Peg Creonte Discusses Progress of OregonSaves Program

In a broadcast segment on CNBC’s Nightly Business Report, SVP Peg Creonte discusses the progress of the OregonSaves state-sponsored retirement program to date. She also shares the Ascensus perspective on how these programs are helping address the national retirement savings gap. “Study after study shows that people are 15x more likely to be saving for retirement if they’re offered access through their employer,” states Creonte. Oregon Treasurer Tobias Read joins Peg to discuss his expectations for the future of the program. Owner of Reach Break Brewing Company, Josh Allison, also shares his personal account of how OregonSaves is making an impact in the financial lives of his employees and helping him attract talented employees to join the business.

Since the broadcast, Nightly Business ReportPower Lunch, Closing Bell, On t​he Money​, and CNBC affiliate shows​ have re-run the segment. ​


Bill Would Make Sweeping Changes to Retirement Plans

Senate Finance Committee Chairman Orrin Hatch (R-UT) and Committee Ranking Member Ron Wyden (D-OR) have introduced the Retirement Enhancement and Savings Act of 2018 (RESA), previously introduced in similar form in 2016. If enacted, the legislation would make many changes to IRAs and employer-sponsored retirement plans and generally be effective for years after 2018. RESA contains the following provisions.

  • Ease establishing of multiple-employer plans by statutorily eliminating a need for common purpose or common ownership for those businesses combining to form such plans
  • Modify the fiduciary safe harbor for plans offering lifetime income investment options (generally annuities) to offer greater protection from fiduciary liability for selection of investment provider(s)
  • Repeal the maximum age for Traditional IRA contributions (currently age 70½)
  • Require nonspouse beneficiaries of IRAs and defined contribution plans to deplete balances in excess of $450,000 within 5 years, with exceptions for the disabled, the chronically ill, and certain others who are no more than 10 years younger than the participant/IRA owner
  • Allow certain college fellowship and stipend payments to be considered compensation for IRA contribution purposes
  • Eliminate the current 10 percent deferral limitation for certain automatic-enrollment 401(k)-type plans
  • Allow safe harbor 401(k) plan elections without a pre-plan-year notice to be made up to 30 days before the end of a plan year if the three percent nonelective safe harbor contribution option is chosen.  The safe harbor election could be made later than this if a four percent nonelective contribution (rather than the standard three percent contribution) is made
  • Increase the maximum small employer retirement plan start-up tax credit from $500 to $5,000 per year
  • Provide a $500 per year tax credit for up to three years for new or existing SIMPLE IRA and 401(k)-type plans that include an automatic enrollment feature
  • Provide nondiscrimination testing relief for defined benefit pension plans that are closed to new participants (generally such employers offer a defined contribution plan as an alternative for new employees)
  • Allow employer-sponsored retirement plans that cease offering lifetime income investments to grant (otherwise-unavailable) distributions that can be transferred to lifetime income investments maintained in an IRA or other employer plan
  • Allow 403(b) custodial accounts of a terminated 403(b) plan to be deemed IRAs as of the termination date; designated Roth 403(b) accounts would be treated as a Roth IRA
  • Permit qualified retirement plans to be established as late as the adopter’s tax return filing deadline, including extensions, rather than by the last day of the business year
  • Allow consolidated Form 5500 reporting for multiple defined contribution plans having in common the same trustee, named fiduciary, plan administrator, plan year, and investment options
  • Require defined contribution plan benefit statements to include a lifetime income calculation/disclosure at least once during any 12-month period
  • Prohibit retirement plan credit card loan arrangements
  • Allow IRAs to invest in S corporation bank securities
  • Clarify the retirement income account rules of certain church plans for employee coverage eligibility
  • Set certain rules for calculating defined benefit pension plan insurance premiums paid to the Pension Benefit Guaranty Corporation (PBGC)
  • Accelerate certain PBGC premium payments to improve the agency’s solvency
  • Set the following plan reporting penalties:  Form 5500: $100 per day up to a maximum of $50,000; Form 8955-SSA (reporting deferred vested benefits): $2 per participant per day up to a maximum of $10,000; withholding notices: $100 per failure up to a maximum of $50,000

Looking Ahead: Changes to IRA Recharacterizations

As the country’s largest independent services provider of retirement and college savings plans, Ascensus aims to provide valuable information for Americans looking for the best ways to save for these milestones. With the recent tax reform bill now effective, there are new rules regarding how IRA contributions can be recharacterized. While regular IRA contributions can still be recharacterized, the new bill states that Roth IRA conversions and retirement plans to Roth IRA rollovers may not be recharacterized into traditional IRAs. For more information, check out our infographic below outlining some of the major changes to IRA recharacterization.

Ascensus is available to answer any and all questions regarding the 2018 tax reform and the implications it has on college or retirement savings. To learn more, visit today.


Provident Trust Earns Top Spot on Wealth Advisor’s Best IRA Custodians List

In a press release issued on PRWeb​,Theresa ​​Fette of Provident Trust Group announced ​Provident’s top ranking on Wealth Advisor’s 2017 America’s Best IRA Custodians list. ​​Provident ​Trust specializes in self-directed administration and passive custodian for non-traditional assets​. “Becoming part of the Ascensus family will greatly enhance our technological capabilities, ushering in a new era and making our organization more seamless and even easier to work with,” adds Fette. ​​​

IRS FAQs Confirm 2017 Roth IRA Conversions Can be Recharacterized in 2018

The IRS updated its website frequently-asked-question (FAQ) information, IRA FAQs – Recharacterizations of Roth Rollovers and Conversions, to address recharacterizing Traditional and SIMPLE IRA conversions to Roth IRAs, and non-Roth retirement plan account rollovers to a Roth IRAs.

