New SECURE and CARES Acts amendments implemented changes to how a Solo(k) plan must operate (“defaults”). We have outlined these new operational requirements in two (2) documents: a Changes & Assumptions document and Basic Plan Document (BPD) Amendment.
Senate Appropriations Committee Chairman Patrick Leahy (D-VT) has released HR 2617, the Consolidated Appropriations Act of 2023, a $1.7 trillion fiscal year 2023 omnibus appropriations bill, whose provisions will fund government operations for the fiscal year. Included in this legislation, as has been anticipated by many, is the SECURE 2.0 Act of 2022.
Congress is expected to vote this week on the Consolidated Appropriations Act of 2023 (CAA 2023), which would serve to fund the federal government for a full year. Included in the bill is a two-year extension that would allow high deductible health plans (HDHPs) to waive the deductible for telehealth and other remote care services without causing plan participants to lose the ability to contribute to a health savings account (HSA).
Planning for a comfortable retirement is a major concern among American workers— particularly among older employees, with less time left in the workforce. In fact, 64% of employees are worried about running out of money in retirement (1), and 45% of Baby Boomers have no retirement savings at all (2).
One of the simplest and most effective ways to save for retirement is through your workplace retirement plan. Many financial professionals recommend saving 10% to 15% of your total income. Yet how much you should save largely depends on your retirement goals, age, and income.
IRA owners sometimes contribute more than they are permitted. Or they may contribute only to later discover that they cannot deduct the contribution. And sometimes they simply want to take the contribution out for some other reason. Whatever the situation, IRA owners—and financial organizations—must follow detailed rules for excess removals.
The Internal Revenue Service (IRS) has released a proposed regulation reflecting statutory changes related to long-term, part-time (LTPT) employees made by the SECURE Act of 2019 (SECURE Act) and the SECURE 2.0 Act of 2022 (SECURE 2.0). This proposed regulation would amend Treasury Regulation (Treas. Reg.) 1.401(k)-5 to reflect the rules for LTPT employees, including specific eligibility and vesting requirements. The proposed regulation also provides guidance regarding employer contributions with respect to LTPT employees and the impact that LTPT employees will have on nondiscrimination, coverage testing, and top-heavy benefits.
Naming a trust your IRA beneficiary is much less common than naming one or more persons, but it is not altogether rare. Unlike a will—which essentially only identifies who will receive a decedent’s assets—a trust can set conditions or limitations for receiving the assets and identifies one or more trustees to ensure that the decedent’s wishes expressed in the trust are carried out.
But naming a trust as IRA beneficiary can also complicate the otherwise straightforward process of conveying one’s IRA assets to others after death. Here are some things that your client should consider.
The coronavirus pandemic resulted in restrictions on where and how people could meet. These limitations—including remote work requirements—made it harder for some participants to take distributions from employer-sponsored retirement plans. In response, the IRS issued temporary relief allowing spousal consent to be obtained using remote notary services. This relief was extended three times but expired on December 31, 2022. Responding to numerous requests to make the temporary provisions permanent, the IRS issued proposed regulations.
A conversion is a taxable, reportable movement of assets from either a Traditional IRA (including Traditional IRAs that hold SEP contributions) or a SIMPLE IRA (after a two-year period) to a Roth IRA.
When converting assets to a Roth IRA, the IRA owner must pay tax on all converted pretax assets in the year the assets leave the Traditional IRA or SIMPLE IRA. Although the assets are taxed, properly converted assets are not subject to the 10 percent early distribution penalty tax.
Individuals may simultaneously convert Traditional IRA assets and roll over pretax 401(k) plan assets to a Roth IRA. The transactions are relatively straightforward from a compliance perspective. Neither are subject to income restrictions or the one-per-12-month rollover rule. Both types of transactions can be done directly, which eliminates concerns over the 60-day rule. Individuals who must take required minimum distributions (RMDs) cannot convert or roll over an RMD, but once their RMD has been satisfied for the year, they may convert or roll over any remaining amounts.
SECURE 2.0 increases the RMD age from age 72 to age 73 in 2023, and then to age 75 in 2033* (or the year of retirement, if later, for certain plan participants who are not 5 percent owners). Individuals born in 1950 or earlier are unaffected by this change and must take any RMDs due for 2022 and later years.
