IRA

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

 

 


Bill Would Resurrect myRAs, Replace Saver’s Credit With Government Match

Senate Finance Committee ranking member Ron Wyden (D-Ore) and four other Democratic senators have introduced the Encouraging Americans to Save Act (EASA). A similar bill with the same title was introduced by Senator Wyden in 2016, but did not reach the floor for a vote. The 2018 version of EASA contains the same provisions as the 2016 version, with a few minor changes.

If enacted, the bill would do the following.

  • Replace the current saver’s credit with a government-funded 50% match of up to $1,000 to be deposited directly into a 401(k), IRA, or similar account (subject to modified adjusted gross income ranges for individuals and married filers). The match would be claimed on Form 1040 or its equivalent.
  • Reestablish the myRA (Roth IRA) program, which was a President Obama initiative that was phased out in September 2017, so that the aforementioned match may be deposited into a myRA for employees who do not provide an account for the match or who provide erroneous account numbers.

The bill was introduced by Democrats in a Republican-controlled Senate, and it is unknown if it will advance through the Senate. Watch this ascensus.com News for further developments, if applicable.

 


IRA Escheatment Guidance Transition Period Extended

The IRS released Notice 2018-90, extending the transition period originally named in Revenue Ruling 2018-17 to January 1, 2020. Revenue Ruling 2018-17 addressed withholding and reporting requirements with respect to the payment of an IRA owner’s interest to a state unclaimed property fund—an action sometimes referred to as “escheatment.”

The ruling states that payments made in this manner are treated as includable in gross income and, therefore, are subject to withholding upon distribution. In addition, the distributing financial organization must report these payments on the applicable year’s Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., identifying the IRA owner as the recipient.

The revenue ruling required financial organizations to comply with the requirement the earlier of January 1, 2019, or the date it becomes reasonably practicable to comply with the requirements. Notice 2018-90 extends this period to January 1, 2020, or the date it becomes reasonably practicable to comply with the requirements.

 


Ascensus Announces Dates and Venues for 4th Annual Ascend Education Conference

Event Offers Robust Training, Certification, Continuing Education, and Networking Opportunities to Attendees

Dresher, PA — Ascensus—whose technology and expertise helps millions of people save for retirement, education, and healthcare—has announced the schedule for its 2019 Ascend education conference, which provides retirement, health, and education savings plan professionals from financial organizations across the nation with regulatory insight, training, and networking opportunities.

Ascend provides access to Ascensus’ expert consultants to help financial professionals remain competitive in the ever-changing retirement- and health-savings-plan marketplaces. Attendees can choose from more than 40 courses—both basic and advanced—covering IRAs, HSAs, employer-sponsored retirement plans, and industry topics. With its flexible format and interactive presentations on compliance issues and marketing opportunities, Ascend truly caters to its audience. In addition, Ascend attendees may also obtain the Certified IRA Specialist (CIS) II and Certified Health Savings Professional (CHSP) designations and earn continuing education credits for additional industry designations.

The scheduled dates and locations for Ascend 2019 include:

• September 9-11, 2019 – Walt Disney World Swan Hotel, Orlando, Florida
• October 7-9, 2019 – Sheraton Seattle Hotel, Seattle, Washington

“Every financial organization must now provide key offerings to the silent generation, baby boomers, generation X, and millennials,” states Steve Christenson, Ascensus’ executive vice president of retirement and health plan services. “Through Ascend, Ascensus has been providing training to financial organizations for over 30 years; we’re proud to continue to offer this interactive educational experience to help attendees better understand how consumers seek to interact with their financial services providers.”

For more information on Ascend 2019, visit https://www2.ascensus.com/academy/ascend/. Registration opens on December 3, 2018.

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 ascensus.com. View career opportunities at careers.ascensus.com.


IRS Issues Tax Relief for California Wildfire Victims

The IRS has issued News Release CA-2018-13, announcing tax-related deadline relief for certain areas in the State of California suffering damage from recent wildfires. The relief, based on Treasury Regulation 301.7508A-1(c)(1)), applies to various tax-related acts whose deadlines can be extended due to a disaster declaration. These include completion of rollovers or recharacterizations, correction of certain excess contributions, making plan loan payments, filing Form 5500, and certain other acts under the above-described regulation.

The announced deadline relief currently applies to Butte, Los Angeles, and Ventura counties. For those covered by this guidance, covered tax-related deadlines falling on or after November 8, 2018, and before April 30, 2019, are extended to April 30, 2019.

The automatic relief applies to residents of the identified areas, to those whose businesses or records necessary to meet a covered deadline are located there, and to certain relief workers providing assistance following the disaster events. Any individual visiting a covered disaster area that is injured or killed as a result of the events is also entitled to deadline relief. Affected taxpayers who reside or have a business located outside the covered disaster areas are required to call the IRS disaster hotline at 866-562-5227 to request relief.

 


Tax-Related Deadline Relief for Hurricane Michael Victims in Alabama

The IRS has released News Release AL-2018-006 describing tax-related deadline relief for victims of Hurricane Michael in certain areas of Alabama. The news release describes the relief provided in Treasury Regulation 301.7508A-1(c)(1)) that applies to various tax-related acts whose deadlines can be extended by a disaster declaration. This includes completion of rollovers or recharacterizations, correction of certain excess contributions, making plan loan payments, filing Form 5500, and certain other acts under the above-described regulation.

