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Valuation and UBTI Issues of IRA Direct-Owned Real Estate
"[D]irect-owned IRA real estate increases the likelihood of running afoul of the prohibited transaction rules. IRA owners, for instance, are prohibited from personally using their IRA-owned real estate, or performing even the smallest of repairs on the property themselves. Purchasing or leasing such properties personally is also off-limits, even when such arrangements are done as an 'arms-length' transaction at a fair market value/rate. But the list of potential challenges doesn't stop there." (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])
[Guidance Overview] IRS Regs Address Withholding on Retirement Payments Made Outside the U.S.
"[T]hese regulations address required withholding for payments made to destinations outside the United States, or made to a U.S. financial institution by a person with no U.S. address.... The proposed regulations are not intended to replace rules that apply to an eligible rollover distribution (ERD) from an employer-sponsored retirement plan... Also, these regulations do not alter the general rule that withholding may be waived for employer plan payments that are not ERDs[.]" (Ascensus)
Understanding the 'Same Property' Rule for IRAs
"For IRA-to-IRA or Roth-to-Roth 60-day rollovers, the same property received is the property that must be rolled over. These rules also apply to SIMPLE and SEP IRAs. An individual cannot receive a distribution of cash and then roll over shares of stock that he purchases with the cash or that he currently owns. If cash is distributed from an IRA, then cash must be rolled over within 60 days." (Slott Report)
2019 Investment Company Fact Book (PDF)
335 pages. "The growth of [IRAs] and defined contribution (DC) plans, particularly 401(k) plans, explains some of the increased household reliance on investment companies in the past three decades. IRAs made up 10 percent of household financial assets at year-end 2018, up from 3 percent in 1988, while DC plans have risen from 5 percent of household financial assets to 9 percent over the same period (with 401(k) plans accounting for 6 percent of household financial assets at year-end 2018)." [HTMl version published June 19, 2019.] (Investment Company Institute [ICI])
GAO Report: Retirement Savings -- Additional Data and Analysis Could Provide Insight Into Early Withdrawals
"For both IRAs and 401(k) plans, GAO was asked to examine: [1] the incidence and amount of early withdrawals; [2] factors that might lead individuals to access retirement savings early; and [3] policies and strategies that might reduce the incidence and amounts of early withdrawals.... GAO recommends that, as part of revising the Form 5500, DOL and IRS require plan sponsors to report the incidence and amount of all 401(k) plan loans that are not repaid." [GAO-19-179, pub. Mar. 28, 2019; released Apr. 29, 2019; 60 pages] (U.S. Government Accountability Office [GAO])
Tools and Tripwires Involved in Supporting Charitable Work Abroad
"A QCD is a direct transfer of funds from an IRA custodian to a qualified charity.... Likely the biggest tripwire, however, for individuals who want to participate in rebuilding and restoring the Notre Dame Cathedral or other tragedies occurring abroad is the restriction against transferring funds offshore from an IRA. To be a qualified distribution, the transfer must be made to a charity qualified to receive charitable contributions under the United States tax laws. Organizations being named in media reports as potential donees may not be eligible as they may be foreign organizations not recognized as eligible for receipt of a tax deductible charitable contribution for U.S. federal income tax purposes." (Jackson Walker)
Proposed Tweaks to the 401(k) System Are Small Ball, But Welcome
"The Secure Act ... boosts incentives for small businesses to offer their employees 401(k)s and to enable the businesses to enroll employees automatically once a plan is in place. It enables part-time workers to join 401(k)s. Also, it raises from 70-1/2 to 72 the age at which [IRAs] must be tapped.... [T]he Secure Act includes offsets for most of its $5.7 billion in new tax breaks over the next five years, and is fully paid for over a decade." (The Washington Post; subscription may be required)
[Guidance Overview] The DOL's Temporary Enforcement Policy: Potential Traps for the Unwary
