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<< Older News  |  December 5, 2020


All News > IRAs

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Text of IRS Final Regs: Unrelated Business Taxable Income Separately Computed for Each Trade or Business (PDF)
Internal Revenue Service [IRS] Link to more items from this source
[Official Guidance]
Nov. 19, 2020

135 pages. "This document contains final regulations that provide guidance on how an exempt organization subject to the unrelated business income tax determines if it has more than one unrelated trade or business, and, if so, how the exempt organization calculates unrelated business taxable income. The final regulations also clarify that the definition of 'unrelated trade or business' applies to individual retirement accounts. Additionally, the final regulations provide that inclusions of 'subpart F income' and 'global intangible low-taxed income' are treated in the same manner as dividends for purposes of determining unrelated business taxable income.... The final regulations are effective on [the date published in the Federal Register]."

Tags: Health Plan Administration  •  IRAs  •  Retirement Plan Administration

New York Creditors' Rights to Assets in Inherited IRAs, and the Proposed Harmonization of Protections for Savings and Retirement Benefits Act
Law Offices of Albert Feuer, via SSRN Link to more items from this source
Nov. 18, 2020

"The article discusses New York protections for a debtor's savings and retirement Benefits and the only Court decisions considering whether a creditor may enforce a claim against the judgment debtor's interest in an inherited IRA.... The article describes a proposed Harmonization of Protections for Savings and Retirement Benefits Act that would increase the coherence, clarity and equity of New York debtor protections for savings and retirement benefits by applying the current widely accepted paradigm that all similar benefits receive similar protections."

Tags: IRAs  •  Local Regulation  •  Retirement Plan Policy

Reducing Estimated Tax Penalties with IRA Distributions
Nerd's Eye View Link to more items from this source
Nov. 4, 2020

"[R]etirement account distributions are often made only once per year, which effectively creates a 'pay-as-you-go' loophole for taxpayers whose income consists of retirement account distributions! Because of this, advisors whose clients rely on retirement account distributions for income can help maximize savings by withholding taxes later in the year, thereby letting clients keep their money longer (and letting those funds grow in the meantime) without risk of incurring Estimated Tax Penalties."

Tags: IRAs  •  Misc. Distribution Issues

Big Changes May Be Coming to Retirement Plans
Forbes Link to more items from this source
Oct. 28, 2020

"A bipartisan bill has been introduced in the House that would make significant changes to 401(k), 403(b), IRAs and other retirement plans. From increasing the required minimum distribution (RMD) and catch-up contributions to expanding automatic enrollment and the Saver's Credit, the legislation is poised to expand retirement savings options for millions of individuals."

Tags: 401(k) Plans  •  403(b) Plans and Annuities  •  IRAs  •  Retirement Plan Policy

Text of 2020 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]
Oct. 20, 2020

Oct. 13, 2020. "[1] Qualified disaster or coronavirus-related distributions.... [2] Maximum age for traditional IRA contributions.... [3] Withdrawals in the case of a birth or adoption of a child.... [4] Increase in age for mandatory distributions.... [5] Temporary waiver of minimum required distributions." [Also available: 2020 IRS Form 5329]

Tags: CARES Act  •  Coronavirus (COVID-19)  •  IRAs  •  Misc. Distribution Issues  •  Required Minimum Distributions (RMDs)

Text of Draft Instructions for 2020 IRS Form 8606: Nondeductible IRAs (PDF)
Internal Revenue Service [IRS] Link to more items from this source
[Official Guidance]
Oct. 20, 2020

Oct. 19, 2020. "What's new ... [1] Coronavirus-related distributions.... [2] Tax relief for qualified 2018, 2019, and 2020 disaster distributions.... [3] Form 1040-NR.... [4] Modified AGI limit for Roth IRA contributions increased.... [5] Due date for contributions. " [Also available: Draft 2020 IRS Form 8606]

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

Can an Investor Make an Investment in a Startup Through an IRA?
Davis Wright Tremaine LLP Link to more items from this source
Oct. 20, 2020

"Assessing the potential for a prohibited transaction requires a thorough analysis of the facts and circumstances to determine the existence of any disqualified person(s) and whether the transaction falls within a prohibited category. Whether a prohibited transaction will occur is not always obvious, especially if it is not clear whether a conflict of interest exists (or could exist) or whether an IRA owner will receive a benefit from the transaction."

