GAO Recommends Further Guidance for Retirement Assets Escheated to States

The U.S. Government Accountability Office (GAO) has released the findings of a survey conducted to measure the effects transfers from qualified retirement plan sponsors and IRA trustees to state unclaimed property funds.

GAO was asked to study what happens after retirement assets transfer to states and to review IRS and DOL guidance to determine steps that can be taken by either agency to improve these transactions. The survey included responses from 22 states, and a variety of 401(k) service providers and IRA trustees.

GAO found that current guidance has resulted in uneven practices across service providers and trustees. To ensure the consistent administration of benefits, GAO has made three recommendations.

  1. The IRS should clarify if transfers to states are considered distributions subject to taxation and withholding requirements.
  2. The IRS should consider whether a transfer to a state is a permissible reason to extend the 60-day rollover period.
  3. The DOL should specify under what circumstances uncashed distribution checks from active qualified retirement plans may be transferred to a state.

The IRS has responded that it will work to implement the suggestions, while DOL has stated it will consider making the changes but will need to consider input from stakeholders before doing so.

The GAO released a Fast Facts summary, highlights of its findings, and the full report.



IRA Updates Nonresident Alien Tax Withholding Publication and Tax Treaties

The IRS has released the 2019 tax year version of Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities. This publication contains information on several aspects of withholding to satisfy potential tax obligations of nonresident aliens, one of which is associated with payments from retirement savings arrangements.

Such payments are subject to withholding at a 30 percent rate, unless a more favorable tax rate applies according to the tax treaty between the U.S. and the nonresident alien’s home country. To qualify for a treaty rate, the individual must provide the payor a completed Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting.

The treaty rates were formerly included in Publication 515, but are now found directly at the tax treaties page IRS website.


Congressmen Reintroduce RESA Legislation with Retirement Savings Enhancements

Representatives Ron Kind (D-WI) and Mike Kelly (R-PA) have introduced the Retirement Enhancement and Savings Act (RESA) of 2019. Versions of this legislation have been introduced in several sessions of Congress dating back to 2016, including introduction in March of 2018. In the past, this legislation has had broad bipartisan support.

RESA of 2019 includes several provisions affecting retirement, which among other things, would results in the following if enacted.

  • Greater ability for employers to participate in multiple-employer plans (MEPs)
  • Incentives for plans to offer lifetime income investments
  • Liberalized IRA provisions
  • Expanded tax credits for establishing retirement plans and implementing automatic enrollment

Watch this News for a detailed analysis on this introduced legislation.

Updated IRA Publication Notes Conversion Changes and Revised Form 1040 Reporting

The IRS has released the 2018 version of Publication 590-B, Distributions From Individual Retirement Arrangements (IRAs). This publication describes taxpayer rules for IRA distributions and is one of two IRA-specific IRS publications—Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs), is the second. The 2018 version of Publication 590-A was released in December 2018.

The What’s New section of Publication 590-B notes that it is no longer possible to recharacterize a Roth IRA conversion or a rollover of non-Roth employer-sponsored retirement plan assets to a Roth IRA. It also notes that Form 1040, U.S. Individual Income Tax Return, has been redesigned, and that Forms 1040A and 1040-EZ and some miscellaneous itemized tax deductions are no longer available.

Rules associated with IRA-based employer-sponsored retirement plans, including SIMPLE IRA or SEP plans, generally are not part of these publications, but are covered in Publication 560, Retirement Plans for Small Business.

Ascensus Transitions More Than 15,000 State Farm SEP and SIMPLE IRA Plans to Its Platform

Firms Continue Strong Partnership of Offering Products to Help Individuals Save for Retirement

Dresher, PA—Ascensus—whose technology and expertise helps millions of people save for retirement, education, and healthcare—is pleased to announce that it has completed the transition of over 15,000 State Farm SEP (Simplified Employee Pension) and SIMPLE IRA (Savings Incentive Match Plan for Employees Individual Retirement Accounts) plans to its platform. The transitioned plans contain more than 45,000 IRA accounts.

Ascensus has partnered with State Farm for the past 15+ years to provide retirement solutions in the 401(k) marketplace. The solid relationship built by the two companies over time led State Farm to entrust Ascensus with its SEP and SIMPLE IRA plans. Ascensus’ technology and commitment to service also factored heavily into State Farm’s decision.

State Farm agents will continue to sell SEP and SIMPLE IRA plans, with all new business going to the Ascensus platform.

