exceptions to the Pro Rata Rule for IRA Distributions
"Distributions that are not subject to the pro-rata rule include: [1] Qualified Charitable Distributions (QCDs) ... [2] Qualified HSA Funding Distributions (QHFDs) ... [3] Rollovers to Company Plans ... You can only fund each of these distribution with the taxable part of your IRA." (Slott Report)
[Opinion] Final DOL Fiduciary Rule Is Likely to Spawn More Litigation Against Financial Advisers
"While the extent of the change is obvious, its worth asking whether the change is for the good or not ... [A recent] article on rollovers certainly describes a process that is more labor intensive, more transparent and puts more legal risk on the adviser involved in the process: however, whether that means better outcomes for consumers is the question, one that is at the heart of the dispute between the financial industry and the [DOL]." (Stephen Rosenberg, The Wagner Law Group)
Are Rollover IRAs on the Way Out?
"Keeping more assets in the plan does have its advantages. However, [there are] several important issues related to the stay-over strategy. These include increased costs and fiduciary responsibilities to the plan sponsor for keeping former employees in the plan, as well as additional administrative time and costs.... [P]lan sponsors will need to maintain close contact with retirees still in the plan, keeping on top of address changes, monitoring death notices, and communicating with retirees (or their successors) when making changes to plan provisions or investments. Plan sponsors will also need to establish a process for communicating information conveyed at investment meetings to retirees who are unable to attend." (PenChecks)
Corporate Pension Sponsors Fight for Ex-Employees' 401(k) Assets
"[United Technologies Vice President and Chief Investment Officer Robin Diamonte] grew tired of watching retiring and separating plan participants become fodder for call centers trolling to open new IRA accounts. To counter this pressure, she and her peers at International Paper Co. and IBM Corp. have launched campaigns to inform employees of their choices when it comes to their 401(k) accounts.... Diamonte faces an uphill battle. As U.S. defined contribution assets have grown to trillions of dollars, brokerages and mutual fund firms big and small have responded with aggressive efforts to vacuum up the 401(k) assets of separating and retiring employees." (Institutional Investor)
[Guidance Overview] The New Fiduciary Regs: A Practical Review, Part 2 (PDF)
"It is clear from the Preamble to the exemption, as well as the exemption terms themselves, that the DOL is trying to structure an environment where the participant remains protected and the advisor acts in the participant's best interests. The DOL approaches this in two ways: on the one hand, forcing the fiduciary to behave within constraints, and on the other, giving a disappointed participant access to litigation as an enforcement mechanism." [Also see Supplement: Best Interest Contract Exemption.] (Ferenczy Benefits Law Center LLP)
Your Qualified Plan: A Retirement 'Home' for Your Former Employees?
"Sponsors should consider their corporate philosophy around supporting retirees by keeping them in the plan.... There may be sponsor costs associated with supporting retirees staying in the plan (e.g., recordkeeping fees). However, sponsors may achieve economies of scale with pricing: Keeping retirees in the plan may help drive down the per-participant price.... [A] plan's withdrawal options should allow enough flexibility to accommodate participants in all phases." (Vanguard)
[Guidance Overview] The Final Fiduciary Rule's Impact on Investment Managers (PDF)
"Although the biggest impact of the Fiduciary Rule will fall on brokers and [RIAs] who give individualized non-discretionary advice in the 'retail' marketplace, discretionary investment managers in the 'institutional' space will also be affected ... [T]he Fiduciary Rule may be relevant to: [1] An RIA seeking to enter into an investment management agreement directly with an ERISA Plan to manage a separate account portfolio; [2] The manager of a private fund that is open to investment by ERISA plans -- regardless of whether the fund will hold ERISA 'plan assets'; and [3] The manager of a private fund that is open to investment by IRAs -- including friends and family and employee IRAs (unless all fees will be waived)." (Groom Law Group)
[Opinion] American Benefits Council Testimony to ERISA Advisory Council on Participant Plan Transfers and Consolidation for the Advancement of Lifetime Plan Participation
"[P]otential solutions that [would] support the DOL's desire to achieve greater lifetime participation in employer DC plans [include:] [1] Modify fiduciary rule to broaden (or clarify) exception for employees of the employer (plan sponsor) ... [2] Create incentives for rollovers without a current determination letter ... [3] Encourage 401k plan sponsorship, including open-MEPs, rather than State-Run Auto IRAs." (American Benefits Council)
[Guidance Overview] The DOL's New Fiduciary Rule: Capturing the Apparent Conflict at the 'Moment of Rollover' (PDF)
"The scope of the final rule may reach websites that allow retail clients to open rollover accounts and to roll distributions or consolidate IRA balances into these accounts. The final rule treats as a separate recommendation how securities or investment property are to be invested after being rolled over, transferred or distributed from the plan or IRA." (Shearman & Sterling LLP)
[Guidance Overview] Best Interest Contract Exemption Permits Proprietary Products and Commissioned Sales
"The BIC exemption broadly (though not universally) acts to preserve access to commissions provided that the advice is not conflicted and is in the 'best interest' of the investor.... The exemption permits advisors and financial institutions to continue to receive commissions for providing fiduciary advice, provided that the financial institution/advisor acts in the retirement investor's best interest, does not receive unreasonable compensation, observes anti-conflict policies, and makes certain required disclosures." (Mintz Levin)

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