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Roth IRAs: Favored for Annual Contributions, Neglected for Rollovers from Company Plans
"The tax on moving funds into a Roth IRA may be sharply reduced by making a series of partial rollovers ... [which] can prevent the taxable income on conversions from piling up into higher tax brackets. Converting just 5% or 10% of plan funds every year can convert them all over time with minimum income tax cost." (Slott Report)
[Guidance Overview] Puerto Rico Treasury Department Issues Post-Hurricane Rules for Qualified Retirement Plan and IRA Distributions and Loans
"As a result of [Administrative Determination No. 17-29], employers must decide whether to amend their plans to incorporate these special rules. Notably, in the event that the employer decides to amend the plan accordingly, AD 17-29 is silent as to which procedure a participant must followed to receive a favorable tax treatment, in the event he/she has already received Eligible Distributions within the Eligible Period prior to the effective date of AD 17-29." (Littler)
60-Day Rollovers: What Happens When Multiple Checks Have Been Issued?
"Individuals who receive multiple distributions from their IRA can generally roll over only one of the distributions as a 60-day rollover within a 12 month period.... There is one exception to this part of the rule. If an individual receives more than one check, from the same IRA, on the same day, then all distributions can be rolled over. This could happen if a custodian issues a separate check for separate investments in one IRA.... On the flip side of the 60-day rollover transaction, an individual can do as many deposits as they wish in order to complete a 60-day rollover." (Slott Report)
Employer Retirement Plans Comparison for Small Businesses, 2018 Plan Year
"This table provides a comparison of the features and benefits that apply to retirement plans that can be sponsored/adopted by small business owners. Focus on the areas that are important o the business owner, so as to help ensure that the plan that is chosen is the plan that is most suitable for the business." (Appleby's IRA Publications)
Average 401(k) and IRA Balances Climb, Hitting Record Levels
"Retirement account balances reached all-time highs for the fourth consecutive quarter. Helped by strong stock market performance, the average 401(k) and IRA balances increased 10 percent over the last year and continued to hit record levels. The average 401(k) balance rose to $99,900, while the average IRA balance climbed to $103,500." (Fidelity)
Should Roth IRA Investment Fees Be Paid Personally, or Deducted from the IRA Account?
"[Rev. Rul. 84-146] allows you to pay trustee fees, annual investment management fees (also called 'wrap fees'), but not brokerage commissions, from non-IRA funds without them being considered an additional contribution to the IRA account. Because Roth IRA assets are not touched, the ability of the account to earn tax-free income is not impaired.... Paying investment fees for traditional, non-Roth IRA accounts which will produce taxable income when distributed is more complex." (Quarles & Brady LLP)
Spousal Rollover Rules for Inherited Roth and Traditional IRAs
"Ultimately, the good news is that spousal beneficiaries have the option to make either choice, and even have flexibility about the timing -- allowing a decision to maintain an inherited stretch IRA for the spouse initially, and completing a spousal rollover later (after he/she turns age 59-1/2). Nonetheless, it's important to carefully consider the choices and trade-offs... especially since a spousal rollover, once completed, is irrevocable and cannot be undone after the fact!" (Nerd's Eye View)
October Retirement Deadlines
"Advisors should be contacting all clients where a trust inherited an IRA last year and reminding the trustee of the trust about the documentation requirement to be sure the deadline is not missed. If you are the trustee of a trust that inherited an IRA last year, you need to make sure that a copy of the trust has been provided to either the plan administrator or the IRA custodian by the October 31st deadline." (Slott Report)
401(k) and IRA Holdings in 2016: An Update from the Federal Reserve's 2016 Survey of Consumer Finances
"For working households nearing retirement with a 401(k), median combined 401(k)/IRA balances rose from $111,000 in 2013 to $135,000 in 2016. While growing balances are encouraging, $135,000 provides only $600 per month in retirement, so current saving levels are still falling short. Moreover, about half of households nearing retirement have no 401(k) assets at all, so lack of access to a plan remains an enormous problem." (Center for Retirement Research at Boston College)
An 'Exception' That Can Delay RMDs from 401(k)s