"[F]or advisors who are fiduciaries, the loss of the BIC Exemption -- which permitted the receipt of 'conflicted compensation' when an advisor satisfied best interest and disclosure requirements -- is problematic. Fortunately, the DOL recognized that problem and provided relief in Field Assistance Bulletin 2018-02 ... [T]he FAB relief doesn't provide relief for prohibited transactions resulting from discretionary investment decisions.... The relief afforded by the FAB applies only to DOL and IRS enforcement of the prohibited transaction rules. It does not prevent claims by plan fiduciaries, participants or IRA owners." (Drinker Biddle)
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)
More Than Half of IRAs Owned by Those Aged 60 or Older Grew from 2012-2015 (PDF)
"80.8 percent of all Traditional and Roth IRAs in 2012 were still open in 2015 rather than closed or depleted. Of the accounts still open, 68.0 percent had higher balances by the end of 2015. The EBRI IRA Database tracked 6.1 million Traditional IRAs and 1.4 million Roth IRAs owned by those ages 60 or older -- ages at which owners are most often in their retirement years.... Only when owners reached ages 85 or older did a significantly higher percentage of accounts fail to have a positive balance after three years, either due to depletion or account closure." (Employee Benefit Research Institute [EBRI])
Why Rollover IRAs May Be a Bad Idea
"For the vast majority of 401(k) plan participants, ... it does not make sense to roll over their 401(k) balances from a prior employer into an [IRA}.... [1] Stable value funds are not available ... [2] IRA advisors may not be fiduciaries ... [3] IRA rollover = higher fees ... [4] IRA rollover balances are too small to meet minimums ... [5] Transaction fees are likely with IRAs ... [6] IRAs offer less protection from creditors and lawsuits ... [7] Loans are not available." (Lawton Retirement Plan Consultants)
What to Expect When You Do a Retirement Account Rollover
"Keep an eye on the process online and maintain any paperwork sent to you about the transfer.... [C]heck to make sure that the amount that left your old account lines up with the amount received in your new account. Consider leaving the old account open for a few weeks to collect any residual interest or dividends in the old account, then make sure those are transferred over as well. You should receive a Form 1099-R from the distributing firm the following year ... Use the paperwork and online history to make sure the transactions line up properly." (Financial Finesse)
The Retirement Plan Raiders are Back: Advisors Push for Withdrawals
"Why should retirement plan sponsors care about having their retirement plans raided by IRA salespeople? One important reason is that other retirement plan participants will pay a lot more if the individuals with the largest account balances leave their plans, since average account balances, as well as cash flow, are important drivers in recordkeeper pricing. And thus, an increasing number of plan sponsors have made conscious efforts to retain retirement plan assets." (Cammack Retirement Group)
Choosing Between a Roth IRA and a Traditional IRA Contribution
"[1] Make sure you received eligible compensation for 2018 ... [2] Check your age for traditional IRA contributions ... [3] Check your MAGI limit for eligibility for Roth IRA contributions ... [4] Check eligibility for deductibility of traditional IRA contribution ... [5] Check suitability." (Denise Appleby, via Forbes)
Maximize the Benefit of Nondeductible IRA Contributions
"There are several reasons to choose making nondeductible amounts to an IRA ... For this strategy to make sense, you need to ensure that you are not paying tax on future IRA distributions of nondeductible (previously taxed) contributions. This will require you to calculate the portion of each distribution attributable to deductible and nondeductible contributions and file Form 8606 to track contributions with your federal income tax return." (ORBA)
Move Carefully When Consolidating Your Retirement Accounts
"A typical employee who has worked for 30 years likely has switched jobs six or seven times and may have just as many former employer plans ... Consolidating can help you manage asset allocation, diversification and rebalancing, and may help reduce taxes and fees.... You might want to keep a 401(k) plan that has lower-cost institutional shares of mutual funds and access to commission-free trading, instead of rolling it into another account that doesn't include those features." (Fidelity)
Evaluating Roth and Pretax Retirement Savings Options