“First and foremost, it was an honor to be selected by State Farm to jointly service their small business clients given the strong commitment to quality for which the firm is known,” states Mike Narkoff, head of Ascensus’ institutional sales. “In addition, our open-architecture SEP and SIMPLE IRA platform has garnered quite a bit of interest over the last 18 months; we believe that partnering with State Farm to service both existing and new clients offers a glimpse into the platform’s potential for growth and success.”

“It goes without saying that transitioning more than 15,000 plans required tremendous effort from both State Farm and Ascensus,” notes Scott Hintz, assistant vice president, investment planning services at State Farm. “The fact that all of the plans were in place and ready to be serviced as scheduled following the transition is a testament to the skill and dedication of the people who made it happen.”

“State Farm is looking forward to continuing to work and grow with Ascensus as we seek to help more individuals prepare for a secure retirement,” concludes Hintz.

About Ascensus

Ascensus is the largest independent recordkeeping services provider, third-party administrator, and government savings facilitator in the United States. The firm delivers technology and expertise to help millions of people save for what matters most—retirement, education, and healthcare. For more information about Ascensus, visit View career opportunities at

About State Farm®

The mission of State Farm is to help people manage the risks of everyday life, recover from the unexpected, and realize their dreams. State Farm and its affiliates are the largest providers of auto and home insurance in the United States. Its nearly 19,000 agents and approximately 65,000 employees serve approximately 83 million policies and accounts – approximately 81 million auto, fire, life, health and commercial policies and approximately 2 million bank accounts. Commercial auto insurance, along with coverage for renters, business owners, boats and motorcycles, is available. State Farm Mutual Automobile Insurance Company is the parent of the State Farm family of companies. State Farm is ranked No. 36 on the 2018 Fortune 500 list of largest companies. For more information, please visit

Steve Christenson Discusses Why it’s Prime Time for IRAs

In a recent CUInsight article, Executive Vice President Steve Christenson discusses why it is prime time for IRA deposits, and how the generations are seeking them. Each generation has unique savings characteristics that credit unions must keep in mind. “Finding the right way to reach all of these groups effectively is a key challenge. Making sure you have the expertise available is equally critical” notes Christenson. “Each generation is seeking a trusted source for financial information… As deposit products become more competitive for every age group, credit unions have the opportunity to provide a valuable service and gain long-term members and deposits.”​

IRS Releases 2019 Form 1099-R and 5498 Reporting Instruction

The IRS has released the 2019 Instructions for Forms 1099-R and 5498. These detailed instructions describe the reporting requirements for IRA and employer-sponsored retirement plan distributions, IRA contributions, rollovers, conversions, recharacterizations, and fair market values.

This follows the 2019 Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., and 2019 Form 5498, IRA Contribution Information, release earlier this month.

In addition to updating years, deadlines, figures, and guidance references, here are a few notable changes.

  • Information on how to report distributions and late rollovers (post 60-day rollovers) of retirement plan loan offset amounts that result from severance from employment or retirement plan termination.
  • Information on how to report IRA payments to state unclaimed property funds (IRA escheatment) on Form 1099-R, applicable on or after January 1, 2019.
  • A note that Forms 1099-R and 5498 can now be completed online to satisfy required reporting to recipients.

IRS Seeks Comments on SIMPLE IRA Plan Documents and Notice 98-4

The IRS has released very little guidance on SIMPLE IRA plans since the release of Notice 98-4. Scheduled to be published in tomorrow’s Federal Register is an IRS request for comments, in which the IRS seeks public input on the SIMPLE IRA plan documents and Notice 98-4. The document for which it seeks comments are Form 5304-SIMPLE, Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)—Not for Use With a Designated Financial Institution, and Form 5305-SIMPLE, Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)—for Use With a Designated Financial Institution.

Notice 98-4 contains SIMPLE IRA plan guidance that answers many general questions. Forms 5304-SIMPLE and 5305-SIMPLE are IRS model employer-level documents used to adopt SIMPLE IRA plans. Employers may elect to use the 5304-SIMPLE when a designated financial institution (i.e., the single organization where all plan contributions are forwarded) is not named, and Form 5305-SIMPLE when one is named. Notice 98-4 provides guidance on SIMPLE plans beyond that contained in Internal Revenue Code section 408(p).

Written comments are due to the IRS on or before February 4, 2019. The request for comments provides details on how to submit the comments.


House Tax Bill Would Make Several Changes to IRAs and Retirement Plans

A tax bill has emerged from the House Ways and Means Committee, extending certain expiring tax provisions, addressing provisions of 2017 tax reform legislation and several recent disaster events (hurricanes and California wildfires), and proposing additional provisions that would affect tax-advantaged retirement savings arrangements. H.R. 88, titled the “Retirement, Savings, and Other Tax Relief Act of 2018,” is being reported as having bipartisan support.