"The still-working exception does not apply to IRAs. It also doesn't apply to employer plans if an employee isn't currently working for that company.... The IRS has no official position on what exactly constitutes staying on the job. Presumably, an individual could work one hour a year and still be considered employed for this exception to the RMD rules to work.... If the worker owns more than 5% of the company the year he or she turns 70-1/2, he or she will never be able to use the still-working exception.... [F]amily aggregation rules apply in determining the percentage of ownership." (Ed Slott, via Financial Planning)
Leveraging: A Hidden Advantage of Roth 401(k) Accounts
"While no tax deduction is available for contributions to Roths, in general, distributions of both principal and earnings are tax-free. When combined with the ability for leveraging (subject to payment of unrelated business income tax (UBIT)), some interesting planning and tax saving opportunities arise. One such opportunity may be the ability to leverage a Roth account to enhance the deferral and tax-free distribution power of the Roth." (Fox Rothschild LLP)
The DOL Fiduciary Rule: Issues to Consider If You Advise IRAs
"Should a vendor be used to help obtain information about the client's existing account? ... How is the best interest analysis impacted by (a) a self-directed brokerage window in a workplace plan, (b) the plan sponsor subsidizing the current plan's administrative costs, (c) a workplace plan that does not allow the client to leave his or her assets in the plan, (d) a client that has the option to roll assets into an account at a new employer's plan and (e) whether lifetime income options are available under the existing account?" (K&L Gates LLP)
[Official Guidance] Text of IRS Publication 3125: An Important Message for Taxpayers with IRAs -- The IRS Does Not 'Approve' IRA Investments (PDF)
Rev. Sept. 2017. "If you have an Individual Retirement Arrangement (IRA), you should be alert to questionable advertisements and solicitations for 'IRS Approved' or 'IRA Approved' investments. These advertisements or solicitations, often for highly speculative or non-traditional types of investments, mislead by falsely claiming that the IRS has approved a particular investment." (Internal Revenue Service [IRS])
A Fiduciary Rule Guide for Advisors
"The rule expands the 'investment advice fiduciary' definition under [ERISA] of 1974. If this sweeping regulation (1,023 pages in length) is not stopped outright, it will automatically elevate all financial professionals who work with retirement plans or provide retirement planning advice to the level of a fiduciary, bound legally and ethically to meet the standards of that status. While the new rules are likely to have at least some impact on all financial advisors, it is expected that those who work on commission, such as brokers and insurance agents, will be impacted the most." (Financial Planning)
IRA Balances, Contributions, Rollovers, Withdrawals, and Asset Allocation: 2015 Update of the EBRI IRA Database (PDF)
44 pages. "The average IRA account balance in the database was $99,017 at year-end 2015 and the average IRA individual balance (combining all accounts owned by the individual) was $125,045.... The overall IRA withdrawal percentage was largely driven by activity among individuals ages 70-1/2 or older owning a Traditional IRA -- the group required to make withdrawals under the required minimum distribution (RMD) rules.... [A]mong owners under age 60, fewer than 12 percent of any age group had a withdrawal." (Employee Benefit Research Institute [EBRI])
Reputation Rather Than Fees Drives Most IRA-to-IRA Transfers
"16% of IRA owners switched to another firm because it was recommended by a friend or family member. This push was stronger among men (32%) than it was among women (24%).... 13% of IRA owners are about as likely to say that reputation and recommendations drew them to a specific IRA company as they are to say that they had an existing relationship with that company." (planadviser)
Replace the Stretch IRA?
"[M]ost IRA owners and beneficiaries do not benefit from the 'stretch,' because: [1] The life expectancy payout is available only if the deceased IRA owner named the individual as his 'designated beneficiary.' Many participants flub this step, causing their retirement benefits to pass to their estate rather than directly to family members.... [2] A trust named as beneficiary can qualify for the life expectancy payout under IRS rules -- but only if it meets stringent IRS requirements.... [3] [It] is actually rare for an IRA to be left to a young individual who would qualify for a multidecade payout. [4] Even when the stretch payout is an option, many beneficiaries prefer an immediate cashout over a deferred payout." (Morningstar Advisor)
Why Do People Move from One IRA Sponsor to Another?