"There are two ways to get Roth account exposure: a Roth IRA or through a retirement plan that has a designated Roth account. While Roth IRAs have income eligibility limits, those do not apply to contributions within a 401(k) plan Pretax contributions are generally preferable for people who expect their income tax rate to decrease in retirement. Having Roth accounts may make sense for tax diversification, flexibility and as a hedge against higher tax rates." (T. Rowe Price)
IRA Owners Can Still Make 2018 IRA Contributions
"For most IRA owners, the deadline for making their 2018 IRA contributions is Monday, April 15, 2019. However, for IRA owners who live in Maine or Massachusetts, the deadline is Wednesday, April 17, 2019." (Morgan Lewis)
'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 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])
Tips for Annually Rebalancing Your Retirement Accounts
"Reestablish target allocations.... Consolidate accounts to simplify rebalancing ... Reevaluate fund selections.... Ignore market returns.... Rebalancing 401(k)s versus IRAs.... Adjust contributions.... Tolerance rebalancing." (U.S. News & World Report)
'KonMari' Your IRA
"Thrift shops around the country are reporting a large influx of donations as Americans reevaluate their homes and tidy up using the 'KonMari' method. While your retirement accounts may be a little different than your home ... [here] are 4 steps you can take to tidy up your IRA and other retirement accounts. [1] Consolidate ... [2] [R]eevaluate your investment strategy in terms of current market conditions.... [3] Review account information ... [4] Check your beneficiary form." (Slott Report)
[Official Guidance] Text of 2018 IRS Form 8606: Nondeductible IRAs (PDF)
"Complete this part only if one or more of the following apply. [1] You made nondeductible contributions to a traditional IRA for 2018. [2] You took distributions from a traditional, SEP, or SIMPLE IRA in 2018 and you made nondeductible contributions to a traditional IRA in 2018 or an earlier year.... [3] You converted part, but not all, of your traditional, SEP, and SIMPLE IRAs to Roth IRAs in 2018 and you made nondeductible contributions to a traditional IRA in 2018 or an earlier year." (Internal Revenue Service [IRS])
[Official Guidance] Text of 2018 Instructions for IRS Form 8915A: Qualified 2016 Disaster Retirement Plan Distributions and Repayments (PDF)
"Use 2018 Form 8915A if you were adversely affected by a 2016 disaster listed in Table 1 ... and you received a distribution that qualifies for favorable tax treatment.... Qualified 2016 disaster distributions can't be made in 2018. Only repayments of qualified 2016 disaster distributions can be made in 2018. You will use 2018 Form 8915A only if you are making the repayments over 3 years." (Internal Revenue Service [IRS])
What to Do if You Missed Your RMD
"There is no effect on the prior year other than you have a potential 50% penalty.... [As] soon as you discover it, you should figure out the amount you were short or whatever the RMD that was missed, and take the makeup distribution immediately. Then, of course, take you regular distribution for the year so you stay on track. And then you report that on ... Form 5329.... [Y]ou must attach a statement saying two things: number one, that I made up the shortfall, you have to show good faith that whatever I missed, I took immediately upon discovery. Then give a short explanation of why, and IRS waives the penalty in almost every case." (Morningstar Advisor)
Restoring Lawsuit Winnings to an IRA
"An IRA owner sometimes has a claim against an investment advisor or a company for losses in connection with products or services provided to the IRA.... In the context of qualified plans, a recovery on a claim like this is allowed to be paid into the plan as a 'restorative payment' ... and as such the IRS does not consider it a contribution to the plan. Therefore, it is not subject to the rules and limits applicable to plan contributions. The IRS similarly has allowed IRA owners to contribute this type of recovery to their IRAs." (Morningstar Advisor)
[Official Guidance] Text of 2018 IRS Publication 590-A: Contributions to Individual Retirement Arrangements (IRAs) (PDF)
61 pages; Dec. 21, 2018. "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 ... A conversion of a traditional IRA to a Roth IRA, and a rollover from any other eligible retirement plan to a Roth IRA, made after December 31, 2017, cannot be re-characterized as having been made to a traditional IRA." (Internal Revenue Service [IRS])
The Role of IRAs in US Households' Saving for Retirement, 2018 (PDF)
