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All News > Misc. Distribution Issues

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Are You Prepared for the Evolution of Retirement?
Kiplinger Link to more items from this source
[Opinion]
Jan. 2, 2024

"[As] people live longer, they are spending more time in retirement, which has the potential of straining resources ... Popular opinion will often suggest taking on more investment risk to grow assets, but the opposite may be true when you add in sequence of returns risks, inflation, taxes, market volatility and medical costs to the equation.... Transferring risk away from you and finding ways to move things into your control helps to prevent unforeseen problems that put your retirement at risk."

Tags: Misc. Distribution Issues  •  Retirement Plan Design

Retirement Plan Disaster Assistance May Be Available for Utah Flooding
Ascensus Link to more items from this source
[Guidance Overview]
Dec. 27, 2023

"[FEMA] issued a disaster declaration on December 23, 2023, for Utah flooding, for the incident period of May 1-May 27, 2023.... [1] Hardship distributions from employer plans ... [2] Qualified disaster recovery distributions ... [3] Recontribution of qualified home purchase distribution ... [4] Employer plan loan relief ... Additional IRS deadline relief may be provided later."

Tags: 401(k) Plans  •  Misc. Distribution Issues

Benefits of Roth IRAs for New Retirees
InsuranceNewsNet.com Link to more items from this source
Dec. 22, 2023

"[W]ith taxable income at a low point compared to their earning years, new retirees may want to consider Roth conversions for their Traditional IRA assets. With a Roth IRA, provided the account has been open for at least five years, withdrawals are tax-free.... If an investor knows they may never tap their Roth assets for spending, the Roth account still passes to heirs tax-free."

Tags: IRAs  •  Misc. Distribution Issues

Last-Minute Roth IRA Conversion Planning Tips
Morningstar Link to more items from this source
Dec. 22, 2023

"Converting a traditional IRA to a Roth IRA is accomplished with two steps: a distribution from a traditional IRA and a rollover to a Roth IRA. But, while seeming simple, the applicable rules can complicate the results. [This article covers] the key operational considerations for getting Roth IRA conversions right."

Tags: IRAs  •  Misc. Distribution Issues  •  Retirement Plan Design

Withholding Rules for Small Rollover Balances
PLANSPONSOR; free registration may be required Link to more items from this source
[Guidance Overview]
Dec. 19, 2023

"[If] total distributions to a participant in a tax year are less than $200, such distributions are not subject to the 20% mandatory withholding. Also, the plan is not required to allow participants to make a direct rollover of such amounts (though the participant may complete an indirect rollover), and no withholding notice and election is required either."

Tags: 403(b) Plans and Annuities  •  Misc. Distribution Issues  •  Rollovers

Text of 2024 IRS Form W-4P: Withholding Certificate for Periodic Pension or Annuity Payments (PDF)
Internal Revenue Service [IRS] Link to more items from this source
[Official Guidance]
Dec. 14, 2023

"Complete Form W-4P to have payers withhold the correct amount of federal income tax from your periodic pension, annuity (including commercial annuities), profit-sharing and stock bonus plan, or IRA payments."

Tags: Misc. Distribution Issues  •  Retirement Plan Administration

Text of Draft 2024 IRS Form W-4R: Withholding Certificate for Nonperiodic Payments and Eligible Rollover Distributions (PDF)
Internal Revenue Service [IRS] Link to more items from this source
[Official Guidance]
Dec. 7, 2023

"Complete Form W-4R to have payers withhold the correct amount of federal income tax from your nonperiodic payment or eligible rollover distribution from an employer retirement plan, annuity (including a commercial annuity), or individual retirement arrangement (IRA)."

Tags: Misc. Distribution Issues  •  Retirement Plan Administration

Text of Draft 2023 Instructions for IRS Form 5329: Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts (PDF)
Internal Revenue Service [IRS] Link to more items from this source
[Official Guidance]
Nov. 29, 2023

10 pages; Nov. 28, 2023. "Beginning on December 29, 2022, the 10% additional tax on early distributions will not apply to a corrective IRA distribution.... The additional tax on early distributions doesn't apply to qualified disaster distributions nor does it apply to qualified disaster recovery distribution." [Also available: Draft 2023 Form 5321 (Dec. 21, 2023)]

Tags: Misc. Distribution Issues  •  Retirement Plan Information for Employees

Supernerds Unite Against Dave Ramsey's 8% Safe Withdrawal Rate Guidance
ThinkAdvisor Link to more items from this source
[Opinion]
Nov. 27, 2023

"Ramsey doesn't appear to grasp the differences between geometric returns (what you earn in an investment) and arithmetic returns (the simple average). He also doesn't appreciate how a 100% stock portfolio increases sequence of return risk. A retiree who listened to Ramsey and followed an 8% withdrawal rule while holding a four-fund stock portfolio in the 2000s would have run out of money in as little as 13 years."

