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<< Older News  |  September 25, 2020

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All News > Rollovers

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Isolating IRA Basis for Tax Efficient Roth IRA Conversions
Nerd's Eye View Link to more items from this source
Sept. 2, 2020

"Despite the intricacies of reporting Roth conversions from Traditional IRAs with pre- and post-tax funding, converting Traditional IRA accounts can make sense ... Since IRA-to-plan rollovers are restricted to pre-tax dollars, such rollovers can essentially serve to reduce the pre-tax balance of a Traditional IRA, maximizing the after-tax balance available for the Roth conversion. Importantly, rolling funds back into an IRA from an employer plan, after completing a Roth conversion, should not be done until after the calendar year in which the Roth conversion was carried out, as doing so would result in the basis of the rollover to be included in the converted amount."

Tags: IRAs  •  Rollovers

IRS Issues Proposed Regs for Qualified Plan Loan Offsets
Morgan Lewis Link to more items from this source
[Guidance Overview]
Aug. 24, 2020

"[The proposed regulations provide] a bright-line rule to make the determination of whether a plan loan offset is a QPLO. It also allows a plan loan offset to be treated as a QPLO (and eligible for the extended rollover period) even if the participant makes loan repayments for some period of time following his or her termination of employment, provided that the plan loan offset occurs within the first year of the termination of employment."

Tags: Retirement Plan Administration  •  Rollovers

August 31 IRS Deadlines Fast Approaching
The Wagner Law Group Link to more items from this source
[Guidance Overview]
Aug. 21, 2020

"Individuals who received required minimum distributions during 2020 have until August 31, 2020, to roll over their payments if they wish to defer paying income taxes on those amounts. Employers have until August 31, 2020, to adopt amendments to suspend safe harbor employer contributions to their defined contribution 401(k) plans even if their annual notices did not reserve the right to reduce or suspend such contributions or they are not operating at an economic loss."

Tags: 401(k) Plans  •  Coronavirus (COVID-19)  •  Required Minimum Distributions (RMDs)  •  Rollovers

Complications When Undoing Unwanted 2020 RMDs Before August 31
Nerd's Eye View Link to more items from this source
[Guidance Overview]
Aug. 20, 2020

"[W]hat happens when a client took an in-kind distribution earlier this year to satisfy their required minimum distribution[?] In many instances, the value of the distributed asset may have appreciated substantially since they were distributed. If the distribution was made from an IRA, retirees must return the same property that was taken out (as if the distribution was never made in the first place), regardless of how much the value of the property increased (or decreased) in the past few months. For those who may have already (incorrectly) returned cash to try and complete a rollover of the in-kind distribution, two steps are required to 'fix' the 'problem' without any penalties."

Tags: CARES Act  •  Coronavirus (COVID-19)  •  Required Minimum Distributions (RMDs)  •  Rollovers

Text of IRS Proposed Regs: Rollover Rules for Qualified Plan Loan Offset Amounts
Internal Revenue Service [IRS] Link to more items from this source
[Official Guidance]
Aug. 17, 2020

"This document sets forth proposed regulations relating to amendments made to section 402(c) of the Internal Revenue Code by section 13613 of the Tax Cuts and Jobs Act, ... [which] provides an extended rollover period for a qualified plan loan offset [QPLO] ...

"These proposed regulations add Section 1.402(c)-3 to take into account changes to the rollover rules made by section 13613 of TCJA with respect to QPLO amounts.... [T]he proposed regulations confirm that a QPLO is a type of plan loan offset; accordingly, most of the general rules relating to plan loan offset amounts apply to QPLO amounts.... The proposed regulations provide examples to illustrate the interaction of the special rules for QPLOs with the general rules for plan loan offsets....

"Consistent with Section 1.402(c)-2, Q&A-9, the proposed regulations provide that a distribution of a plan loan offset amount that is an eligible rollover distribution and not a QPLO amount may be rolled over by the employee (or spousal distributee) to an eligible retirement plan ... within the 60-day period set forth in section 402(c)(3)(A). While a plan loan offset generally is subject to this 60-day rollover period, there are special rules for the waiver of the 60-day rollover deadline....

"Consistent with the amended provisions of section 402(c)(3)(C), the proposed regulations provide that a distribution of a plan loan offset amount that is an eligible rollover distribution and a QPLO amount may be rolled over by the employee (or spousal distributee) to an eligible retirement plan through the period ending on the individual's tax filing due date (including extensions) for the taxable year in which the offset is treated as distributed from a qualified employer plan....

