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[Official Guidance] Text of IRS Instructions for 2018 Forms 1099-R and 5498: Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. (PDF)
25 pages. "What's New: ... [1] 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 recharacterized as having been made to a traditional IRA.... [2] Special rules apply to retirement plan distributions made to employees affected by certain natural disasters that occurred in 2016 and 2017." (Internal Revenue Service [IRS])
How to Deal with Improper Roth Contributions
"Option 1: Make a corrective distribution.... Option 2: Recharacterize.... Although the Tax Cuts and Jobs Act of 2017 eliminated the ability to recharacterize Roth conversions, the recharacterization option still exists for regular contributions to traditional or Roth IRAs ... Option 3: Accept the excess contributions penalty for one year and move on." (Natalie Choate, in Morningstar Advisor)
Why You Should Be Especially Careful with Future Roth Conversions
"In the past, you would have been able to 'test' the Roth waters with conversions, with the assurance that you could recharacterize those conversions by the applicable deadline, if you changed you mind.... Under the Tax Cuts and Jobs Act ... any Roth conversion that you perform on January 1, 2018 and after must remain as Roth conversions, and included in your income for the year in which the assets leave your traditional retirement account." (Appleby Retirement Dictionary)
How to Use Income Tax Withholding on IRA Distributions, and When Not To
"Using withholding saves the trouble of sending a payment to the IRS yourself.... Withheld tax is treated as if it is paid at an even rate over the year even if in fact it is all paid just before year-end. This means that withholding on an IRA distribution taken just before year-end can be used to retroactively escape underpayment penalties on earlier missed quarterly estimated payments.... Quarterly payments and withholding can be used together." (Slott Report)
The IRA Aggregation Rule: Easing RMDs, Complicating Roth Conversions
"Instead of taking a separate RMD from each IRA, you can take the total RMD for all of them from any one of the IRAs, or from across them in any way you wish.... Because total IRA balances are aggregated, it is not possible to withdraw just nondeductible contributions, ... no matter which IRA you withdraw funds from.... [A]ny distribution will be taxable in proportion to the ratio of pre-tax to post-tax funds in your aggregated IRAs." (Slott Report)
My Husband Made Me Do It: IRS Approves Reason for Waiving 60-Day IRA Rollover Deadline
"In PLR 201822033, the fact that the funds were sitting in the account uninvested and never used is a plus. But, the excuse of missing the deadline because she relied on her husband and had a 'misinformed belief' about the rules is not typical for approval." (Appleby Retirement Dictionary)
Three Misleading IRS Forms
"Form 5498 for inherited IRA ... [N]obody has the responsibility to tell the beneficiary about this [RMD] obligation.... Form 5329: Missed RMD 'shortfall' ... if you want a waiver of the penalty, you must ignore the instructions on Form 5329 itself ... file the form along with your explanation of reasonable cause and how you remedied the shortfall and you have a chance at getting an IRS waiver.... Form 1099-R: Where's my QCD? ... [T]he Form 1099-R ... will show a total ... IRA distribution ... with no mention whatsoever that any of it went to a charity, or that there even was a QCD at all." (Natalie Choate, in Morningstar Advisor)
[Guidance Overview] IRS Clarifies Federal Tax Reporting and Withholding for Escheated Funds from IRAs
"The IRA owner's ability to reclaim these monies from the state unclaimed property fund is noted in the ruling but does not figure in the analysis. For Form 1099-R reporting, the ruling does not prescribe a unique reporting code or other designation that the IRA has been escheated to the state. The ruling by its terms is inapplicable to simplified employee pensions (SEPs), SIMPLE-IRAs and deemed IRAs." (Eversheds Sutherland)
[Official Guidance] Text of IRS Rev. Rul. 2018-17: Withholding and Reporting with Respect to Payments from IRAs to State Unclaimed Property Funds (PDF)
"The payment of Individual C's interest in IRA O, a traditional IRA, to the State J unclaimed property fund, as required by State J law, is a payment from an IRA that is treated as includible in gross income ... Because Individual C has not made a withholding election with respect to the payment, a 10 percent withholding rate applies to the payment ... and Trustee Y must withhold federal income tax of $100 (10% of Individual C's $1,000 interest in IRA O).... Trustee Y must report the $1,000 distribution from IRA O ... on a 2018 Form 1099-R identifying Individual C as the recipient.... A person will not be treated as failing to comply with the withholding and reporting requirements described in this revenue ruling with respect to payments made before the earlier of January 1, 2019, or the date it becomes reasonably practicable for the person to comply with those requirements." (Internal Revenue Service [IRS])
Using Deferred Income to Fund Your Startup Business Could 'ROB' Your Future
"[T]his process is complicated and fraught with peril. If the plan is found to be discriminatory or the IRS concludes that a prohibited transaction took place, the entire arrangement will be invalidated. The result is a bill for taxes and penalties going back to the date of the initial ROBS transaction!" (Slott Report)
DOL's Fiduciary Rule is Finally Dead, or Is It?