This article is part of a multi-part series that describes the penalty-free distribution options created by SECURE 2.0
Distributions taken from qualified plans and IRAs before age 59½ are often subject to a 10 percent early distribution penalty tax. But numerous exceptions apply.
Internal Revenue Code Section 72(t) lists exceptions such as disability distributions, death distributions to beneficiaries, and substantially equal periodic payments.
Now the SECURE 2.0 Act has added several more penalty-free distribution options—including one that helps individuals pay for certain emergency expenses. We will address more options in separate installments in this series.
The SECURE 2.0 Act provides more ways for individuals to access their retirement savings and creates new exceptions to the 10 percent early distribution penalty tax. Normally, IRA owners and retirement plan participants are subject to this penalty tax if they withdraw assets before age 59½. Many exceptions already existed before SECURE 2.0.
We cover some of the new SECURE 2.0 provisions—such as those that allow distributions to be taken for certain emergency expenses and that create pension-linked emergency savings accounts—in separate articles. But here we’ll focus on several new distributable events and penalty tax exceptions that provide more alternatives for account owners.
The Senate has approved the Consolidated Appropriations Act, 2023 (CAA 2023), by a 68-29 vote. Included in this bill is the SECURE 2.0 Act of 2022.
Small business owners make hundreds of decisions a day ranging from big to small—and many decisions have some sort of effect on their company’s bottom line and overall livelihood. When it comes to the benefits package offered by the company, small business owners may also make decisions that impact the livelihood of their employees as well.
That’s a lot of pressure.
It can be tough to justify adding extra expenses to the company’s bottom line in the form of benefits, but there are a few that come with advantages for the small business owner as well, like a 401(k) plan. When it comes down to it, there are many reasons you’ll want to consider starting a 401(k) plan and benefits of doing so for both the business and the employees.
The House of Representatives has passed the Consolidated Appropriations Act of 2023, HR 2617, today with a 225-201-1 vote. Included in this bill is the SECURE 2.0 Act of 2022. Following the Senate’s approval on December 22, 2022, the bill will now be presented to the President for his signature.
The Consolidated Appropriations Act of 2023 is a $1.7 trillion fiscal year 2023 omnibus appropriations bill that contains provisions that will fund government operations for the fiscal year. The SECURE 2.0 Act is a combination of several bills that the House and Senate have been working on for months. The Securing a Strong Retirement Act of 2022 was passed by the House of Representatives earlier this year. The Senate HELP committee approved the RISE & SHINE Act, and the Senate Finance committee likewise approved the EARN Act. Attaching SECURE 2.0 to the Consolidated Appropriations Act was considered the last opportunity for passage of this retirement legislation in the current Congress.
Picture this: you’ve left your office for the last time. You’ve spent the better part of your career preparing for this exact moment and have finally reached retirement bliss. You have an open horizon stretched out in front of you—filled with relaxation, plenty of travel, time spent with the grandkids, opportunities to enjoy and explore new hobbies…your retirement looks very promising.
Now imagine those magnificent golden years being ripped away from you—and in their place, many more years spent working in that same office you just pictured yourself leaving. This nightmare is a reality for many workers, due in part to poor planning, inadequate preparation, and insufficient education on what it takes to reach true retirement readiness. One of the most misunderstood retirement basics is what really happens when you make an early withdrawal from your 401(k) plan.
An old, well-known adage says that only two things in life are guaranteed: death and taxes. While we may not have much control over the first of life’s guarantees, we can aim to fully understand and be prepared for the second, right? Unfortunately, tax time often leaves people feeling overwhelmed and unclear. Things can get especially confusing when you receive a tax form you’ve never seen or don’t know what to do with—like Form 1099-R.
As year-end approaches, many business owners begin scrambling to find ways to maximize potential tax benefits for the year. Perhaps your financial advisor suggested saving any expensive company purchases for the end of the year in a last-ditch effort to lower your profit margins and drop your business into a lower tax bracket. Or maybe you instead decided to ramp up your employees’ year-end holiday bonuses to lower your tax rate. But if you’re looking for the best way to maximize your business’s tax benefits for the year—while also making a tangible difference in your employees’ financial future—starting a 401(k) or similar retirement plan should be front and center in your mind.
There are many benefits that come along with self-employment and running your own business ; you make your own work schedule, you’re passionate about what you do, and you’re in full control—just to name a few. One advantage that may not be as prevalent in self-employment, however, is benefits.
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