"9 percent of all IRA owners transferred their IRA assets to another firm within the last 24 months. Most of these transfers were conducted by working Americans rather than those retired (82 percent vs. 18 percent).... [Y]ounger IRA owners (ages 40-44) are more likely to move their assets than those ages 45 or older (29 percent vs. 11 percent).... [T]he top two reasons people give for selecting another company to manage their retirement assets are relationships and recommendations." (LIMRA)
[Official Guidance] Text of DOL Proposed Extension of Transition Period and Delay of Applicability Dates for BICE and other PTEs
39 pages. "This document proposes to extend the special transition period under sections II and IX of the Best Interest Contract Exemption and section VII of the Class Exemption for Principal Transactions in Certain Assets Between Investment Advice Fiduciaries and Employee Benefit Plans and IRAs. This document also proposes to delay the applicability of certain amendments to Prohibited Transaction Exemption 84-24 for the same period.... The Department is particularly concerned that, without a delay in the applicability dates, regulated parties may incur undue expense to comply with conditions or requirements that it ultimately determines to revise or repeal. The present transition period is from June 9, 2017, to January 1, 2018. The new transition period would end on July 1, 2019.... Comments must be submitted on or before [Sept. 15, 2017]." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
[Official Guidance] IRS Publication 1220: Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G for Tax Year 2017 (PDF)
150 pages, August 2017 revision date. Includes a "First Time Filers Quick Reference Guide" with information about Form 4419, Application for Filing Information Returns Electronically (FIRE), which is used to request authorization to file Forms 1097, 1098 Series, 1099 Series, 3921, 3922, 5498 Series, 8027, 8955-SSA, 1042-S, and W-2G electronically through the Filing Information Returns Electronically (FIRE) System. Excerpt: "Allow a 45-day processing timeframe prior to the earliest information return due date." (Internal Revenue Service [IRS])
Interesting Angles on the DOL's Fiduciary Rule, Part 2
"The legal requirement that advisers make prudent recommendations and act with a duty of loyalty is well understood in the retirement plan world, but is new to IRAs." (
[Discussion] Treat Required Minimum Distribution as a Qualified Charitable Distribution?
"A 401(k) participant wants to treat her RMD for the year as a qualified charitable distribution. She is eligible for an in-service distribution, so since these rules apply only to IRA's we could transfer her money to an IRA first and she could make the charitable distribution from there. However, isn't the RMD required before the rollover to the IRA? Is there any way around this hiccup?" (BenefitsLink Message Boards)
Transferring IRA Money to a Health Savings Account
"People who still qualify to make HSA contributions can make a one-time rollover from an IRA to an HSA, which can be a good way to build up the account if you don't have other cash to contribute. You must currently have an HSA-eligible health insurance policy with a deductible of at least $1,300 for single coverage or $2,600 for family coverage. The amount you can roll over is the same as your annual HSA contribution limit[.]" (Kiplinger)
Close Is Not Enough When It Comes to the 10% Penalty
"There is an exception to the 10% early distribution penalty for IRA distributions due to an IRS levy. The Pritchards said that even though the IRA distribution was not actually due to a levy by the IRS, it was pretty close because the funds were used to pay taxes and, therefore, this exception to the 10% penalty should apply. Basically, the Pritchards argued that close was good enough. The Court disagreed[.]" [David D. Pritchard et ux. v. Comm'r, T.C. Memo. 2017-136 (July 10, 2017)] (Slott Report)
Key Rules for Non-Spouse Beneficiaries
