presented by ed slott, cpa and jeffrey levine, cpa ed...
TRANSCRIPT
The Only Thing Constant is Change
• Each year the rules and/or the interpretation of the rules
for retirement accounts change dramatically.
• There are always new
• Laws
• Revenue rulings
• Private letter rulings
• Tax Court cases
• IRS notices
• IRS announcements and other guidance
2016 Contribution and Income Limits
• Maximum IRA contribution - $5,500
• IRA catch-up contribution $1,000
• Elective deferral limit for 401(k), 403(b), Thrift
Savings Plan and most 457 plans - $18,000
• Catch-up contribution for 401(k), 403(b), Thrift
Savings Plan and most 457 plans - $6,000
All unchanged from 2015
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2016 Contribution and Income Limits
• What did change?
• Roth IRA contribution income limits rose to: • $184,000 - $194,000 married-joint
• $117,000 - $132,000 single
• Traditional IRA contribution deduction phase-out
(spouse of IRA owner an active participant) • $184,000 - $194,000
• Saver’s Credit thresholds have also increased
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The “New” Once-Per-Year Rollover Rule Transition Relief Expired
• Only one 60-day IRA-to-IRA or Roth IRA-to-Roth IRA
each year (365 days)
• Bobrow decision changes rule from per-account-rule to
an aggregate rule
• Trustee-to-trustee transfers do not count
• The following rollovers also do not count:
• Plan-to-IRA rollovers
• IRA-to-plan rollovers
• Roth IRA conversions
The “New” Once-Per-Year Rollover Rule Transition Relief Expired
• New interpretation of the once-per-year
rollover rule was effective January 1, 2015,
BUT...
• Clients had a (somewhat) fresh start in 2015 • 2014 60-day rollovers were disregarded for NEW interpretation
• That transition relief will have fully expired by
January 1, 2016
Qualified Charitable Distributions
• NOT CURRENTLY IN EFFECT
FOR 2015 OR BEYOND!!!
• Each time the provision has expired in the past, it’s been reinstated
retroactively.
• No guarantees that will happen this time though!
Qualified Charitable Distributions
• QCD vs. “regular” charitable contribution
• QCD
• No deduction
• Not added to income
• “Regular” charitable contribution
• IRA distribution added to income
• Itemized deduction • Charitable deductions may be limited
• Clients may not itemize
• Does not prevent reduction of tax benefits tied to AGI/MAGI
Qualified Charitable Distributions
• Overview of key rules
• Must be 70 ½ or older on the date the QCD is made
• Funds must go right from an IRA owner’s IRA to the charity
• Checks made payable to charity also qualify
• Can be made for up to $100,000 and is counted towards
fulfillment of RMD
• Amount needs to be entirely deductible, had it been made with
non-IRA funds
• No concert tickets, books, CDs, DVDs or other gifts in return
Qualified Charitable Distributions
• Two QCD Strategies
• Wait-and-see
• Act-like-it’s-already-there
“New” 10% Penalty Exception
• Trade Priorities and Accountability Act of 2015
• Signed into Law on June 29, 2015
• Includes provision changing the “Age 50
Exception”
Current “Age 50 Exception” Rules
• Applicable to state and local public safety workers
• Firefighters
• Police
• EMS
• Client must separate from service in the year they
turn 50 or later
• Applicable only to defined benefit plans
The “New” Age 50 Exception
• Expands availability to additional professions
• Federal law enforcement
• Federal Firefighters
• Border Patrol
• Customs
• Air Traffic Controllers
The “New” Age 50 Exception
• Will apply to both defined benefit and defined
contribution plans
• Can be used in conjunction with 72(t)
distributions!
• THE CHANGES DO NOT TAKE EFFECT UNTIL
JANUARY 1, 2016
Review Retirement Income Plans to Account for Budget Act’s Changes
• Bipartisan Budget Act of 2015
• Eliminates file-and-suspend strategy • Effective 180 days after signing of the law
• After grace period expires: • Clients still allowed to suspend benefit at FRA or
later, BUT
• If benefits are suspended, all other benefits
received based on individuals earnings history are
also suspended
Review Retirement Income Plans to Account for Budget Act’s Changes
• Bipartisan Budget Act of 2015
• Eliminates restricted application strategy • Effective for individuals turning reaching age 62 on
or after January 2, 2016
• After grace period expires: • Regardless of client’s age, they will not be able to
restrict their application to just their spousal benefit
• No more “free” spousal benefits
Review Retirement Income Plans to Account for Budget Act’s Changes
• Both strategies may have a significant
impact on a client’s retirement income
• In the most severe of cases, clients could
see over a $60,000 decrease in retirement
income over a 4 year period
• What will they do to offset the effects?