Tags: IRAs  •  Retirement Plan Investments

401(k)/IRA Holdings in 2019
Center for Retirement Research at Boston College Link to more items from this source
Oct. 13, 2020

"For working households nearing retirement with a 401(k), median combined 401(k)/IRA balances rose from $135,000 in 2016 to $144,000 in 2019. $144,000 provides a married couple with only $570 per month in retirement. The bigger problem is that only half of households have any 401(k)-related assets. The main reason for low savings is the lack of continuous coverage, so the solution is for policymakers to mandate coverage for all workers."

Tags: 401(k) Plans  •  IRAs  •  Retirement Plan Policy

IRA Custodian Not Telling IRA Owner About the 60-Day Rollover Rule Is Not a Valid Excuse for Missing the 60-Day Rollover Deadline
Appleby Retirement Consulting Inc. Link to more items from this source
[Guidance Overview]
Oct. 6, 2020

"PLR 202033008 provides valuable lessons and insight into the operational and compliance requirements of IRAs, which include the following: When it comes to IRAs, much of the responsibility for compliance with rollover rules rests with the IRA owner. The IRS is strict about applying the rollover rules; and waivers are granted under narrowly defined exceptions.... IRA owners should seek IRA advice from trained IRA professionals.... [In] addition to the unfavourable ruling which requires the amount to be included in income, the IRA owner is out of pocket for $10,000 plus any fees paid to the professional whose service was engaged to assist with requesting the PLR."

Tags: IRAs

IRS PLR Provides Lesson About the Importance of Updating Addresses for Retirement Accounts
Appleby Retirement Consulting Inc. Link to more items from this source
[Guidance Overview]
Oct. 6, 2020

"Neither the [custodian's] resignation letter nor the 1099-R issued for the distribution was forwarded to Tyrone's new address. As a result, Tyrone was not aware of the distribution until he received a CP2000 notice from the IRS.... The IRS's fee and other expenses incurred for requesting the PLR might be worth it, as it provides an assurance that the IRS would not later disqualify the rollover, as long as all other rollover requirements are satisfied. But this could have been avoided, if Tyrone had notified Custodian-D that he had moved and instructed them to update his address of record." [PLR 202023007]

Tags: IRAs

Combined 401(k) Plan and IRA Balances by Age and Time (PDF)
Employee Benefit Research Institute [EBRI] Link to more items from this source
Sept. 25, 2020

"Owning both a 401(k) plan and an individual retirement account (IRA) leads to larger balances, but missed opportunities to contribute and leakage reduce those balances."

Tags: IRAs  •  Retirement Plan Design

IRA Withdrawal Patterns in Times of Crisis (PDF)
Employee Benefit Research Institute [EBRI] Link to more items from this source
Sept. 11, 2020

Infographic. "The likelihood of an IRA withdrawal among retired households went down during the 2008 market downturn. In contrast, the share of not-yet-retired households taking withdrawals from their IRA increased in the same period."

Tags: IRAs  •  Misc. Distribution Issues

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

Traditional and Roth Individual Retirement Accounts (IRAs): A Primer (PDF)
Congressional Research Service [CRS] Link to more items from this source
[Guidance Overview]
Sept. 1, 2020

"This report explains [traditional and Roth] IRAs' eligibility requirements, contribution limits, tax deductibility of contributions, and withdrawal rules, and it provides data on the accounts' holdings. It also describes the Saver's Credit and provisions enacted after the Gulf of Mexico hurricanes in 2005, the Midwestern storms in 2008, the hurricanes in 2012 and 2017, the California wildfires in 2017, certain other federally declared disasters occurring on or after January 1, 2018, and the Coronavirus Disease 2019 (COVID-19) pandemic to exempt distributions to those affected from the 10% early withdrawal penalty." [RL34397, updated Aug. 20, 2020]

Tags: CARES Act  •  Coronavirus (COVID-19)  •  IRAs  •  Retirement Plan Design

How Does Having Both a 401(k) Plan and an IRA Change the Retirement Asset Picture?
Employee Benefit Research Institute [EBRI] Link to more items from this source
Aug. 21, 2020

"The ratio of the average combined 401(k) plan/IRA balance to the average 401(k) plan balance (of all of those having a 401(k) plan each year) was 2.48 at the end of the study.... However, many individuals with both account types did not maintain both in all years studied: Accounts were closed when individuals changed jobs or dollars were rolled over to other accounts as individuals retired."

