New for 2015 – Changes in the Retirement Planning World

By Beverly DeVeny, IRA Technical Expert
Follow Me on Twitter: @BevIRAEdSlott

Beware of the more stringent interpretation of the one-rollover-per-year rule. The Tax Court ruled in 2014 that an individual can do only one 60-day IRA-to-IRA or Roth-to-Roth rollover in a 12-month period. Previous IRS guidance was that you could do one 60-day rollover per account in a 12-month period. Beginning in 2015, IRS will adhere to the Court’s decision and enforce the one-rollover-per-individual rule. I think we will be seeing a lot of individuals losing their IRAs this year when their IRA custodians make it virtually impossible for them to do a direct rollover and all too easy for them to take a check payable to themselves.

A U.S. Supreme Court ruling held bad news for beneficiaries of inherited retirement accounts. The Court ruled that an inherited account is not a “retirement” account for the beneficiary, and therefore, it is not federally protected in bankruptcy. Instead, beneficiaries will have to look to state law to protect their inherited IRAs. This has already prompted an increase in recommendations that a trust be the beneficiary of an IRA. If you choose to go this route, make sure that your attorney understands the IRA distribution rules. An ordinary, everyday trust could create serious complications when it is time to make distributions to heirs.

There was some good news for plan participants with both pre- and after-tax amounts in their employer plans. IRS revised their guidelines on the treatment of rollovers out of plans when the participant wants the pre-tax funds to go to an IRA and the after-tax funds to go to a Roth IRA in a tax-free Roth IRA conversion. However, IRS emphasized that partial distributions from a plan will continue to be treated as pro-rata distributions.

Qualifying longevity annuity contracts (QLACs) are finally here. IRS released final regulations for these contracts last July. The rules are essentially unchanged from the proposed regulations with one major exception. There is now a return of premium option available for individuals investing in these contracts.

The myRA may be coming to an employer near you. The Treasury Department has released final regulations for myRA accounts. They can only be offered by employers and are targeted to savers just started out or with more modest income. The myRA is a Roth IRA account so the Roth contribution and distribution rules will apply. Comerica Bank will be the custodian for these accounts. The accounts will be invested in a new nonmarketable, electronic savings bond, which will protect the principal and offer earnings at the rate used for federal employees invested in the Thrift Savings Plan’s Government Securities Investment Fund (G Fund).

IRS released safe harbor guidelines for plans that accept rollovers from plan participant’s IRA accounts. This should make it easier for an individual to accomplish this type of rollover. An employer plan is not required to allow this option, but more plans may now consider allowing these rollovers.

There will be increased scrutiny of hard-to-value assets in IRAs in the upcoming year. IRS has added reporting requirements for these assets on Forms 1099-R and 5498. The reporting was optional for 2014 transactions, but is required for transactions in 2015 and beyond.

There are no qualified charitable distributions (QCDs) for 2015 – yet. The extenders bill only renewed the QCD provision for 2014.