"Consistent with Section 1.402(c)-2, Q&A-9(b), the proposed regulations provide that a plan loan offset amount is the amount by which, under plan terms governing a plan loan, an employee's accrued benefit is reduced (offset) in order to repay the loan (including the enforcement of the plan's security interest in the employee's accrued benefit). A distribution of a plan loan offset amount is an actual distribution, not a deemed distribution under section 72(p)....

"The proposed regulations provide several special rules for purposes of determining whether a plan loan offset amount is a QPLO amount....

"Taxpayers ... may rely on these proposed regulations with respect to plan loan offset amounts, including qualified plan loan offset amounts, treated as distributed on or after [the date these proposed regulations are published in the Federal Register, currently scheduled for Aug. 20, 2020]."

Tags: 401(k) Plans  •  Retirement Plan Administration  •  Retirement Plan Design  •  Rollovers

IRS Provides Guidance on 2020 Waiver of Retirement Plan Required Minimum Distributions
Frost Brown Todd LLC Link to more items from this source
[Guidance Overview]
Aug. 14, 2020

"Individuals who receive an RMD in 2020 or one or more payments that include a 2020 RMD that would be treated as part of a series of substantially equal periodic payments may rollover such distribution to an employer's retirement plan ... or to an IRA. The deadline to roll over any such distribution ... will not be before August 31, 2020 even if the distribution was made as early as January 2020.... The deadline for a beneficiary making an election for the use of either the five-year rule or the life expectancy rule in determining an RMD ... is extended one year to December 31, 2021 if the deadline is otherwise December 31, 2020. There is no similar extension if death occurs in 2020."

Tags: CARES Act  •  Coronavirus (COVID-19)  •  IRAs  •  Required Minimum Distributions (RMDs)  •  Rollovers  •  SECURE Act

Text of IRS Notice 2020-62: Safe Harbor Explanations -- Eligible Rollover Distributions (PDF)
Internal Revenue Service [IRS] Link to more items from this source
[Official Guidance]
Aug. 6, 2020

29 pages. "This notice modifies the two safe harbor explanations in Notice 2018‑74, that may be used to satisfy the requirement under Section 402(f) of the Internal Revenue Code that certain information be provided to recipients of eligible rollover distributions. The safe harbor explanations as modified by this notice take into consideration certain legislative changes, including changes related to the [SECURE Act] ... [T]his notice includes an appendix with two model safe harbor explanations: one for distributions that are not from a designated Roth account, and the other for distributions from a designated Roth account."

Tags: 401(k) Plans  •  IRAs  •  Rollovers  •  SECURE Act

DOL Reinstates Five-Part Test for Fiduciary Investment Advice
Frost Brown Todd LLC Link to more items from this source
[Guidance Overview]
Aug. 4, 2020

"Advice to rollover assets from a plan to an IRA can constitute investment advice and cause the person or institution providing investment advice to be an investment advice fiduciary and therefore, subject to the conflict of interest prohibitions. Notably, once plan money is invested in an IRA, it is then subject only to the Code's prohibited transaction provisions. While this is not the broad authority that the DOL originally sought over IRAs, the refreshed interpretation causes some rollover solicitations to be subject to the applicable fiduciary and prohibited transaction provisions of ERISA and/or the Code."

Tags: Fiduciary Duties  •  IRAs  •  Rollovers

The CARES Act: Waiver of Required Minimum Distributions
FredReish.com Link to more items from this source
[Guidance Overview]
July 30, 2020

"[T]here is an opportunity for an individual to do a rollover if the participant had already received a payout in 2020 before the adoption of the CARES Act on March 27 or if the participant receives such a payout after that date. In addition, in Notice 2020-23, the IRS has already indicated that if the 60-day rollover period would have ended on or after April 1, the rollover period is extended to July 15. In Notice 2020-51, the IRS further extended this deadline, to the later of August 31, 2020 or 60 days after the distribution." [Updated Jul. 28, 2020]

Tags: CARES Act  •  Coronavirus (COVID-19)  •  IRAs  •  Rollovers

CIEBA Comment Letter to DOL on Improving Investment Advice for Workers and Retirees -- Strengthening Protections for Rollovers (PDF)
Committee on Investment of Employee Benefit Assets Inc. [CIEBA] Link to more items from this source
[Opinion]
July 30, 2020

"CIEBA continues to believe that DOL should re-evaluate the Five Part Test, which was issued well before the proliferation of 401(k) plans. Those who market and recommend rollovers to plan participants should be fiduciaries under ERISA, and the Five Part Test should make it much more clear that rollover providers are almost invariably acting as fiduciaries in the context of the rollover."