Tags: Misc. Distribution Issues  •  Retirement Plan Design

Retirement Plan Disaster Assistance May Be Available for Illinois Excessive Rainfall
Ascensus Link to more items from this source
[Guidance Overview]
Nov. 22, 2023

"[FEMA has] issued a disaster declaration ... for Illinois excessive rainfall, for the incident period of September 17- September 18, 2023.... Employers with qualified retirement plans may allow participants to take hardship distributions if they have incurred expenses and losses because of a FEMA-declared disaster, and their principal residence or place of employment at the time of the disaster is located in an area designated by FEMA as eligible for individual disaster assistance."

Tags: Misc. Distribution Issues  •  Retirement Plan Administration

Can You Safely Spend More Early in Retirement?
Morningstar Link to more items from this source
Nov. 22, 2023

"Spending aggressively can make sense for older retirees who have relatively short life expectancies, but it is not appropriate for those in their 60s.... Perhaps, though, one could apply the strategy flexibly. That is, rather than automatically withdrawing the same inflation-adjusted amount ... adjust spending according to the stock market's results. If equities perform well, stay on track. If they do not, pull back."

Tags: Misc. Distribution Issues  •  Retirement Plan Design  •  Retirement Plan Information for Employees

Draft of 2024 IRS Form 1099-R: Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, Etc. (PDF)
Internal Revenue Service [IRS] Link to more items from this source
[Official Guidance]
Nov. 21, 2023

"Generally, distributions from retirement plans (IRAs, qualified plans, section 403(b) plans, and governmental section 457(b) plans), insurance contracts, etc., are reported to recipients on Form 1099-R."

Tags: Misc. Distribution Issues  •  Reporting to Government Agencies

Confidently Boost Your Spending in Retirement with the Actuarial Approach
Ken Steiner, FSA Retired Link to more items from this source
Nov. 14, 2023

"[T]he Actuarial Approach is superior to Monte Carlo modeling for encouraging spending-hesitant households to increase spending is its ability to: distinguish between recurring vs. non-recurring expenses, anticipate reductions in expenses after the first death within the couple, and to assume lower than inflationary rates of increases in future discretionary spending."

Tags: Misc. Distribution Issues  •  Retirement Plan Design  •  Retirement Plan Information for Employees

Good News on Safe Withdrawal Rates
Morningstar Link to more items from this source
Nov. 13, 2023

"[The authors estimate that] retirees drawing down income from an investment portfolio can now afford to withdraw as much as 4.0% as an initial spending rate ... That figure is the highest safe withdrawal percentage since Morningstar began creating this research in 2021. (The highest starting safe withdrawal rate based on similar assumptions was 3.3% in 2021 and 3.8% in 2022.)"

Tags: Misc. Distribution Issues  •  Retirement Plan Design  •  Retirement Plan Information for Employees

Bucketing by Expense Type with the Actuarial Approach
Ken Steiner, FSA Retired Link to more items from this source
Nov. 8, 2023

"The Actuarial Approach ... is a dynamic, two-bucket approach that requires the household to distinguish between expenses that they consider to be either essential or discretionary. Matching the present value of future essential expenses with the present value of low-risk, or lifetime guaranteed assets is part of the Actuarial Approach's recommended Liability-Driven Investment (LDI) strategy."

Tags: Misc. Distribution Issues  •  Retirement Plan Information for Employees

Retirement Plan Disaster Distributions May Be Available for Kansas Severe Storms
Ascensus Link to more items from this source
[Guidance Overview]
Oct. 30, 2023

"[FEMA has] issued a disaster declaration ... for severe storms, straight-line winds, tornadoes, and flooding in Kansas, [which occurred July 14-21, 2023] ... Employers with qualified retirement plans may allow participants to take hardship distributions if they have incurred expenses and losses because of a FEMA-declared disaster, and their principal residence or place of employment at the time of the disaster is located in an area designated by FEMA as eligible for individual disaster assistance."

Tags: Misc. Distribution Issues  •  Retirement Plan Administration

Trust But Verify -- But Not for Hardship Distributions
DWC Link to more items from this source
[Guidance Overview]
Oct. 13, 2023

"Unless/until the IRS says otherwise, these new rules suggest sponsors can accept a self-certification that they know is straight-up incorrect.... Note that this self-certification only applies to plans that limit hardships to one of the seven listed 'safe harbor' reasons. ... [It] appears plan sponsors can take advantage of this simplification without even having to amend their plans."