"One-third of US households owned individual retirement accounts (IRAs) in 2018.... More than one-quarter of US households owned traditional IRAs in 2018 ... Rollovers from employer-sponsored retirement plans have fueled the growth in IRAs.... Traditional IRA-owning households with rollovers cite multiple reasons for rolling over their retirement plan assets into traditional IRAs.... Although most US households were eligible to make IRA contributions, few did so." (Investment Company Institute [ICI])
Pros and Cons of Completing a Rollover Before Year-End
"[A]ny money that leaves one account must be out before December 31st, but beyond the common timeframes for rollovers, it's okay if the money doesn't transfer into the receiving account until after January 1st. One thing that's important to keep in mind for clients subject to RMDs, however, is that the custodian likely will not track that last minute change, and it will be up to the advisor to make sure to account for any year-end balance increases for the following year's RMD." (Nerd's Eye View)
What to Do with Retirement Plan Accounts After You've Left Your Employer
"Generally you cannot keep contributing to an employer-sponsored plan, such as a 401(k) or 403(b), if you have left that employer, but you do have several options when it comes to managing those savings going forward -- and they can all impact the size of your future nest egg.... [1] Do nothing ... [2] Roll into your current employer's plan ... [3] Roll into an annuity ... [4] Roll into an IRA ... [5] Cash out your retirement balance." (MassMutual)
Year-End Required Minimum Distribution Considerations
"If you have a RMD from a 401(k) plan, the RMD amount must be calculated separately. You cannot lump the amount together with another plan account or IRA.... RMD's are not eligible for a rollover.... If the account holder died during the year, the RMD must still be made." (Watkins Ross)
End-of-Year Tax Planning for IRAs, QCDs, FSAs, and 529As
"[W]hile it often takes consistent planning through the year to make the most of [tax-advantaged] accounts, the end of the year provides the opportunity to make a number of last-minute changes, not only in order optimize contributions and distributions, but potentially to avoid any unnecessary and preventable costs as well." (Nerd's Eye View)
Making Charitable Donations of Stock Instead of Cash After Tax Reform
"If you're charitably inclined and hold meaningful amounts of appreciated stock, such as shares acquired from a stock option exercise, restricted stock/RSU vesting, or ESPP purchase, donating stock instead of cash can be a smart tax-planning move.... [S]tock donations can reduce your taxes by giving you total deductions that exceed your new increased standard deduction amount." (Forbes)
House Tax Bill Would Make Several Changes to IRAs and Retirement Plans
"A tax bill has emerged from the House Ways and Means Committee, extending certain expiring tax provisions, addressing provisions of 2017 tax reform legislation and several recent disaster events (hurricanes and California wildfires), and proposing additional provisions that would affect tax-advantaged retirement savings arrangements. H.R. 88, titled the 'Retirement, Savings, and Other Tax Relief Act of 2018,' is being reported as having bipartisan support.... The following provisions of this legislation would in some manner impact retirement savings arrangements." (Ascensus)
Tips to Maximize the Tax Savings of Your QCDs and RMDs
"This year, [qualified charitable distributions (QCDs)] are more valuable than ever before. So valuable in fact, that everyone who qualifies should be making their donations through QCDs, which allow you to make charitable gifts of up to $100,000 per year directly from your IRA. An IRA check made payable to the charity will also qualify." (The Wall Street Journal; subscription may be required)
[Official Guidance] Text of IRS Notice 2018-90: Extension of Transition Relief on Withholding and Reporting with Respect to Payments from IRAs to State Unclaimed Property Funds (PDF)
"The purpose of this notice is to extend the withholding and reporting transition relief described in Rev. Rul. 2018‑17 ... that applies with respect to payments made before the earlier of January 1, 2019, or the date it becomes reasonably practicable to comply with those requirements. Relief is extended to payments made before the earlier of January 1, 2020, or the date it becomes reasonably practicable to comply with the withholding and reporting requirements described in Rev. Rul. 2018‑17." (Internal Revenue Service [IRS])