Tags: 401(k) Plans  •  IRAs  •  Retirement Plan Design

Editor's Pick Maximizing Premium Assistance Tax Credits for Self-Employed Individuals
Nerd's Eye View Link to more items from this source
Aug. 19, 2020

"[B]ecause of the unique control that self-employed individuals have over the income and expenses of their businesses, they have a unique opportunity to make business decisions that can also help maximize their ability to receive Premium Tax Credits.... [W]hile a Solo 401(k) contribution may decrease income which both improves the PTC and reduces the Federal tax liability, the reduced income may also make the QBI deduction lower. As a result, making contributions to a Traditional IRA account instead of a Solo 401(k) could be even more beneficial, as the result would still reduce MAGI to increase the PTC, but would not reduce the QBI deduction for the self-employed individual."

Tags: 401(k) Plans  •  Health Plan Costs  •  IRAs  •  Retirement Plan Design

Editor's Pick Projected 2021 IRA and Saver's Credit Limits for 2021
Mercer Link to more items from this source
Aug. 18, 2020

"Maximum 2021 deductions for traditional IRA contributions are projected to remain at 2020 levels. Adjusted gross income (AGI) phase-out thresholds for Roth IRA contributions and a qualified plan participant's deductible traditional IRA contributions are projected to increase slightly in 2021."

Tags: IRAs  •  Retirement Plan Administration

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

IRA Withdrawal Patterns in Times of Crisis
Employee Benefit Research Institute [EBRI] Link to more items from this source
Aug. 14, 2020

"Both the share of households reporting IRA withdrawals and the average percentage of their account balances withdrawn went up between 2008 and 2010 for IRA owners ages 50–70, suggesting that during market downturns, households are more likely to withdraw too much, too fast from their IRAs. For households ages 71 and older who were subject to RMDs, the 2008 market downturn did not appear to have increased the share withdrawing from their IRAs. However, it did result in increased average withdrawals relative to account balances for those taking withdrawals in excess of the RMD."

Tags: Coronavirus (COVID-19)  •  IRAs  •  Misc. Distribution Issues

Steady Contributions Combined with Market Performance Lead to Double-Digit Rebound Across Retirement Account Balances
Fidelity Link to more items from this source
Aug. 11, 2020

"[In Q2, the] average IRA balance was $111,500, a 13% increase from last quarter and slightly higher than the average balance of $110,400 a year ago. The average 401(k) balance increased to $104,400 in Q2, a 14% increase from Q1 but down 2% from a year ago. The average 403(b) account balance increased to $91,100, an increase of 17% from last quarter and up 3% from a year ago.... More than three quarters (76%) of workers received an employer contribution in Q2, with the average employer contribution reaching $1,080."

Tags: 401(k) Plans  •  403(b) Plans and Annuities  •  IRAs

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

Congress Should Give Americans Flexibility to Keep Retirement Savings on Track
Investment Company Institute [ICI] Link to more items from this source
Aug. 3, 2020

"Congress can help American families get their retirement savings goals back on track by including the 'Temporary Coronavirus-Related Catch-Up Contribution' proposal in the next COVID-19 relief package. The proposal would allow workers who were adversely affected by COVID-19 to make additional contributions of up to $6,000 annually -- for three years beginning in 2021 -- to their retirement accounts ... The proposal would be available to qualified workers regardless of age, and would permit employers to match their employees' catch-up contributions."

Tags: 401(k) Plans  •  403(b) Plans and Annuities  •  457 Plans  •  Coronavirus (COVID-19)  •  IRAs  •  Retirement Plan Design

The CARES Act: Waiver of Required Minimum Distributions 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

Successor Beneficiary RMDs After Death of an Inherited IRA's Owner
Nerd's Eye View Link to more items from this source
[Guidance Overview]
July 29, 2020

"While Successor Beneficiaries who inherit accounts from beneficiaries taking RMDs using the 'stretch' provision will get the 10-Year Rule (from scratch), some Successor Beneficiaries (i.e., post-SECURE Act beneficiaries of Non-Eligible Designated Beneficiaries) will 'only' be able to step into the initial beneficiary's shoes, and will have to empty the balance of the IRA by the end 10-year period established by the original 10-year rule (i.e., the Non-Eligible Designated Beneficiary's 10-year window)."

Tags: IRAs  •  Required Minimum Distributions (RMDs)  •  SECURE Act

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