"It is very important to check the terms of the agreement that governs the inherited retirement account to determine if the beneficiary is subject to the five-year rule or the life expectancy rule. In some cases, the beneficiary might be required to make an election by certain deadlines in order to be subject to the rule that he wants to use." (Appleby Retirement Dictionary)
Leaving an IRA to Charity
"[O]pening an inherited IRA is not necessarily easy for a charity.... [C]onsider opening a donor-advised fund run by a major financial institution, community foundation, or umbrella charity.... [Another approach is to leave all] assets including the IRA to [a personal] trust. The trust instrument states what percentage of the total trust each beneficiary is to receive and specifies that the IRA shall be used 'first' to fund the charities' shares." (Morningstar Advisor)
The Trusteed IRA vs. Using a Trust as IRA Beneficiary
"[A] trusteed IRA really doesn't provide any benefits that can't already be accomplished with a (separate) trust as beneficiary. And in fact, having a standalone trust drafted to be the beneficiary of a retirement account can provide even more flexibility, or more robust spendthrift and asset protection for future beneficiaries." (Nerd's Eye View)
So You're the New Owner of an Existing Inherited IRA
"The IRS has some complicated rules for titling inherited IRAs when there are successor beneficiaries.... The RMD calculation cannot be reset when a successor beneficiary inherits an inherited IRA.... A beneficiary can combine inherited IRA accounts that are inherited from the same individual as long as the RMDs are calculated using the same life expectancy factor." (Slott Report)
Tax Traps of Non-Conventional IRA Investments
"Advisers working with clients who wish to make non-conventional IRA investments must understand when a client might be entering a tax trap. They should know the answer to the question: When does a transaction become an unintended distribution because the IRA owner has too much control over the funds?" (Financial Planning)
Newborns Would Save $2.2 Million for Retirement with This Idea
"Any adult would be permitted to make tax-deductible contributions to any child's account, whether family, friend or stranger. Each minor would be able to receive a maximum $1,000 yearly, but contributors could spread a greater amount across multiple accounts. [The] idea also calls for the Child IRA converting to a traditional one at age 19, subject to current law. This means that additional contributions -- 2017's limit is $5,500 for people under age 50 -- would lead to even higher account balances in retirement." (CNBC)
[Official Guidance] Text of IRS Chief Counsel Memo 2017-18: Rollover of IRA Distributions from Failed Financial Institution (PDF)
"[An] IRA distribution made from a failed financial institution by the FDIC as receiver is disregarded for purposes of applying the one-rollover-per-year limitation, provided: [1] neither the failed financial institution nor the depositor initiated the distribution, and [2] no financial institution has assumed the IRAs of the failed financial institution." (Internal Revenue Service [IRS])
[Opinion] OregonSaves will Force Large Employers to Redirect Costs
"[ERIC] is disappointed that Oregon lawmakers ignored the Joint Resolution of Disapproval rescinding federal rulemaking that allowed states to create mandatory retirement plans and next week will launch a pilot of OregonSaves, a program that will eventually reach beyond what the federal law allows by imposing a compliance burden on employers who voluntarily provide a retirement plan to their employees." (The ERISA Industry Committee [ERIC])
Military Benefit Allows Widows to Put $500K Into Roth IRA at One Time
"Under the Heroes Earning Assistance and Relief Tax Act, which was introduced under President George W. Bush, the entirety of a service member's $400,000 life insurance policy, plus an additional $100,000 for a combat-related fatality, can be rolled directly into a Roth. 'If every potential penny went in, a survivor could contribute $500,000 into a Roth,' [one advisor] said. 'That means, for a young widow, their retirement could be set. But there is obviously some financial advice needed.' " (InvestmentNews)
How Do Distributions from Retirement Accounts Respond to Early Withdrawal Penalties?
