News Archive

Estate Planning with Retirement Plan Assets Under the SECURE Act

"[B]efore the SECURE Act, clients could often choose between leaving their retirement plan accounts to their intended beneficiaries directly or sending those accounts to a properly-drafted trust for the benefit of those heirs -- and there was no difference from an income tax perspective ... Now, there is no longer a 'one-size-fits-all' approach to estate planning with retirement plan assets."  MORE >>

Supreme Court Rules Part of DOMA Unconstitutional; Employer Action Steps Suggested

"[T]here are at least five steps that any affected employer should now be considering: [1] Stop imputing income for federal income and FICA tax purposes on health plan coverage provided for a same-sex spouse, but continue imputing income for state income tax purposes if the employee resides in a non-recognizing state; [2] Communicate the Supreme Court's decision to employees, and request that any employees in same-sex marriages that may not be known to the employer identify themselves; [3] Offer a mid-2013 enrollment right under welfare plans for same-sex spouses not previously eligible; [4] Identify all employee plan provisions that may be affected by a changed definition of the term 'spouse'; [and] [5] Identify all past and present employees who are in a same-sex marriage."

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Current Challenges and Best Practices Concerning Beneficiary Designations in Retirement and Life Insurance Plans (PDF)

2 pages. "The complexity of the rules under ERISA may, in some cases, lead to beneficiary designations that do not accurately reflect the participant's intent, and can frequently result in disputes over who is entitled to ERISA plan benefits following the death of the participant.... [E]ven when the beneficiary designation correctly indicates the participant's intent, beneficiaries may be unaware of what to do to obtain the benefit or to determine the benefit to which they are entitled.... The Council is examining this topic and intends to draft recommendations to the Secretary of Labor for consideration."

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Despite Husband's Beneficiary Designation, Second Wife Not Entitled to Annuity When Husband Never Divorced First Wife

"If the participant never divorced his first wife, then she would be his surviving spouse under the plan. As such, her status as the participant's surviving spouse would take precedence over the participant's express election of the second wife as his spouse and beneficiary. This is because the first wife never waived her rights to receive spousal benefits as required by ERISA Section 205."  MORE >>

GAO Testimony: Enhancing the Effectiveness of the Federal Government's Role in Improving Financial Literacy

14 pages. "This testimony discusses [1] the federal government's role in promoting financial literacy, including GAO's role; [2] the advantages and risks of financial literacy efforts being spread across multiple federal agencies; and [3] opportunities to enhance the effectiveness of federal financial literacy education efforts going forward. This testimony is based on prior and ongoing work, for which GAO reviewed agency budget documents, strategic plans, performance reports, websites, and other materials; convened forums of financial literacy experts; and interviewed representatives of federal agencies and selected private and nonprofit organizations." [GAO-12-636T, Apr. 26, 2012]  MORE >>

Deceased Participant's Estate Can Sue to Recover Benefits Paid to Ex-Spouse

"The Third Circuit Court of Appeals ruled that ERISA does not bar the estate of a deceased 401(k) plan participant from suing the participant's ex-spouse to recover benefits distributed to her as the named beneficiary where she previously waived the right to those benefits as part of their divorce decree. The case is the first in which a federal Court of Appeals has addressed the issue."

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Investment Costs Hit Retirees Twice

"[I]t's as critical for retirees (people spending money) to think about how costs hit their portfolios as it is for people who are still saving. In fact, you might say that by taking a bite out of both income and wealth over time, costs actually hit retirees with a 'double whammy.'"

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GAO Report: Highlights of Forum on Financial Literacy -- Strengthening Partnerships in Challenging Times

25 pages. "On October 20, 2011, GAO convened a select group of leaders and experts for a forum to discuss key issues related to financial literacy. These participants, which included representatives of federal, state, and local government agencies; academic experts; nonprofit practitioners; and representatives from the private sector, were selected to represent a range of viewpoints and draw from a variety of backgrounds." [GAO-12-299SP, Feb. 9, 2012]

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Pitfalls of Inherited IRAs

If you are the guardian of a child who inherits such an account, you should consider moving the assets into an inherited IRA for the child rather than simply withdrawing the money and paying a sizable chunk of the inheritance in taxes upfront, says William Schmidt, an estate-planning attorney at Schmidt & Federico in Boston.

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Retirement Beneficiary Designations: Getting the Right Assets to the Right People

According to the Wall Street Journal, 401ks and IRAs account for about 60 percent of the assets of U.S. households investing at least $100,000. Both state and federal laws affect to whom these assets may go, and the results can be complicated, especially when the owner of the account has been divorced and remarried.

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Recent Changes in Tax Code Allow Investors with Huge 401(k) Accounts to Turn Them into Tax-Free Income for Grandchildren's Lifetimes

This massive estate-tax break was created last year in two steps. First Congress lifted a $100,000 income restriction on who can convert a 401(k) or IRA to a Roth IRA .... Then late in the year, it raised the generation-skipping transfer tax exemption (GST) to $5 million until 2013.