"Plan sponsors who signed new service agreements proposed by plan service providers in response to the fiduciary rule may have more choices available to them now.... If a plan sponsor did not sign one of the proposed updated service agreements, it may still want to consider if it wants to investigate whether other terms may now be available as part of periodic due diligence to determine if its service providers continue to be prudent selections[.]" (Winstead PC)
Prohibited Transaction Rules Can Spell Trouble for Self-Directed IRAs
"[W]ith the rise of self-directed IRAs buying real estate over the past decade, and more generally the popularity of using self-directed IRAs for 'alternative' investments ... there is a growing risk that the IRS will soon increase its enforcement on IRA prohibited transactions.... [E]ven if a self-directed IRA provider affirms that it can hold a particular alternative investment, it's still the legal responsibility of the IRA owner themselves to determine if it is permissible, and avoid triggering prohibited transactions!" (Nerd's Eye View)
First Circuit Agrees That Roth IRA Can Own DISC
"The IRS argued, and previously the Tax Court had agreed, that while both the DISC and the Roth IRA were enacted for the purpose of providing tax benefits to their owners and beneficiaries, the taxpayers used these provisions to improperly sidestep the Roth IRA contribution limitations.... In a majority opinion, the First Circuit concluded that the application of the substance over form doctrine to reclassify the dividends as excess contributions was inappropriate." [Benenson v. Commissioner, No. 16-2067 (1st Cir. Apr. 6, 2018)] (RSM US)
Roth Conversion Cost Averaging and Roth 'Barbell' Strategies
"Although many popular Roth conversion strategies are no longer viable after the elimination of the recharacterization of Roth conversions, the attractiveness of recently reduced tax rates arguably makes Roth conversions even more appealing... with the caveat that it's more important than ever to consider the timing!" (Nerd's Eye View)
[Official Guidance] List of IRS-Approved Nonbank Trustees as of April 1, 2018 (PDF)
An entity that is not a bank (or an insurance company in the case of Archer Medical Savings Accounts and health savings accounts) can request to be a nonbank trustee/custodian by applying in writing and demonstrating that certain requirements will be met in order to handle any of the following fiduciary accounts: [1] Archer Medical Savings Account (MSA); [2] Health Savings Account; [3] Qualified Retirement Plan Custodial Account; [4] 403(b)(7) Custodial Account; [5] Individual Retirement Arrangement (IRA); [6] Roth IRA; [7] Deferred Compensation Plan of State & Local Government and Tax Exempt Organizations; [8] Custodial Accounts Coverdell Education Savings Account. [More information is on an IRS web page.] (Internal Revenue Service [IRS])
Individual Account Retirement Plans Have Become a Key Financial Asset Among Families That Own Them (PDF)
"[B]etween 1992 and 2016, the median amount of financial assets attributable to [individual account (IA)] plans for families owning them rose by more than half, where IA plans account for more than two-thirds of these families' financial assets (67.9 percent in 2016). This is up from 44.3 percent of financial assets in 1992." (Employee Benefit Research Institute [EBRI])
RESA's Return May Be Departing Senator Hatch's Gift to Retirement Readiness
"Many of RESA's provisions are intended to make it less complicated and less expensive to establish a plan and to reduce fiduciary exposure for employers establishing a retirement plan.... RESA includes provisions intended to lead to greater saving by retirement plan participants.... Some provisions would affect participants or beneficiaries of both employer plans and IRAs, or would in some manner connect an employer plan and an IRA." (Ascensus)
Recharacterization of Roth Conversions: Exit Stage Left in 2018
"The fact that recharacterization is no longer permitted doesn't mean that the Roth conversion isn't still a powerful tax diversification strategy. It just means that more time and consideration should be given to the potential outcome if circumstances change post-conversion. It may make more sense to wait until closer to year end when one's tax picture is more clearly defined and less likely to change substantially. Smaller conversions over several years to mitigate the risk of a large tax bill all at once is always an option as well." (HLS Retirement Consulting)
Should You Transfer Money from an IRA to an HSA?
"[T]ransferring money from an IRA to an HSA will be of limited value, except in a small handful of cases. Most other IRA owners should leave their IRA assets intact and fund their HSAs with non-IRA dollars, the better to maximize contributions to both account types and take advantage of tax-sheltered savings." (Morningstar Advisor)
Trap for the Unwary: Family Members as Investment Advisors for IRAs and Plans
"[If], for example, a mother asks her son, who is an advisor at a broker-dealer, to manage her IRA, any compensation paid to the son would be a prohibited transaction. That is, the mother is causing a family member -- a person in whom she presumably has an interest that could affect her fiduciary judgment -- to receive compensation. The consequences are harsh." (Drinker Biddle)
Can I Deduct My IRA Contribution When Covered Under My Employer's Retirement Plan?