Tax reform legislation enacted late in 2017 eliminated the ability to recharacterize such converted or rolled-over amounts, eliminating the ability to reverse the transaction and change the nature of the amount to non-Roth IRA status. This tax reform change is effective for 2018 and later tax years.

Some uncertainty existed as to whether an amount so converted or rolled over to a Roth IRA in 2017 could be recharacterized to non-Roth status in 2018, as long as this was completed by the statutory recharacterization deadline (October 15, 2018, for most taxpayers).

Upon inquire, a highly-placed IRS source commented to Ascensus that recharacterizing such 2017 amounts could be done because the statutory change was effective beginning in 2018. The IRS has now confirmed this ability within their FAQs.

The information can be found in the last FAQ item. Remember, however, that while no conversion to Roth IRA status in 2018 or later years can be recharacterized, Traditional or Roth IRA annual contributions can continue to be recharacterized to the other type of IRA if done by the recharacterization deadline.

Dennis Zuehlke Discusses IRA Provisions in Tax Reform Bill

In a recent article for Credit Union Insight, Compliance Manager Dennis Zuehlke​ summarizes the IRA provisions included in the final tax reform bill. ​The bill will allow credit union tax-exemption to remain in place, and it includes ​​minimal changes to individual retirement accounts (IRAs). Zuehlke explains, “Eliminating the ability to recharacterize a conversion to a Roth IRA creates a significant tax-trap for the unwary, but in retrospect, it is a small price to pay given the minor changes that the final tax reform bill makes to retirement plans.”

Retirement Spotlight: How Tax Reform Changed IRA Recharacterizations

The recent tax reform bill made a few changes to IRAs and retirement plans. You may have heard rumblings about one of them involving IRA recharacterizations. The change, which took effect January 1, 2018, reduces the scenarios in which IRA owners may choose to recharacterize a contribution. To help you understand and prepare for this change, let’s take a closer look at both the old and new recharacterization rules.

Old Recharacterization Rules

The recharacterization rules generally allowed you to “undo” certain transactions. You could recharacterize a contribution for any reason as long as it was completed by your tax return due date, plus extensions.

Before January 1, 2018, you could recharacterize a

  1. regular Traditional IRA contribution to a Roth IRA,
  2. regular Roth IRA contribution to a Traditional IRA,
  3. conversion of Traditional or SIMPLE IRA assets back to the original type of IRA, and
  4. retirement plan-to-Roth IRA rollover to a Traditional IRA.

New Recharacterization Rules

Under the new rules, your list of recharacterization options has been trimmed from four to two.

As of January 1, 2018, scenarios 3 and 4 (shown above) do not apply. You may no longer recharacterize a Roth IRA conversion, from any source. It is now a one-way transaction without an “undo” feature.

Options 1 and 2 remain unchanged. You can continue to recharacterize a regular current year IRA contribution by your tax return due date, plus extensions.

The new rules are clear about conversions and retirement plan-to-Roth IRA rollovers that occur in 2018—they cannot be recharacterized. But whether conversions and retirement plan rollovers completed in 2017 can be recharacterized in 2018 is unanswered in the new rules. Ascensus contacted an IRS representative who said that IRS was aware of this issue and that conversions and retirement plan rollovers completed in 2017 may be recharacterized in 2018.

Going Forward

If you are considering a conversion or retirement plan-to-Roth IRA rollover, you’ll want to carefully consider the new recharacterization restrictions. If you completed a conversion or retirement plan-to-Roth IRA rollover in 2017 and wish to recharacterize it in 2018, note that the IRS’ comments were provided in an unofficial, verbal conversation. As a result, you should consider talking to your tax or financial professional beforehand.

David Musto Comments on New Tax Bill’s Implications for Retirement Accounts

In a recent article​ published by Investor’s Business Daily​, President David Musto discusses which provisions of the House and Senate tax bills have made their way into the final version of the bill. ​Regarding strategic implications, ​Congress has declined ​to limit or ​​kill the deductibility of contributions to ​traditional ​401(k) ​accounts or traditional ​​IRAs. ​​”There is no proposal so far for Rothification of retirement accounts,” notes Musto. “So this is a case of no news is good news for retirement savers in general.”​

IRS Issues Reminder About Retirement Effects of Hurricane Relief Legislation

The IRS has released a reminder notice of the tax-related relief granted by the Disaster Tax Relief and Airport and Airway Extension Act of 2017. This legislation, enacted in early October, provides special options for those affected by Hurricanes Harvey, Irma, and Maria, including options specific to IRA and employer retirement plan assets.

The reminder notes that the relief goes well beyond the simple extension of tax-related deadlines, extensions commonly granted in many post-disaster situations by the IRS and Department of Labor (DOL).

The options provided by the Act include the following.

  • Waives the 10 percent early distribution penalty tax on distributions
  • Allows recipients to include qualified hurricane distributions in their income over a three-year period
  • Allows retirement plan participants to repay distributions to the plan or an IRA
  • Expands availability of plan loans
  • Extends the normal loan repayment period under the plan
  • Extends the period for plans to make amendments

See the Ascensus Washington Pulse: Hurricane Legislation Grants Retirement Plan Relief published in this News in October.

Scott Morrison Discusses OregonSaves Pilot Program

In a recent article​ published by Society for Human Resource Management, ​Scott Morison, chief product officer at Ascensus, discusses the OregonSaves ​retirement program. OregonSaves is an ​automatic individual ​retirement account (auto- IRA), in which ​employees invest a percentage of their wages every pay period. “We are pioneers and understand the world is watching,” says Morrison. “Folks from the HR industry, financial services companies and other states will be looking at the Oregon plan as the blueprint for these programs.”​