IRA

Industry & Regulatory News
Senate Finance Committee Advances EARN Act

The Senate Finance Committee conducted a hearing today to consider the Enhancing American Retirement Now (EARN) Act. The bill was unanimously approved out of committee with one minor amendment. While text of the bill has not yet been made available, details of a summary released by the committee were previously announced. During the hearing, several other amendments were discussed and, while not included, many had broad support and could be included in the final full Senate version of the bill.

June 22 2022
Industry & Regulatory News
College Savings Rollovers to Roth IRAs Proposed

Senators Richard Burr (R-NC) and Bob Casey (D-PA) have introduced the College Savings Recovery Act, to allow families to transfer unused funds in their college savings 529 accounts into a Roth IRA. The College Savings Recovery Act was originally included as part of Senator Burr’s Boost Savings for College Act proposed in 2017.

June 17 2022
Industry & Regulatory News
IRS Issues Deadline Relief for New Mexico Victims of Wildfires and Straight-Line Winds

The IRS has issued a news release announcing the postponement of certain tax-related deadlines for victims of wildfires and straight-line winds in New Mexico. The tax relief postpones various tax filing deadlines that began April 5, 2022.

May 13 2022
Industry & Regulatory News
Legislation to Encourage 529 Plan Savings Introduced

May 3, 2022 - Senators Maggie Hassan (D-NH) and Susan Collins (R-ME) have introduced S. 4103, the Helping Parents Save for College Act. The bill would provide low- and middle-income parents with a tax credit for contributions to 529 education savings accounts by expanding the Saver’s Credit. The credit would be worth up to 50 percent of 529 account contributions, with a maximum credit of $2,000 for low-and-middle income families.

Additionally, the proposal would allow plan beneficiaries to move excess funds from the 529 account to a Roth IRA without penalty, so long as the account was maintained for a 10-year period at the time of the distribution. This would alleviate concerns of adverse tax consequences if funds are not used for college. The amount eligible for rollover to a Roth IRA is limited to the lesser of the annual Roth contribution limit or the aggregate amount contributed to the program before the five-year period ending on the date of the distribution.

May 03 2022
Industry & Regulatory News
IRS Releases Revised 2021 Publication 590-B

April 29, 2022 - The IRS has issued a revised 2021 Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs). The updated publication appears to correct several errors in the life expectancy tables found in Appendix B. The 2021 tax year publication reflects new life expectancy and distribution period tables that are applicable to distribution calendar years beginning on or after January 1, 2022.

April 29 2022
Industry & Regulatory News
DOL Launches Roundtable Discussions on Retirement

The Department of Labor (DOL) has kicked off what is to be a series of roundtable discussions on how to improve retirement security for workers. Labor Secretary Marty Walsh and Kathleen Kennedy Townsend, the Secretary’s representative for pensions and retirement, joined several state officials, trade group representatives, educators, and others in New York City to review current retirement security policies.

In the coming months, Kennedy Townsend will host similar discussions around the country to promote retirement security reform and open a dialogue between various stakeholders. Topics of focus will include encouraging automatic enrollment, improving portability of benefits as workers move from job to job, and leveraging affordable lifetime income options.

April 26 2022
Industry & Regulatory News
IRA Bankruptcy Exemption Increases

Effective April 1, 2022, the maximum aggregate bankruptcy exemption amount for IRAs increased from $1,362,800 to $1,512,350. This exemption amount is subject to cost-of-living adjustments (COLAs), having risen from an initial exemption limit of $1,000,000 as enacted within the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Public Law 109-8. The limitation is reviewed every three years and increased if COLA measures warrant. There is no maximum exemption for assets accumulated in employer-sponsored retirement plans.

April 20 2022
IRA
Industry & Regulatory News
IRS Announces Applicable Federal Rates for May 2022

The IRS has issued Revenue Ruling 2022-9, which contains the applicable federal rates (AFR) for May 2022. These rates are used for such purposes as calculating distributions from retirement savings arrangements that meet the requirements for substantially equal periodic payments (a 10 percent early distribution penalty tax exception), also referred to as “72(t) payments.”

April 19 2022
Industry & Regulatory News
House Passes Retirement Reform Proposal

The House of Representatives has passed the Securing a Strong Retirement Act of 2022 (which lawmakers are coining SECURE 2.0) by a 414-5 vote. H.R. 2954 was first introduced by House Ways and Means Committee Chairman Richard Neal (D-MA) and Ranking Member Kevin Brady (R-TX) in October 2020, and subsequently amended by the Ways and Means Committee last year. The bill now includes provisions from the Retirement Improvement and Savings Enhancement (RISE) Act that came out of the House Education and Labor Committee last November.

Several key provisions are highlighted below.