[Guidance Overview] DOL RCH Advisory Opinion Illustrates the Difficulties Inherent to Bulk IRA/Auto Portability Programs
"IRAs are individually owned investment contracts, which are under the control of the former participant -- even though they are set up by the former employer.... [T]he DOL made it clear that negative consent will not suffice to relieve the program's sponsor from the fiduciary obligations related to the decision to move the money from the IRA to the new plan.... Then there is that nasty problem of securities laws and other state laws ... The question ... is how a fiduciary which is not appointed by the individual IRA holder has any legal authority to do ANYTHING with a registered security (or even any other investment) after it is set up by the original employer, as the investments are legally owned by the former participant." (Business of Benefits)
[Guidance Overview] DOL Guidance on Auto Portability
"Concerning the ERISA implications of a plan sponsor for electing to participate in the RCH Program, the DOL indicated that choosing to have a plan participant in the RCH Program is a fiduciary decision. The decision must, therefore, be prudent and solely in the interest of plan participants and beneficiaries. The relevant plan fiduciaries must also determine that the RCH Program is a necessary service, a reasonable arrangement, and that the compensation paid to RCH is reasonable.... 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." (The Wagner Law Group)
[Official Guidance] Text of DOL Advisory Opinion 2018-01: Retirement Clearinghouse Auto-Portability Program (PDF)
"[The] portability services related to your request involve: [1] automatic rollovers of mandatory distributions ... and account balances from terminated defined contribution plans into default IRAs ... and [2] the subsequent automatic roll-in of funds in such default IRAs to an individual account plan maintained by a new employer when the IRA owner changes jobs.... [It] is the view of the Department that the plan sponsors of the former and new plans would not be acting as a fiduciary with respect to the decision to transfer the individual's default IRA into the new employer's plan.... Absent affirmative consent of the IRA owner/participant, RCH acts as a fiduciary... in deciding to transfer the individual's RCH default IRA to the individual's new employer plan.... Similarly, absent affirmative consent of the IRA owner/participant, in situations where a default IRA maintained by a third party record keeper is transferred to an RCH default IRA acting as a conduit to facilitate the transfer to a new employer's plan, RCH acts as a fiduciary ... in directing the transfer of the individual's default IRA to the RCH default IRA and subsequently to the new employer's plan." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
[Official Guidance] EBSA Invites Comments on Proposal Related to Retirement Asset Auto Portability
"[EBSA] today invited public comment on a proposed exemption related to the consolidation of small retirement savings accounts in 401(k) plans and IRAs when workers change jobs.... [ERISA] and the Internal Revenue Code of 1986 prohibit a plan or IRA fiduciary from using its discretion to cause the plan or IRA to pay the fiduciary a fee. The Department has the authority, however, to grant exemptions that are protective of and in the interests of plan participants and IRA owners. The Department looks forward to receiving input from the public, including any data or factors that it should consider as part of the exemption, including protective conditions for participants and beneficiaries.... Any such comments or requests should be sent either by e-mail ... or by FAX ... within 45 days." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
[Guidance Overview] 401(k) Deferral Limit Increases to $19,000 for 2019; IRA Limit Increases to $6,000
"The IRS today issued technical guidance detailing these items in Notice 2018‑83.... The limit on annual contributions to an IRA, which last increased in 2013, is increased from $5,500 to $6,000. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000. The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs and to claim the saver's credit all increased for 2019." (Internal Revenue Service [IRS])
Important Facts About IRAs (PDF)