"You are eligible to take full deduction for your Traditional IRA contribution if you are not an active participant, or married to an active participant.... [T]he rules that define who is an active participant vary among the types of employer sponsored plans, and may depend on when the contributions are made to the participant's account (under the employer sponsored plan)." (Appleby Retirement Dictionary)
Is a Roth IRA Conversion Right for You?
"You must pay income taxes on any converted funds in the year of the conversion, but there are three scenarios in which that might be a good choice. [1] You believe your tax bracket will be higher in retirement ... [2] You're far from retirement ... [3] You want to maximize your estate for your heirs[.]" (Charles Schwab)
Tax Reform and Your IRA: Five Things You Need to Know
"[1] Recharacterization of Roth IRA conversions is gone.... [2] Rothification is not ready for prime time....yet.... [3] Qualified Charitable Distributions (QCDs) are more valuable than ever.... [4] Medical expense exception to the 10% penalty is expanded.... [5] Long live the stretch IRA." (Slott Report)
[Official Guidance] IRS FAQs on Recharacterization of Roth Rollovers and Conversions
"A Roth IRA conversion made in 2017 may be recharacterized as a contribution to a traditional IRA if the recharacterization is made by October 15, 2018. A Roth IRA conversion made on or after January 1, 2018, cannot be recharacterized." [Updated Jan. 18, 2018 to clarify effective date of the Tax Cuts and Jobs Act.] (Internal Revenue Service [IRS])
[Guidance Overview] U.S. Tax Reform Impacts Roth IRA Conversions
"Some have questioned whether the new legislation permits Roth IRA conversion contributions made in 2017 to be recharacterized in 2018, given the December 31, 2017 effective date of the change.... The IRS has apparently informally stated that Roth IRA conversion contributions made in 2017 are still permitted to be recharacterized in 2018 up to the October 15, 2018 deadline, but hopefully it will issue formal guidance confirming this soon." (Morgan Lewis)
What the Tax Cuts and Jobs Act Means for Retirement Benefits
"For Roth IRA conversions in 2018 and later, there will be no option to recharacterize the conversion; all Roth conversions will be irrevocable. What's not clear yet is how the law impacts 2017 conversions." (Morningstar)
IRA Balances, Contributions, Withdrawals, and Asset Allocation Longitudinal Results 2010-2015 (PDF)
32 pages. "While the cross-sectional overall average balance increased 36.1 percent from 2010 to 2015, the increase for those IRA owners who continuously owned IRAs from 2010-2015 was 47.1 percent.... Roth IRA owners ages 25-29 were the most likely to contribute in any year at 64.1 percent, and Roth IRA owners ages 30-34 were most likely to contribute in all six years at 15.0 percent ... The overall average contribution increased each year through 2013 before a slight decline in 2014 and a small increase in 2015." (Employee Benefit Research Institute [EBRI])
The Effect of Recent Tax Law Changes on Transfers from IRAs to Charity
"Now that TCJA has substantially increased the standard deduction and has substantially slashed other individual taxpayer deductions, QCD's can be a much more beneficial means of making charitable gifts for the over age 70-1/2 taxpayer.... Generally, direct transfers from the older donor's IRA to the older donor's favorite public charities will be beneficial if the older donor has low or no mortgage interest and does not have medical expenses that substantially exceed the AGI threshold." (Bryan Cave)
How Tax Reform Changed IRA Recharacterizations
"Under the new rules, your list of recharacterization options has been trimmed from four to two. As of January 1, 2018, ... [you] may no longer recharacterize a Roth IRA conversion, from any source. It is now a one-way transaction without an 'undo' feature.... You can continue to recharacterize a regular current year IRA contribution by your tax return due date, plus extensions." (Ascensus)
IRAs, SEPs, SIMPLEs and Qualified Charitable Distributions
"Aside from the philanthropical aspect of making a [qualified charitable contribution (QCD)], a QCD is excludable from taxable income, plus it may count towards the individual's required minimum distribution (RMD) for the year, and may lower taxable income enough for the person to avoid paying additional Medicare premiums.... Where an individual has made nondeductible contributions to his or her traditional IRAs, a special rule treats amounts distributed to charities as coming first from taxable funds, instead of proportionately from taxable and nontaxable funds, as would be the case with regular distributions." (National Association of Plan Advisors [NAPA])
Retirement Assets Total $27.2 Trillion in Third Quarter 2017
"Total US retirement assets were $27.2 trillion as of September 30, 2017, up 2.3 percent from June 30, 2017. Retirement assets accounted for 35 percent of all household financial assets in the United States at the end of September 2017." (Investment Company Institute [ICI])
Navigating Pension and Annuity Payments: General Rule and Taxation Guidelines
