Rules governing defined benefit (DB) plans are typically more complicated than defined contribution (DC) plan rules. But required minimum distributions (RMDs) are one area where the DB plan requirements are easier to understand.If you’re in a DB plan, your benefit payments must begin no later than your “required beginning date” (RBD) – just like with IRA distributions or DC plan benefits. Your RBD is generally the April 1 following the year you reach age 72. However, if your DB plan allows the “still-working exception,” you can delay your RBD until you retire.
Question:Good afternoon. We have a client who was 19 years younger than her spouse. He passed away this year. We are planning to keep this as an inherited IRA for now. Can we move the assets to her own IRA at any time?Thank you, stay safe and have a great day,Julie
Most of us have a pretty good understanding of how IRA and 401(k) plan benefits are taxed. But the taxation rules for defined benefit (DB) plans are less familiar, probably because there are fewer DB plans out there these days.DB plans usually offer several types of annuity distribution options, but most do not offer a lump sum distribution option. Under the tax code, only “eligible rollover distributions” can be rolled over to an IRA or another company plan. Annuity payments do not qualify (unless payments are scheduled over a period of fewer than ten years). So, benefits payable from DB plans are typically fully taxable in the year received and cannot be rolled over.
If you sponsor a solo 401(k) plan, beware!The IRS recently announced that it is targeting several employer plan areas for stepped-up auditing. One of those areas is solo 401(k) plans.The fact that solo plans made the list is a signal that the IRS believes there are widespread compliance issues with these plans. While solo 401(k) plans don’t have as many rules to follow as employer-based 401(k) plans, there are still several requirements. The IRS announcement should be a warning to business owners with solo plans to make sure they are obeying those rules.
Just a few weeks after the start of the baseball season, the IRS has thrown us a curveball by apparently interpreting the SECURE Act 10-year payout rule in a totally-unexpected way.We say “apparently” because the IRS explanation isn’t very clear. And even if it was clear, the IRS offered the information in an informal publication that should not be relied on.Here’s the backstory: One of the major changes made by the 2019 SECURE Act was the elimination of the stretch for many beneficiaries of inherited IRAs.
Question:Hi, Ed,I am hoping I get to attend one or more of your events IN PERSON this year!If you have time for a refresher . . . .Jon’s 2021 RMD is $200k. He takes $100k as a distribution to himself in February and later, he decides to satisfy the remaining $100k as a QCD in November.Does this work as far as the timing of the QCD?
Fewer and fewer workers are participating in defined benefit pension (DB) plans these days. The high cost of maintaining those plans has led many employers to terminate existing plans and dissuaded many others from setting up new plans in the first place.But there are still many DB plans out there, and it’s important to know that they operate very differently from defined contribution (DC) plans, like 401(k), 403(b) and 457(b) plans. Here are eight important differences:
We’ve been getting a number of questions lately about whether it’s too late to set up a new solo 401(k) plan for 2020.The answer is “sort of.”Business owners with no employees (other than a spouse) can contribute to a solo 401(k) plan. Solo plans are typically used by sole proprietors but are also available if your business is incorporated or structured as a partnership or LLC.
I have self-directed traditional and Roth accounts at an SDIRA Custodian. Can I do a Roth conversion of an illiquid asset from the traditional to the Roth account? The investment I want to convert is a debt-only asset (no equity component) generating a fixed 8% dividend. It has a consistent FMV from year to year. I know I will pay tax on the conversion. I am 75 and retired.Thank you,
For an area as highly regulated as IRAs and company plans, it’s not surprising that there’s a ton of abbreviated terms to keep track of. Here’s 18 common ones that you should know:CARES Act. The Coronavirus Aid, Relief, and Economic Security Act. A law enacted on March 27, 2020 that, among other items, waived RMDs for 2020 and allowed CRDs.CRD. Coronavirus-related distribution. A penalty-free distribution, up to $100,000, that certain COVID-affected individuals were eligible to receive from IRAs and company plans in 2020.