Review Retirement Income Plans to Account for Budget Act’s Changes
• Will clients still delay Social Security benefits
• Will they have to withdraw more from their IRA in the
interim years?
• How will this impact them?
• Will clients claim Social Security benefits
sooner?
• Will they have to withdraw larger than previously
anticipated amounts from their IRA to account for
smaller Social Security benefits?
• How will this impact them?
New Reporting Requirements for Hard-to-Value Assets
• New reporting for IRS forms
• 5498, IRA Contribution Information
• 1099-R, Distributions From Pensions, Annuities,
Retirement or Profit Sharing Plans, IRAs, Insurance
Contracts, etc.
• Was optional for 2014
• Mandatory for 2015 an beyond
• 2015 1099-Rs and 5498s received in 2016
• First time many clients/CPAs will see the changes
More Options for QLACs
• Qualifying longevity annuity contracts (QLACs)
• Established July 2014
• Initially only a few carriers had QLAC-qualifying
products available
• More carriers have begun to offer these
products and additional options are expected to
continue to come on line
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More Options for QLACs
• Key QLAC rules
• Value of contract excluded for RMD purposes
• Distributions must begin no later than first day
of month following client’s 85th birthday
• Premium limited to lesser of 25% of client’s
retirement funds or $125,000
• Limited death benefit options
• Fixed contracts only
• No cash surrender value or similar benefit
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5 Critical IRA Items to Check Before Year-End
1) Have clients maxed-out on retirement
contributions?
2) Have beneficiary forms been reviewed?
3) Should you initiate a Roth IRA conversion?
4) Are clients behind on their estimated tax
payments?
5) Have all RMDs been taken?
Maxed-Out Retirement Accounts?
• 2015 IRA contributions can generally be made up
to April 15, 2016
• Salary deferrals to employer-sponsored retirement
plans for 2015 must generally be made in 2015
• Many companies pay their bonuses around year-
end. Encourage clients to use some of these new-
found funds to save for their retirement.
Have Beneficiary Forms Been Reviewed?
• Have there been any
• Births
• Deaths
• Marriages
• Divorces
• Beneficiaries who have reached the age of
majority
• Changes that would suggest the use of a trust as
an IRA beneficiary (or suggest eliminating a trust as
an IRA beneficiary)
Roth IRA Conversion Before Year-End?
• Can always be recharacterized up to October 15,
2016
• As long as the funds leave a client’s traditional
account by December 31, 2015, it will be considered
a 2015 Roth IRA conversion... Even if the funds
don’t get into the Roth IRA until 2016
• May effectively turn the 5-year rule into a 4-year rule
Short on Estimated Tax Payments? Use This Trick! • Take a distribution from the client’s IRA for an amount equal to the
estimated tax shortfall.
• Withhold 100% of the distribution
• Eliminates estimated tax penalty
• Withholdings are treated as paid in ratably throughout the year
• Take other, non-IRA money and, within 60-days, rollover an amount
equal to the distribution.
• Restores client’s IRA and eliminates the tax on the distribution.
***Be careful of the once-per-year rollover rule***
Have All RMDs Been Taken?
• Verify that all RMDs have been correctly calculated
• Ensure that an RMD has been taken from each of a client’s
employer-sponsored retirement plans
• Exception – RMDs for 403(b) plans can be aggregated
• Make sure that clients have taken a distribution from at least one of
their IRAs large enough to satisfy the RMD requirement for all of
their IRAs
• Double-check to make sure RMDs have been correctly distributed
from any inherited retirement accounts a client may have
Introducing Savvy IRA Planning With Ed Slott and Company
A comprehensive new resource to help you
attract more clients, including: • 4-part IRA webinar training series delivered by the Ed Slott and Company
team (CE credit)
• Seminar presentations to deliver to clients and prospects (FINRA -reviewed)
• 2 IRA study guides to support your learning and expertise
• Live webinars with Ed Slott and Company experts answering select
subscriber questions
• Marketing toolkit to promote the seminar presentations
• IRA article reprints and IRA Boomer guides to hand out
• Plus, lots more.
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