16 pages. "[1] IRAs are the largest pool of assets in the US retirement market.... [2] IRAs are predominantly held by moderate-income households.... [3] Although few traditional IRA investors make contributions, those who do display persistence.... [4] Rollovers from employer-sponsored retirement plans have fueled growth in IRAs.... [5] IRA withdrawals are infrequent and mostly retirement related, and most households consult a financial professional when taking withdrawals." (Investment Company Institute [ICI])
How to Prioritize IRA and 401(k) Accounts
"[T]here are some scenarios where placing contributions in a traditional or Roth IRA ahead of your 401(k) could make sense. If you're able to save in multiple tax-advantaged accounts, getting the order of operations right matters.... Check the match.... Compare investment options and fees.... Think about timing.... Don't forget about your HSA.... It's not either/or." (U.S. News & World Report)
How U.S. Households Steward Their IRA Assets to and Through Retirement (PDF)
"Nearly 60% of households with traditional IRAs rolled over funds from employer-sponsored retirement plans into the accounts.... More than two-thirds (69%) of traditional IRA-owning households in mid-2017 said they have a strategy for managing income and assets in retirement.... More than seven in ten (71%) households owning traditional IRAs in mid-2017 and making withdrawals in tax year 2016 calculated their withdrawal amount based on the RMD rule." (Benefits Quarterly, published by the International Society of Certified Employee Benefit Specialists [ISCEBS])
Tracking Basis with IRS Form 8606
"While it's easier for IRA owners to track their basis, it becomes much more difficult for beneficiaries of inherited IRAs. That's because basis is carried over, but without adequate records, a beneficiary will have no clue whether a contribution was made before or after-tax." (Slott Report)
Recommending Rollovers in the Evolving Regulatory Environment, Part 3
"[R]egardless of which rule is being applied, to satisfy the best interest and loyalty standards, an advisor (of a broker-dealer or an RIA) must use and document a process of gathering and carefully and professionally considering the relevant information.... What are the relevant factors? ... [T]he two best sources are Regulatory Notice 13‑45 and the DOL's Best Interest Contract Exemption (BICE)." (Drinker Biddle)
How to Effectively Take Early IRA Distributions Without Penalty
"If IRA owners design their 'series' of payments in accordance with strict IRS rules, and keep taking their series payments regularly without any 'modification' until they are over age 59‑1/2 (and for at least five years), the SOSEPP payments are penalty-free.... Your clients need to get the largest possible payments allowed by IRS rules. This means they should use a single life expectancy ... the highest permitted interest rate ... [and] the amortization method[.]" (Natalie Choate, in Morningstar; free registration may be required)
Tax-Efficient Charitable Giving of Savings or Retirement Benefits
"This article discusses how savings or retirement lifetime and survivor benefits may be used to fund charitable contributions in a tax-efficient manner. These tax advantages may be offset by other considerations, tax and otherwise.... The most favorable tax consequences arise from special or demonstrative (pecuniary) bequests, which are treated like plan designations. General (pecuniary) bequests, unlike residuary bequests, may cause a mismatch between income and charitable deductions." (Albert Feuer, via SSRN)
Assessing the Recent Proposals to Reduce RMD Obligations
"[L]ife expectancy increases have not been terribly dramatic -- no more than about 2 years of joint life expectancy for a 70-something retiree.... [T]he first RMD would actually decrease only about 25 basis points -- from 3.65% of the account balance to just 3.4% instead -- or a whopping $250 of reduced RMDs per year on an account with a $100,000 balance.... [W]hat hasn't received much attention at all is a ... proposal buried in the Retirement Enhancement and Savings Act of 2018 (RESA) ... which would eliminate the stretch IRA for most non-spouse beneficiaries, who would then be subject to the far-harsher 5‑year rule instead!" (Nerd's Eye View)
Traditional IRA Investors' Activity, 2007-2016 (PDF)
88 pages. "[T]raditional IRA investors with accounts from year-end 2007 through year-end 2016 showed little reaction to the financial events. Contribution and rollover activity declined only a bit in the wake of the financial crisis.... Although account balances fell considerably following the stock market decline in 2008, the average traditional IRA balance for traditional IRA investors in all age groups with account balances in all years between 2007 and 2016 was higher at year-end 2016 than at year-end 2007." (Investment Company Institute [ICI])