Currently, the announced deadline relief applies to the Alabama counties of Geneva, Henry, Houston, and Mobile. Under this guidance, covered tax-related deadlines that fall on or after October 10, 2018, and before February 28, 2019, are extended to February 28, 2019.

The automatic relief applies to residents of the identified areas, to those whose businesses or records necessary to meet a covered deadline are located there, and to certain relief workers providing assistance following the disaster events. Any individual visiting a covered disaster area who was injured or killed as a result of the events is also entitled to deadline relief. Affected taxpayers who reside or have a business located outside the covered disaster areas are required to call the IRS disaster hotline at 1-866-562-5227 to request relief.

 


2019 COLA Adjustments for IRAs and Retirement Plans

The IRS issued Notice 2018-83 containing the 2019 IRA and retirement plan limitations as adjusted for cost-of-living. The IRS contribution limit is increasing to $6,000 for 2019, and most of the income limitations associated with Roth IRA eligibility and Traditional IRA deductions increase. Several retirement plan limitations increase as well. The 401(k) deferral limit (IRC Sec. 402(g)) will be to $19,000 for 2019.

2019 IRA Contribution Limitations

  • Traditional and Roth IRA contributions: $6,000 ($5,500 for 2018)
  • Traditional and Roth IRA catch-up contributions: $1,000 (not subject to COLA adjustments)
  • IRA deductibility phase-out range for single taxpayers that are active participants in retirement plans: $64,000 to $74,000 (was $63,000 to $73,000 for 2018)
  • IRA deductibility phase-out range for married joint filing taxpayers that are active participants in retirement plans: $103,000 to $123,000 (was $101,000 to $121,000 for 2018)
  • IRA deductibility phase-out range for non-active participants who are married to active participants in retirement plans: $193,000 to $203,000 (was $189,000 to $199,000 for 2018)
  • Roth IRA income limit phase-out range for determining contribution eligibility for married joint filers: $193,000 to $203,000 (was $189,000 to $199,000 for 2018)
  • Roth IRA income limit phase-out range for determining contribution eligibility for single filers and heads-of-households: $122,000 to $137,000 (was $120,000 to $135,000 for 2018)

2019 Retirement Plan Limitations

  • Annual additions under IRC Sec. 415(c)(1)(A) for defined contribution plans: $56,000 ($55,000 for 2018)
  • Annual additions under IRC Sec. 415(b)(1)(A) for defined benefit pension plans: $225,000 ($220,000 for 2018)
  • Annual IRC Sec. 402(g) deferral limit for 401(k), 403(b) and 457(b) plans: $19,000 ($18,500 for 2018)
  • Catch-up contributions to 401(k), 403(b) and 457(b) plans: $6,000 (unchanged)
  • Annual deferral limit for SIMPLE IRA and SIMPLE 401(k) plans: $13,000 ($12,500 for 2018)
  • Catch-up contributions for SIMPLE IRA and SIMPLE 401(k) plans: $3,000 (unchanged)
  • IRC Sec. 401(a)(17) compensation cap: $280,000 ($275,000 for 2018)
  • Highly compensated employee definition income threshold: $125,000 ($120,000 for 2018)
  • Top-heavy determination key employee definition income threshold: $180,000 ($175,000 for 2018)
  • SEP plan employee income threshold for benefit eligibility: $600 (unchanged)

Social Security Taxable Wage Base

The Social Security Administration announced in mid-October that the 2019 limitation for the taxable wage base increases from $128,400 to $132,900 for 2019.

Retirement Savings Tax Credit

Taxpayers who make contributions to IRAs and/or salary deferrals under retirement plans may qualify for an income tax credit if their income is under certain amounts. Contributions of up to $2,000 may be eligible for credits that range from 10 to 50 percent of the amount contributed. Eligibility is based on income and tax filing status as provided in the instructions for Form 8880, Credit for Qualified Retirement Savings Contributions. The applicable income limits are subject to cost-of-living adjustments as well.

The maximum income thresholds in all categories for this credit will increase for 2019. For 2019, taxpayers with adjusted gross income that exceeds $64,000 for joint filers, $48,000 for head of household, and $32,000 for all other filers will not qualify for a tax credit. See Notice 2018-83 for the specific income limitations based on tax filing status.

 


Tax-Related Deadline Relief for Victims of Severe Storms in Wisconsin

The IRS has issued News Release WI-2018-07 announcing tax-related deadline relief for certain Wisconsin residents who are victims of recent storms, tornadoes, straight-line winds, flooding, and landslides that took place beginning on August 17, 2018. In addition to postponement of tax return deadlines falling within dates identified in the news release, the relief includes postponement of deadlines for completing certain time-sensitive, tax-related acts specified in Treasury Regulation 301.7508A-1(c)(1).

These acts include completion of rollovers or recharacterizations, correction of certain excess contributions, making plan loan payments, filing Form 5500, and certain other acts under this regulation. For those who qualify, such deadlines falling on or after August 17, 2018, and on or before December 17, 2018, are postponed to December 17, 2018.

The areas identified as directly qualifying for relief are Crawford, Dane, Juneau, La Crosse, Monroe, Richland, Sauk, and Vernon counties. The relief applies specifically to residents of the identified areas, to those whose businesses or records necessary to meet a covered deadline are located there, and to certain relief workers providing assistance following the disaster events. Any individual visiting a covered disaster area who is injured or killed as a result of the events is also entitled to deadline relief.

Affected taxpayers who reside in or have a business located outside the covered disaster area are required to call the IRS disaster hotline at 1-866-562-5227 to request relief.