How the legislation in its current form will be received in the Senate, if passed by the House, remains to be seen, although it is known that there have previously been negotiations on retirement provisions between leaders of both congressional bodies. Control of the House of Representatives will change with the start of the 116th Congress in January 2019, resulting from the November 2018 midterm elections. Leadership of the House Ways and Means Committee—the source of this bill—will shift from Rep. Kevin Brady (R-CA) to a Democratic House leader, widely expected to be Rep. Richard Neal (D-MA).

The following provisions of this legislation would in some manner impact retirement savings arrangements.

  • Enhance retirement plan options related to distributions and repayments, plan loans, prorated tax treatment of distributions, etc., for several geographic areas recently affected by hurricanes, wildfires, typhoons, and volcanic eruptions
  • Broaden options for employers to participate in multiple employer plans (MEPs) or a similar new design known as “pooled employer plan” (PEP)
  • Extend the period within which a 401(k)-type plan may elect a safe harbor plan design
  • Make Traditional IRA contributions an option for taxpayers of any age who have earned income
  • Exempt $50,000 of aggregate retirement savings from RMD requirement (to be COLA-adjusted)
  • Allow graduate student fellowship and stipend payments to qualify as earned income for IRA purposes
  • Prohibit credit card-enabled retirement plan loan programs
  • Allow retirement plan lifetime income investments to be distributed and rolled over to another accepting retirement arrangement if the plan ceases to offer this investment option
  • Allow a higher cap (15 percent) on deferral rates in certain automatic enrollment 401(k) type plans
  • Increase the maximum tax credit for small employers that establish retirement plans (maximum of $1,500 per year)
  • Provide a tax credit incentive for employers to add automatic enrollment features to their retirement plans
  • Allow 403(b)(7) custodial accounts to retain 403(b) status even if the plan is terminated by the sponsoring employer
  • Permit recipients of military Ready Reserve compensation to make additional retirement plan salary deferrals
  • Allow certain qualified retirement plans to be established through an employer’s tax return deadline, including filing extensions
  • Provide nondiscrimination testing relief to certain defined benefit pension plans that are closed to new participants
  • Enhance the fiduciary safe harbor for employer selection of lifetime income retirement plan investments
  • Require an annual projection of potential lifetime income based on a participant’s retirement plan account balance
  • Modify certain defined benefit pension plan insurance premiums paid to the Pension Benefit Guaranty Corporation (PBGC)
  • Create a birth or adoption exemption to the 10 percent excise tax on early distributions from retirement plans

IRS Updates Acts that May Be Postponed Due to Disaster, Armed Forces Service

The IRS released an updated list of tax-related time-sensitive acts that may be postponed due to federally-declared disasters or service in the Armed Forces in Revenue Procedure 2018-58.

The revenue procedure itself does not provide for any postponements. Instead, it states that postponements under Internal Revenue Code section 7508A (referring to disasters) are contingent on IRS notices or other guidance, but that postponements of acts listed under Internal Revenue Code section 7508 (referring to service in the Armed Forces) is allowed regardless of whether the IRS issues notices or other guidance. As the regulations stand now, when an individual qualifies for relief by virtue of serving in the Armed Forces in a combat zone, the time for performing tax-related acts is not postponed. So, Revenue Procedure 2018-58 contains a list of these acts, so that individuals serving in combat zones may also receive a postponement.

A partial list of notable acts that are cited in the revenue procedure follows.


Business and Individual Tax Issues

  • Indirect rollover timing (60-day requirement) from 529 plans, ABLE accounts, Coverdell ESAs
  • Distribution of excess contributions from 529 plans
  • Filing of Form 5498-QA with the IRS
  • Distribution of excess contributions from Coverdell ESAs
  • Filing of Form 5498-ESA with the IRS


Employee Benefit Issues

  • Timing requirements for loan repayments
  • Substantially equal periodic payments timing
  • IRA contribution timing
  • Indirect rollover timing (60-day requirement) from Archer MSAs, HSAs, and qualified retirement plans
  • Filing of Form 5498-SA with the IRS
  • RMDs from qualified plans
  • Distribution of qualified plan excess deferrals, excess contributions, and excess aggregate contributions
  • Plan loan offset timing
  • Qualified plan, SEP, and SIMPLE IRA contribution deadlines
  • Filing of Form 5498 with the IRS
  • Recharacterization deadlines/timing
  • Permissible withdrawal timing for EACAs and QACAs
  • Distribution of IRA excesses
  • Form 5500, 5500-SF, Form 5500-EZ, and Form 8955-SSA filing deadlines