"Crossing the age 59-1/2 threshold leads to a $1,600 increase in annual distributions from IRAs. People with birthdays that result in fewer months of penalty-free withdrawal in the calendar year in which they turn 59-1/2 have a much smaller increase in annual distributions between the years in which they turn 58-1/2 and 59-1/2. In contrast, those who turn 59-1/2 early in the calendar year see much sharper increases." (TIAA Institute)
Retirement Assets Total $26.1 Trillion in First Quarter 2017
"Assets in [IRAs] totaled $8.2 trillion at the end of the first quarter of 2017, an increase of 4.1 percent from the end of the fourth quarter of 2016. [DC] plan assets were $7.3 trillion at the end of the first quarter, up 3.7 percent from year-end 2016. Government [DB] plans ... held $5.5 trillion in assets as of the end of March, a 2.1 percent increase from the end of December. Private-sector DB plans held $3.0 trillion in assets at the end of the first quarter of 2017, and annuity reserves outside of retirement accounts accounted for another $2.1 trillion." (Investment Company Institute [ICI])
The IRA Investor Profile: Roth IRA Investors' Activity, 2007-2015 (PDF)
96 pages. "Forty-eight percent of consistent Roth IRA investors aged 26 or older in 2015 contributed to their Roth IRAs between tax year 2008 and tax year 2015, and about 80 percent contributed in multiple years.... Withdrawal rates rose slightly between 2008 and 2015, but still only a very small fraction of Roth IRA investors took money out of their Roth IRAs." (Investment Company Institute [ICI])
The IRA Investor Profile: Traditional IRA Investors' Activity, 2007-2015 (PDF)
88 pages. "Although relatively few traditional IRA investors contribute to their traditional IRAs in any given year, those that do contribute tend to do so in multiple years; this tendency persisted even from 2008 to 2015. Withdrawal rates rose slightly between 2008 and 2015, but still only a small fraction of younger traditional IRA investors took money out of their traditional IRAs." (Investment Company Institute [ICI])
DOL Fiduciary Rule to Take Effect -- At Least for Now
"A private fund manager will not be a fiduciary when it markets its fund to a plan committee that the fund manager reasonably believes holds or has under management and control total assets in excess of $50 million ... [T]he private fund manager [must] know or reasonably believe that: (a) the plan committee is capable of evaluating investment risks independently, both in general and with regard to the private fund's investment program and strategies; and (b) that the plan committee is a fiduciary with respect to the transaction and is exercising independent judgment in evaluating the transaction." (Schulte Roth & Zabel LLP)
The 99% Rule for Spousal Beneficiaries of Retirement Accounts
"When a spouse chooses to remain a beneficiary of an IRA, they are able to take penalty-free distributions from the account at any age and at any time.... The second option for a spouse beneficiary, and one available only to a spouse beneficiary is to ... [take] a distribution from their deceased spouse's IRA or a beneficiary IRA they inherited from the spouse and [move] the funds, either directly, or indirectly within 60 days, to their own IRA.... Once the funds are deposited into their own IRA, they are treated as if they were always in the account. There is no way, at this point, for the surviving spouse to change their mind and be treated as a beneficiary." (Slott Report)
Why Wait to Retire to Take Control of Your 401(k)?
"If you're 59-1/2 years old and still working, you have the ability to roll over money from your 401(k) into an IRA.... There are four reasons why you should consider an in-service rollover: [1] You are in control of your money.... [2] An IRA gives you more investment options to choose from.... [3] There are more safe havens for your money in an IRA.... [4] You can automatically set up your account as a multigenerational IRA (or 'stretch IRA')." (Chad Slagle, via Kiplinger)
Could a Switch to Roth Be Good for Retirement Security?