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Family Feuds: The Battles Over Retirement Accounts

As the amount of money stashed in 401(k)s and individual retirement accounts has grown, more and more families are finding themselves locked in battles over who has rights to the assets, especially in cases involving divorce and remarriage.

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Article on the Plan Document Rule Under ERISA

[The target page presents the introduction to a recent comment] entitled When Happily Ever After is Not Ever After, After All: Rectifying the Plan Documents Rule Under ERISA to Benefit the Right Person.  MORE >>

GAO Report: Cost and Legal Authority for Selected Financial Literacy Programs and Activities

10 pages. "This letter provides additional information about federal financial literacy activities that were addressed in two reports to Congress issued in March 2011, Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue and List of Selected Federal Programs That Have Similar or Overlapping Objectives, Provide Similar Services, or Are Fragmented Across Government Missions. These reports were prepared in response to a statutory requirement to identify federal programs, agencies, offices, and initiatives, either within departments or governmentwide that have duplicative goals or activities." [GAO-11-781R, Jul. 13, 2011]

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GAO Report: A Federal Certification Process for Providers of Financial Literacy Information Would Pose Challenges

55 pages. "Financial literacy program evaluations are most reliable and definitive when they track participants over time, include a control group, and measure the program's impact on consumers' behavior. However, such evaluations are typically expensive, time-consuming, and methodologically challenging." [GAO-11-614, Jun. 28, 2011]

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Court Says Spouse Trumps Beneficiary Designation of Children

A federal court has granted retirement plan benefits of a deceased participant to his spouse, even though he had listed his children as beneficiaries on the plan's designation form.

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Court Denies Mother's Claim to Deceased Son's Benefits

A federal court has upheld an employer's decision to grant death benefits to the beneficiary designated by a former employee, though his mother claimed he was unduly influenced.

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Beneficiary Designations Under Qualified Plans

There have been many changes in federal pension law that have an impact on a participant's beneficiary designation form. Beneficiary forms drafted even a few years ago may be outdated and not compliant with current law.

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Long-Term Care Insurance: A Piece of the Retirement & Estate Planning Puzzle (PDF)

Specifically, the study measures attitudes towards and knowledge of long-term care insurance among Americans. The survey also explores concerns about needing extended care services, confidence in being able to pay for such services in the future, perceived methods of funding the expenses associated with long-term care, and the misperceptions about and barriers to purchasing long-term care insurance.

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GAO Report: Regulatory Coverage Generally Exists for Financial Planners, But Consumer Protection Issues Remain

51 pages. "This report examines [1] how financial planners are regulated and overseen at the federal and state levels, [2] what is known about the effectiveness of this regulation, and [3] the advantages and disadvantages of alternative regulatory approaches. To address these objectives, GAO reviewed federal and state statutes and regulations, analyzed complaint and enforcement activity, and interviewed federal and state government entities and organizations representing financial planners, various other arms of the financial services industry, and consumers." [GAO-11-235, Jan. 18, 2011]

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Child Loses Battle over 401(k) Distribution Taxes

Excerpt: A federal court has upheld a lower court ruling that the minor child of a woman who pleaded guilty to killing the child's father is liable for federal income tax on a 401(k) distribution from his father's account.

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Trends in Employee Financial Issues (PDF)

16 pages. Excerpt: The tide has shifted, and never before have we seen so many employees focused on long-term planning. In Q3 2010, more than 1 in every 4 calls into our Financial Helpline was related to retirement planning, and in total, over 60% of employee interactions involved discussions surrounding long-term planning issues. This gives us the impression that employees are beginning to regain confidence in their overall financial picture.

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How Financial Literacy and Impatience Shape Retirement Wealth and Investment Behaviors (PDF)

29 pages. Excerpt: Two competing explanations for why consumers have trouble with financial decisions are gaining momentum. One is that people are financially illiterate since they lack understanding of simple economic concepts and cannot carry out computations such as computing compound interest, which could cause them to make suboptimal financial decisions. A second is that impatience or present-bias might explain suboptimal financial decisions. That is, some people persistently choose immediate gratification instead of taking advantage of larger long-term payoffs. [Working paper no. 2010-233]  MORE >>

Americans Want More Financial Education, According to Survey

Excerpt: When asked to rank the importance of understanding their own personal finances, nearly 8 in 10 respondents (79%) gave it a 7 or above on a scale of one ('what I don't know won't hurt me') to 10 ('I feel the need to know all I can about my financial situation'), according to a press release.

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Retirement Planning Most Difficult Financial Task, According to Recent Study

Excerpt: A news release about the poll of more than 4,000 U.S. households said many investors are taking over the responsibility for their own financial planning, but many don't know enough to make informed choices.

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