  • Requires automatic enrollment of eligible employees in 401(k) and 403(b) plans with certain exceptions and grandfathering provisions
  • Enhances the three-year small retirement plan start-up credit, with a maximum credit of 100 percent (vs. the current 50 percent) for employers with no more than 50 employees, and phasing out for employers that have between 51 and 100 employees
  • Provides a new credit for employer contributions to defined contribution plans of up to $1,000 per employee
  • Enhances the saver’s credit by replacing the three-tier formula with a single 50 percent credit percentage on contributions up to $2,000, with phase outs beginning at certain AGI thresholds
  • Increases the age for required minimum distributions (RMDs) from age 72 to age 73 in 2023, then age 74 in 2030, and finally age 75 in 2033
  • Increases the catch-up contribution limit for plan participants who have attained ages 62-64 to $10,000 ($5,000 for SIMPLE plans)
  • Clarifies pooled employer plan (PEP) trustee duties by indicating that any fiduciary of a pooled employer plan may be responsible for collecting contributions
  • Permits 403(b) plans to participate in multiple employer plan (MEP) arrangements, including PEPs
  • Reduces from three years to two years the period of service requirement for long-term, part-time workers, and disregards pre-2021 service for vesting purposes
  • Reduces excise tax from 50 percent to 25 percent for failures to take RMDs, and further reduces tax to 10 percent if an RMD from an IRA is corrected within a certain time frame
  • Establishes a national online “lost and found” database to connect individuals with unclaimed retirement account benefits
  • Increases the cash-out limit from $5,000 to $7,000
  • Requires defined contribution plan sponsors to provide paper benefit statements at least once annually, unless a participant elects otherwise
  • Allows employers to permit employees to elect Roth treatment of both employee and employer contributions to SIMPLE and SEP plans
  • Requires catch-up contributions made to a 401(k), 403(b), or 457(b) plan to be made on a Roth basis
  • Permits defined contribution plan sponsors to provide participants with the option of receiving match contributions on a Roth basis

Additional proposals include the following.

  • Requires the IRS to promote the saver’s credit
  • Permits 403(b) plans to invest in collective investment trusts
  • Provides for indexing of IRA catch-up contributions
  • Permits certain student loan repayments to qualify for employer retirement plan matching contributions
  • Allows a small employer joining a MEP or PEP arrangement to potentially claim a small plan start-up credit during the first three years of the MEP/PEP arrangement’s existence
  • Provides a new small employer tax credit for enhanced plan eligibility for military spouses
  • Permits immediate de minimis financial incentives, in addition to a matching contribution, to individuals for contributing to a retirement plan
  • Enhances options for correcting employee salary deferral errors
  • Defers tax for certain sales of employer stock to an employee stock ownership plan sponsored by an S Corporation
  • Expands securities treated as publicly traded in the case of employee stock ownership plans
  • Removes RMD barriers for life annuities by updating applicable actuarial test
  • Reforms qualifying longevity annuity contract rules by repealing 25 percent limit for premiums and addressing spousal survivor rights after a divorce
  • Directs agencies to review reporting and disclosure requirements and report to Congress
  • Exempts defined contribution plans from sending otherwise required notices to certain individuals who are eligible but do not participate in the plan
  • Expands failures eligible for self-correction under the Employee Plans Compliance Resolution System
  • Eliminates “first day of the month” deferral election requirement for governmental 457(b) plans
  • Expands types of distributions that can be considered IRA qualified charitable distributions and excluded from income
  • Adds private sector firefighters to those qualified public safety employees eligible for distribution penalty exception at age 50
  • Excludes certain disability-related first responder retirement payments from income after retirement age
  • Clarifies the statute of limitations for taxes on prohibited transactions with regard to IRAs to include the date such return would have been due
  • Allows otherwise excludable employees from a defined contribution plan to be excluded from determination of whether top-heavy requirements are met
  • Limits repayment of qualified birth or adoption distributions to three years
  • Permits participants to self-certify that deemed hardship distribution conditions are met in certain circumstances
  • Permits participants who self-certify that they have experienced domestic abuse to withdraw the lesser of $10,000 or 50 percent of their account without being subject to the 10 percent early distribution penalty tax. The funds could be repaid to the plan over three years.
  • Makes changes to stock attribution rules under family attribution for coverage and nondiscrimination testing
  • Permits discretionary amendments that increase benefits to participants to be adopted by the due date of the employer’s tax return
  • Permits new 401(k) plans established after the end of the taxable year but before the employer’s tax filing date to receive elective deferrals up to the due date of the employee’s tax return for the initial year when they are sponsored by sole proprietors and single-member LLCs
  • Limits only the portion of an IRA used in a prohibited transaction to be treated as distributed, as opposed to current rules disqualifying and treating the entire IRA as distributed
  • Directs the DOL to review pension risk transfer interpretive bulletin relative to conditions for discharging defined benefit plan liabilities

The legislation also includes minor technical corrections to the SECURE Act. One such correction clarifies that defined benefit plan participants other than 5 percent owners who retire after the year they turn 70½ are entitled to actuarial adjustment for the period in which they do not receive distributions. Plan amendments would be required by the last day of the first plan year beginning on or after January 1, 2024 (2026 for governmental and collectively bargained plans), and would extend these new deadlines to the SECURE Act, CARES Act, and the Taxpayer Certainty and Disaster Tax Relief Act.

The bill will now head to the Senate for consideration. Senator Patty Murray (D-WA) who chairs the Senate HELP committee indicated that she and ranking member Senator Burr intend to advance companion legislation later in the spring.

March 30 2022
Industry & Regulatory News
Washington Pulse: U.S. House Passes Significant Retirement Bill

The U.S. House of Representatives passed the Securing a Strong Retirement Act of 2022 (SSRA) by a 414-5 vote on March 29, 2022. H.R. 2954 (also commonly referred to as “SECURE 2.0”) contains over 50 retirement plan provisions—nearly double the number as the original Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. The U.S. Senate is expected to take up a similar bipartisan bill later this year, which could result in the need for a conference committee to reconcile differences between the two bills.

April 13 2022