"[T]he break-even point in terms of where the tax advantages of Roth at the back end in retirement largely equal out the advantages of deferral at the front end lies at a 9.1% reduction in contributions. Beyond that point, the Roth option (and the assumed reduction in retirement savings) worsens the retirement savings shortfall -- though even assuming a 25% reduction, the shortfall deepens by a mere 2.6%." (American Society of Pension Professionals & Actuaries [ASPPA])
Most Plan Participants Who Roll Over DC Assets into IRA Seek Advice
"8 in 10 [DC] plan participants who roll their assets into an [IRA] speak to someone before performing the transaction.... DC plan participants roll over more than $400 billion annually.... The top reasons plan participants gave for rolling over their DC assets into an IRA are: [1] To gain more control over their assets; [2] Access better investment options to achieve better returns; and [3] To consolidate their portfolio." (LIMRA Secured Retirement Institute)
[Opinion] State IRA Plans Are Deeply Flawed
"There's no sense in addressing a national issue with state-by-state solutions.... State IRAs also carry unavoidable design defects.... State IRAs are inferior to 401(k)s.... Writing 50 rulebooks to do one book's work makes little sense. Also, the U.S. retirement system needs less fragmentation and more portability, not the reverse. But ignoring the problem simply won't do." (John Rekenthaler, in Morningstar Advisor)
[Guidance Overview] Oregon Board Adopts Final Rules to Implement Retirement Savings Program
"Oregon employers play a limited role under OregonSaves, consisting of: [1] collecting contributions and remitting those amounts to the Program Administrator; [2] providing information to the Program Administrator; [3] retaining notice of any employee elections or election changes for no less than three years; [4] recording participating employees' elections in their payroll system in a manner enabling accurate deductions from employee's paychecks; and [5] making clear that the employer's involvement in the program is limited to collecting contributions and remitting them to the Program Administrator." (Littler)
Senate Repeals Safe Harbors for State-Run IRA Programs
"The Senate narrowly approved a resolution Wednesday to rescind federal safe harbors for states to set up private-sector retirement programs for small businesses.... It mirrors a resolution passed by the House on Feb. 15. A similar resolution that rescinded safe harbors for cities and other large political subdivisions was passed by both chambers and signed on April 13 by President Donald Trump, who is expected to sign the state version shortly." (Pensions & Investments)
[Guidance Overview] Interesting Angles on the DOL's Fiduciary Rule, Part 45
"Financial Institutions (such as broker-dealers and IRA firms) should, between now and June 9, focus on the fiduciary processes that will be implemented by the home offices ... In a sense, the Financial Institutions will be co-fiduciaries with the advisers and, therefore, share responsibility for the recommendations that are made to the qualified accounts. As a result, Financial Institutions need to have protective policies, procedures and practices in place." (
Why the Fiduciary Rule Applies to IRAs but Not Non-ERISA 403(b)s
"IRAs are subject to the Tax Code; and Section 4975 of the Internal Revenue Code address prohibited transactions between IRAs an 'disqualified persons' including fiduciaries. The section then goes on to define to define a fiduciary to include any person designated as a fiduciary under ERISA. It is this basis that the DOL is using to affirm that its definition of what constitutes a fiduciary applies to Section 4975 of the Code as well." (PLANSPONSOR)
Understanding the Dynamics of Rollovers, Roll-Ins, and IRA Transfers
"Unlike rollover transactions, more roll-in participants discuss their decisions with their employers than with advisors, DC plan provider call centers, or others. Although the most common method of transferring from one IRA to another is by means of a self-directed online transaction, this method is strongly associated with younger owners; older owners typically have an advisor handle the transaction." (LIMRA)
[Guidance Overview] Interesting Angles on the DOL's Fiduciary Rule, Part 44
"For the rest of this year -- the 'transition period'-- most firms will use the Best Interest Contract Exemption.... Transition BICE requires that the entity and the adviser only comply with the Impartial Conduct Standards (ICS) [which] has 3 components: the best interest standard of care, only reasonable compensation, and no materially misleading statements. In effect the best interest standard of care brings the ERISA prudent man rule and duty of loyalty to IRAs. As a result, advisers and their supervisory entities need to educate themselves on the requirements of a prudent process with a duty of loyalty to the IRA owner." (
Who Contributes to Individual Retirement Accounts?
"Today, IRAs hold nearly half of all private retirement assets, but most of these funds are rollovers from 401(k)s, rather than contributions. The 14 percent of households who do contribute to IRAs include: higher-income dual-earners who also save in a 401(k); moderate-income singles or one-earner couples, often with a 401(k); and higher-income entrepreneurs with no current 401(k)." (Center for Retirement Research at Boston College)
How Should You Invest Your Roth IRA?