Tags: Fiduciary Duties  •  Rollovers

IRS Provides Relief on the Waiver of 2020 Required Minimum Distributions -- with a Deadline of Aug. 31
McDonald Hopkins Link to more items from this source
[Guidance Overview]
July 23, 2020

"Generally, the amount that you can roll back into the plan or IRA under [Notice 2020-51] is the amount that would have been all or part of the 2020 RMD, if the 2020 RMD requirement had not been waived under the CARES Act.... [In] the case of 2020 distributions from IRAs that would have been RMDs, the relief ... requires the distribution to be repaid to the IRA from which it was distributed."

Tags: CARES Act  •  Coronavirus (COVID-19)  •  Required Minimum Distributions (RMDs)  •  Rollovers

DOL Proposes New 'Fiduciary Rule' and Provides Guidance for IRA Rollovers
Ice Miller LLP Link to more items from this source
[Guidance Overview]
July 21, 2020

"[P]lan sponsors should [1] carefully review investment advisory agreements and be sure to include protective clauses that prevent advisors from selling their own products or that result in the advisors realizing significant profit to the disadvantage of plan participants.... [2] review and approve any financial disclosures provided by investment advisors to participants and ensure that the language describing any potential conflicts of interest is clear and understandable to the average plan participant."

Tags: Fiduciary Duties  •  IRAs  •  Retirement Plan Investments  •  Rollovers

DOL: Rollover Recommendations May Constitute Advice; Proposes Prohibited Transaction Exemption
Shearman & Sterling LLP Link to more items from this source
[Guidance Overview]
July 15, 2020

"The DOL appears to have abandoned its efforts over the last decade to reframe the test for determining who is an investment advice fiduciary and has instead reaffirmed the five-part test.... Unresolved by the guidance are the types of relationships involving an adviser providing 'financial advice' on a regular basis.... In providing broad, principles-based relief for financial advisers' compensation arrangements, the proposed exemption differs from the DOL's historic approach to granting prohibited transaction exemptions, which generally provided relief for discrete, identified transactions."

Tags: Fiduciary Duties  •  Retirement Plan Investments  •  Rollovers

With the DOL's New Rule 95% Likely to Get Finalized, RIAs Need to Be Very Wary
RIABiz Link to more items from this source
[Opinion]
July 15, 2020

"Right now, most RIAs recommend IRA rollovers without having to jump through a lot of hoops, but DOL's 'exemption' makes a federal case out of suggesting the move away from the protection of the employer's plan.... The impact of this proposal on investment advisers (as opposed to brokers) cannot be overstated."

Tags: Fiduciary Duties  •  Retirement Plan Investments  •  Rollovers

The DOL's New Proposal to Regulate Investment Advice
Ascensus Link to more items from this source
[Guidance Overview]
July 13, 2020

"[T]he DOL now believes that a recommendation to distribute assets from an IRA or an ERISA-covered plan would be considered investment advice with respect to the first prong of the five-part test.... [D]etermining whether advice to roll over assets meets the 'regular basis' prong depends on the facts and circumstances. So the DOL could view a rollover recommendation that begins an ongoing advisory relationship as meeting the 'regular basis' prong."

Tags: Fiduciary Duties  •  Retirement Plan Investments  •  Rollovers

DOL's New Fiduciary Investment Advice Package Presents Significant Compliance Risk
Stradley Ronon Link to more items from this source
[Guidance Overview]
July 13, 2020

"[T]he DOL indicated that the first prong would encompass advice to a retirement investor as to whether to take a distribution from a plan or whether to roll out of a plan and into an IRA. This is a notable departure from the DOL's previous position ... The second prong would also be interpreted quite broadly."

Tags: Fiduciary Duties  •  Retirement Plan Investments  •  Rollovers

DOL Proposes New 'Fiduciary Rule' Exemption, Upends Longstanding Guidance on Rollover Advice
K&L Gates Link to more items from this source
[Guidance Overview]
July 8, 2020

"In the Exemption preamble, DOL now disavows the conclusion in [Advisory Opinion 2005-23A (the Deseret Letter)] ... As a result, whether one is an investment advice fiduciary under ERISA or the Code over rollover advice would depend upon whether each requirement of the five-part test is met. DOL acknowledged that not all rollover advice would be fiduciary investment advice under the five-part test."