Tags: 401(k) Plans  •  Misc. Distribution Issues  •  SECURE 2.0

401(k) Loans Grow as Participants Struggle with Emergency Savings
401(k) Specialist Link to more items from this source
Sept. 27, 2023

"[W]hile the current percentage of participants taking 401(k) loans increased across all age groups, average loan amounts decreased from 2022 to 2023 among all cohorts expect for participants between the ages of 50 to 59, who also had the highest loan balances."

Tags: 401(k) Plans  •  Misc. Distribution Issues

How SECURE 2.0 Impacts 403(b) Plans
Bricker Graydon Link to more items from this source
[Guidance Overview]
Sept. 22, 2023

"Effective for plan years beginning on or after January 1, 2023, 403(b) plans (other than church plans) may now participate in multiple employer plans (MEP) and pooled employer plans (PEP).... [E]ffective for plan years beginning on or after January 1, 2024 ... plan sponsors will be able to amend their 403(b) plans to allow hardship withdrawals to be made from non-elective and matching contribution sources ... in addition to elective deferral amounts[.]"

Tags: 403(b) Plans and Annuities  •  MEP/PEP  •  Misc. Distribution Issues  •  SECURE 2.0

SECURE 2.0: New Distribution Options
Varnum Link to more items from this source
[Guidance Overview]
Sept. 14, 2023

"As there are several changes and many are optional, it is important that plan sponsors take time now to decide which will be added to a retirement plan. Even though plan amendments are not immediately required, coordination with administrators, legal counsel and other service providers will help minimize the compliance risks.... [A] chart provides some of the most important information about each distribution option, including whether adding the distribution option is voluntary and when it goes into effect."

Tags: Misc. Distribution Issues  •  SECURE 2.0

The Evolution of Hardship Distributions
TRI-AD Link to more items from this source
[Guidance Overview]
Sept. 14, 2023

"Effective in 2023, a participant can self-certify that the distribution is not in excess of the amount required to satisfy the financial need, and the participant has no alternative means reasonably available to satisfy the financial need. Similar rules will also apply to distributions from a governmental 457(b) plan due to an 'unforeseeable emergency' of a participant.... For plan years beginning after December 31, 2023, 403(b) plans will now be treated the same as 401(k) plans, meaning that 403(b) plans may also allow hardship withdrawals of employer contributions and historical earnings."

Tags: 401(k) Plans  •  403(b) Plans and Annuities  •  457 Plans  •  Misc. Distribution Issues

Outside-The-Box Ideas for Continued Improvements to 401(k) Plans
Bradley Bartells, via LinkedIn Link to more items from this source
[Opinion]
Sept. 8, 2023

"SECURE and SECURE 2.0 did some amazing things to enhance and improve 401k plans. It will be years before we are able to truly understand and evaluate the impact of the various provisions on retirement accounts, but on the surface, all of these provisions are welcome improvements to 401k plans.... [Here are] few proposals to continue to improve the benefits participants will receive from their 401k accounts."

Tags: 401(k) Plans  •  Misc. Distribution Issues  •  Retirement Plan Design

If Your Home Was Damaged by a Natural Disaster, Leveraging Your Retirement May Not Be Such a Bad Idea Anymore
Benefit Resources Inc. Link to more items from this source
[Guidance Overview]
Sept. 7, 2023

"Section 331 [of SECURE 2.0] makes the following changes: [1] Exempts up to $22,000 per disaster from the federal 10% early withdrawal penalty. [2] Spreads the tax liability for the withdrawal over the course of three years, and [3] Gives the participant the opportunity to repay the money to the plan to offset the tax liability. This relief applies to qualified plans with respect to any federally declared disaster occurring on or after January 26, 2021."

Tags: 401(k) Plans  •  Misc. Distribution Issues  •  SECURE 2.0

Manage Your Financial Risks in Retirement Like an Actuary
Ken Steiner, FSA Retired Link to more items from this source
Sept. 5, 2023

"Instead of simply having faith that historical returns will continue in the future and believing your financial advisor's assessment that you have a 90% probability of not running out of money if you spend exactly $X per year, [the authors] recommend using [these steps] to better manage your financial risks in retirement.... [1] General actuarial process.... [2] Use a floor portfolio to fund essential expenses.... [3] Use conservative assumptions.... [4] Spend less."

Tags: Misc. Distribution Issues  •  Retirement Plan Design  •  Retirement Plan Information for Employees

Winding Down a ROBS Corporation and Its Plan
KLB Benefits Law Group Link to more items from this source
Aug. 31, 2023

"Several steps are required to get from Point A to completely closed down.... [1] Locate all plan records.... [2] Locate all corporate records.... [3] Get in touch with the plan's various service providers.... [4] decide how (and where) to take your distribution."

Tags: Misc. Distribution Issues  •  Retirement Plan Administration

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