"Use it as an emergency fund.... Save for a short term goal.... Choose investments that complement your other retirement accounts.... Choose a more conservative mix for early retirement.... Choose more aggressive investments for long term tax-free growth.... Keep it simple." (Financial Finesse)
[Opinion] Appleby Retirement Consulting Comment Letter to IRS on Form 5498, IRA Contribution Information (PDF)
"[M]any IRA custodians refuse to report indirect Roth IRA conversions in Box 3 ... of Form 5498, and instead, report such amounts as rollover contributions in Box 2 ... IRA custodians are hesitant to apply the self-certification procedure to indirect Roth IRA conversions that miss the 60- day deadline. Even for those that are inclined to apply the self-certification procedure to indirect Roth IRA conversions that miss the 60-day deadline, they are unsure of whether such amounts should be reported in Boxes 13a, 13b and 13c." (Appleby Retirement Consulting, Inc.)
[Official Guidance] Text of IRS Publication 590-B: Distributions from IRAs (PDF)
60 pages, for use in preparing 2016 returns. "You can make only one rollover from an IRA to another (or the same) IRA in any 12-month period regardless of the number of IRAs you own. However, you can continue to make unlimited trustee-to-trustee transfers between IRAs because it is not considered a rollover.... If an RMD is required from your IRA, the trustee, custodian, or issuer that held the IRA at the end of the preceding year must either report the amount of the RMD to you, or offer to calculate it for you.... For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan ... However, these distributions are taken into account when determining the modified adjusted gross income threshold." (Internal Revenue Service [IRS])
Substance Over Form May No Longer Prevail in the Sixth Circuit (PDF)
"[T]he Sixth Circuit outright rejected the substance-over-form doctrine, and held that because Roth IRAs are able to hold DISC stock, and that by Congressional design, DISCs are all form and no substance, neither it nor the IRS has the authority to undo this transaction just because the end goal was intended to be, and resulted in, a reduction in taxes.... Outside of the Sixth Circuit, companies should tread very lightly in this area. Everyone should anticipate Congressional action or possibly IRS appeal to the Supreme Court[.]" [Summa Holdings, Inc. v. Comm'r, No. 16-1712 (6th Cir. Feb. 16, 2017)] (Groom Law Group)
Are IRAs the Future of Lifetime Income and Even Retirement Security?
"There is really quite bit of arrogance in the retirement plan marketplace, especially when it comes to dealing with IRAs. Most of us tend to actively ignore them ... The high degree of technical skill needed to maintain plans seems to engender this attitude. But it also has fostered a great deal of resistance to innovation.... IRAs, for whatever reason, are stealthily changing the retirement future. When you look closely at their structures, they can be designed to be incredibly flexible[.]" (Business of Benefits)
New Sixth Circuit Decision Blesses Aggressive Tax Planning with Roth IRA
"In view of the Sixth Circuit's decision, it would appear that other tax-advantaged companies also could be owned through Roth IRAs.... Another tax-advantaged vehicle that might be an attractive candidate for ownership by a Roth IRA is a foreign corporation that is not subject to significant tax in its home country or in the United States.... [A] taxpayer still must establish a legitimate business purpose for forming the tax advantaged vehicle." [Summa Holdings, Inc. v. Comm'r, No. 16-1712 (6th Cir. Feb. 16, 2017)] (Foley & Lardner LLP)
[Opinion] Many IRA Contracts Include Impartial Conduct Standards as an 'Implied Term'
"[T]he absence of a express term in the contract that the Impartial Conduct Standards are to be adhered to does not means that the parties to the contract cannot enforce the Impartial Conduct Standards. Rather, the Impartial Conduct Standards become implied terms of every new IRA account agreement (or IRA annuity contract) entered into on or after June 9, 2017, and become applicable to existing IRA account agreements when transactions are undertaken that remove the arrangement from grandfathered status." (Ron A. Rhoades, JD, CFP)
How to Invest in Private Equity with a Self-Directed IRA
"[1] Get familiar with the self-directed IRA guidelines.... [2] Understand the risks associated with private equity investments.... [3] Compare the costs to any potential upside of investing in private equity." (U.S. News & World Report)
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)

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