Roth IRA Investors' Activity, 2007-2016 (PDF)
96 pages. "Consistent Roth IRA investors showed little reaction to the steep declines in stock values between October 2007 and March 2009, a recession (December 2007 to June 2009), and rising unemployment rates, though contribution activity did decline a bit in the wake of the financial crisis.... From 2007 to 2016, Roth IRA investors' allocation to equity holdings ... edged down.... Although account balances fell considerably following the stock market decline in 2008, the average Roth IRA balance for consistent Roth IRA investors aged 27 to 69 in 2016 was higher at year-end 2009 than at year-end 2007." (Investment Company Institute [ICI])
Managing a Year-of-Death RMD in an Inherited IRA
"The minute Mother died Junior owned her account. It was transferred to him automatically. But the IRA provider's records still showed only Mother's name on the account. The IRA provider's paperwork had to catch up with what had already happened: It had to change its records to show that Junior now owns this money.... An IRA-to-IRA transfer is not a rollover. An IRA-to-IRA transfer is a nonevent for minimum distribution purposes or any other purpose. It's not reportable to the IRS, either as a distribution from the old IRA or as a contribution to the new IRA." (Morningstar Advisor)
October 15 Deadline to Recharacterize 2017 IRA Contributions and Conversions
"A recharacterization is a tax-free transfer of funds from one kind of IRA to another.... The Tax Cuts and Jobs Act does away with recharacterization for conversions done in 2018 and later, but the IRS has made it clear that 2017 conversions can still be recharacterized." (Slott Report)
How an Indirect Retirement Account Rollover Can Go Wrong and How to Avoid It
"[An individual received] a full distribution from her traditional IRA because the mutual fund it was invested in had been closed by the fund company.... [T]he fund company withheld 10% for federal income taxes.... To avoid taxes and penalties on the amount withheld, she will need to come up with that 10% amount to make the indirect rollover a complete rollover. Otherwise, she will incur taxes and penalties for the amount withheld that won't get into the new IRA within the 60 day deadline." (Financial Finesse)
IRS Issues Guidance on New UBTI Calculation with Potential IRA Effects
"The change in effect for 2018 and future taxable years requires that UBTI be reported when taxable business earnings reach $1,000, but is not offset by net losses of one or more UBTI-generating lines of business -- in this case, UBTI-generating business interests held within an IRA. Note however, that only IRAs that hold interests in multiple businesses generating UBTI would potentially be affected. Such business interests are among the less common IRA investments, and generally are held in IRAs administered by nonbank trustees or by trust departments." (Ascensus)
IRA Balances, Contributions, Rollovers, Withdrawals, and Asset Allocation, 2016 Update (PDF)
48 pages. "Just under 11 percent of all accounts in the database received a contribution in 2016 ... Rollovers to IRAs in 2016, regardless of the source, amounted to over 16 times more than the total contributions in the database.... 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 rules.... [A]mong owners under age 60, fewer than 12 percent of any age group had a withdrawal." (Employee Benefit Research Institute [EBRI])
[Guidance Overview] States May Escheat IRAs, But Who Gets the Tax Bill? (PDF)
"[Rev. Rul. 2018-17 states] that the escheat of a traditional individual retirement account or annuity over to a state unclaimed property fund will now be subject to federal tax withholding and reporting. Escheat will be treated as a 'designated distribution' to the IRA owner subject to withholding as a nonperiodic distribution at a 10 percent rate absent a withholding election by the IRA owner, and reporting on Form 1099-R." (Eversheds Sutherland, via Law360)
Changes to State Mandatory IRAs Help Employers Comply (PDF)
"Oregon recently indicated plans to integrate employer Form 5500 filings with its own registration program starting in December 2018.... [T]he governor of Illinois amended its Secure Choice program, changing the retirement law from saying employers 'shall' offer Secure Choice to 'may.' This seems to take away the mandate entirely." (Lockton)
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