76-slide PowerPoint presentation. Topics: [1] sources of distributions (employer contributions, employee deferrals, Roths, after-tax contributions, and rollovers); [2] restrictions on how early and how late distributions can be taken; [3] penalties on early withdrawals; [4] taxation of lump sum distributions; [5] taxation of withdrawals and partial distributions; [6] taxation of annuities and other periodic payments; [7] plan withholding and reporting; and [8] participant reporting. (Venable LLP)
Why IRA Holders Need to Scrutinize IRS Form 5498
"The major of piece of information to review on Form 5498 is the prior year-end 'fair market value' of the account (Box 5). If you are subject to taking required minimum distributions ... this is the value the IRS would look at first to figure out whether you took your full RMD.... The trouble is, Form 5498 may not arrive until after you've already filed your tax return." (Morningstar)
Tax Reform: Comparison of House and Senate Tax Cuts and Jobs Act Versions (PDF)
7-page chart provides side-by-side comparison summary of current law and the provisions of each bill that pertain to retirement and individual savings arrangements. (Ascensus)
[Guidance Overview] The DOL Fiduciary Rule: Charting a Course, Avoiding Collisions and Potential Litigation, Part 4
"[T]his Q&A addresses issues raised in the Department's recent release which provides for an 18-month Extension ... In particular, [the authors] focus on the issues the Department (and consumer groups) raised regarding the status of 'enforcement' procedures during the transition period, with an emphasis on the comments in the Release on potential implications for both regulatory enforcement and litigation during this period and beyond.... [This Q&A] will address the IRA only transactions as well as potential litigation in federal court when advice or sales are made to ERISA plans." (Carlton Fields)
Senate Passes Tax Reform; Certain Savings Arrangements Impacted
"The changes to savings arrangements that are included in the bill would affect forms, documents, and operations if the provisions become law. The major savings related changes included in the bill are described [in this article].... IRA Recharacterizations Eliminated ... Slower Cost-of-Living Adjustments for IRAs, HSAs, Archer MSAs, and the Saver Credit ... 529 Plans and ABLE Accounts ... Rollover of Offset Retirement Plan Loans ... Hardship Distributions Expanded ... Taxation of Pass-Through Income ... Special Relief for 2016 Disaster Areas ... Items Removed From Original Senate Bill." (Ascensus)
New Tax Bill: No More Roth IRA Do-Overs
"Advisors need to contact every client who did a Roth conversion in 2017, especially if it was on your recommendation. You probably told them -- and rightfully so at the time -- that they had until October 15, 2018 to undo any part or all of that conversion for any reason, even if they simply changed their mind and no longer wished to pay the tax on the conversion. The new law repeals the Roth recharacterization after 2017, which effectively means that any 2017 Roth recharacterizations must be completed by the end of this year, or your clients will be stuck with the tax bill." (Financial Planning)
The Role of IRAs in U.S. Households' Saving for Retirement, 2017 (PDF)
"More than one-third of U.S. households owned individual retirement accounts (IRAs) in 2017.... More than one-quarter of U.S. households owned traditional IRAs in 2017.... More than half of traditional IRA-owning households indicated their IRAs contained rollovers from employer-sponsored retirement plans.... Traditional IRA-owning households with rollovers cite multiple reasons for rolling over their retirement plan assets into traditional IRAs.... Only 12 percent of US households contributed to traditional or Roth IRAs in tax year 2016, and very few eligible households made catch-up contributions to traditional IRAs or Roth IRAs." (Investment Company Institute [ICI])
[Guidance Overview] DOL Extends Transition Period for Fiduciary Rule Exemptions
"During the extended Transition Period, fiduciary advisers have an obligation to give advice that adheres to 'impartial conduct standards.' These fiduciary standards require advisers to adhere to a best interest standard when making investment recommendations, charge no more than reasonable compensation for their services, and refrain from making misleading statements. Further, between now and July 1, 2019, when the exemptions' remaining conditions are scheduled to become applicable, the Department intends to complete its review under the Presidential Memorandum and decide whether to propose further changes." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
[Official Guidance] Text of EBSA Extension of Transition Period and Delay of Applicability Dates for BICE and other Prohibited Transaction Exemptions
51 pages. "This document extends 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 for 18 months. This document also delays the applicability of certain amendments to Prohibited Transaction Exemption 84-24 for the same period.... The former transition period was from June 9, 2017, to January 1, 2018. The new transition period ends on July 1, 2019, rather than on January 1, 2018. The amendments to these exemptions affect participants and beneficiaries of plans, IRA owners and fiduciaries with respect to such plans and IRAs." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
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])
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