Tags: Fiduciary Duties  •  IRAs  •  Retirement Plan Investments  •  Rollovers

Full Rollover Relief for Unwanted RMDs Under IRS Notice 2020-51
Nerd's Eye View Link to more items from this source
[Opinion]
June 25, 2020

"Ultimately, the new guidance just released by the IRS provides a fair and favorable outcome for people who took their RMDs earlier this year ... However, this is an unprecedented and potentially troubling move by the IRS, given that they do not actually have the legal authority to make this change  ... While it's unlikely that anyone will take issue with the IRS' attempt to be fair and equitable, there's no question that they stepped outside of their legal authority when issuing this notice, and that could set a troubling precedent moving forward."

Tags: Coronavirus (COVID-19)  •  IRAs  •  Required Minimum Distributions (RMDs)  •  Rollovers

Avoiding or Rolling Over Required Minimum Distributions Already Taken in 2020
Holland & Knight Link to more items from this source
Apr. 30, 2020

"Although RMDs are not eligible to be rolled over, any distribution from an IRA and/or 401(k), 403(b) or 457(b) accounts during 2020 will not be considered a RMD and thus would be eligible to be indirectly rolled over.... Another possible strategy for an RMD already received in 2020 is to roll over the RMD into a Roth IRA[.]"

Tags: Coronavirus (COVID-19)  •  Rollovers

Exiting a High-Fee 403(b) Product Using a CARES Act Distribution
403bwise Link to more items from this source
Apr. 14, 2020

"[I]ncluded in the CARES Act stimulus package may be some relief for 403(b) participants stuck in high-cost investments.... [T]he provision that permits withdrawal of up to $100,000 from a retirement plan can be used to exit a bad 403(b), and move that money to a traditional IRA with a low-cost vendor."

Tags: 403(b) Plans and Annuities  •  CARES Act  •  Coronavirus (COVID-19)  •  Retirement Plan Investments  •  Rollovers

Best Interest Standard of Care for Advisors, Part 24
FredReish.com Link to more items from this source
[Guidance Overview]
Feb. 5, 2020

"This article looks at rollover recommendations to participants in defined benefit plans and concludes that rollover 'education' may be the more practical approach."

Tags: Fiduciary Duties  •  Retirement Plan Investments  •  Rollovers

What Happens to Asset Allocation When Participants Roll 401(k) Plan Assets Into IRAs? (PDF)
Employee Benefit Research Institute [EBRI] Link to more items from this source
Jan. 3, 2020

"Even though target-date/balanced funds (TDFs) were specifically designed to make the asset allocation process automatic, assets are not being allocated the same way when they are rolled into IRAs.... Of the accounts that started with less than 10 percent of assets allocated to equities, just under half maintained a similar allocation when rolled over to IRAs. Of 401(k) plans with more than 90 percent in equities, only 30 percent still had this allocation when rolled over to IRAs."

Tags: IRAs  •  Retirement Plan Investments  •  Rollovers

Editor's Pick Differentiating Direct and Indirect IRA Rollovers from Transfers
Nerd's Eye View Link to more items from this source
Dec. 26, 2019

"[E]ach of the various ways funds can move between retirement accounts has its own distinct set of rules and requirements. Direct Rollovers are generally preferable over Indirect Rollovers, as they are subject to neither the 60-day time limit nor the 20% mandatory withholding, but do require to be reported to the IRS. On the other hand, Transfers do not need to be reported to the IRS and are used when an individual simply needs to change custodians or consolidate accounts involving the same kind of account."

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

Editor's Pick The Role of IRAs in U.S. Households' Saving for Retirement, 2019 (PDF)
Investment Company Institute [ICI] Link to more items from this source
Dec. 11, 2019

"In mid-2019, 36 percent of US households owned [IRAs]. More than eight in 10 IRA-owning households also had employer-sponsored retirement plan accumulations or had defined benefit plan coverage. All told, more than six in 10 US households had retirement plans through work or IRAs; three-quarters of near-retiree households did.... About six in 10 traditional IRA -- owning households in mid-2019 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."

Tags: IRAs  •  Rollovers

Standard of Care for Rollover Advice
Drinker Biddle Link to more items from this source
Aug. 27, 2019

"[T]he SEC standard of care for rollover recommendations differs from the DOL’s. The standards appear to be essentially the same -- a requirement to act in the customer’s best interest (keeping in mind that Reg BI will not be applicable until June 30, 2020, while the DOL rules are applicable now). However, there are two major differences[.]"

Tags: Fiduciary Duties  •  Retirement Plan Investments  •  Rollovers


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