Page 11 - Investment Advisor April/May 2022

agenda, as set out in the Retirement IRA Contributions for 2021 Can Be
Blueprint, include:
• Passage of the Lifetime Income for Made Until April 18: IRS
Employees Act, H.R. 6746, which would
allow plan sponsors to utilize annuities that he Internal Revenue Service to a 401(k) or 403(b), an IRA or an
provide a guaranteed return on investment Treminded taxpayers in early Achieving a Better Life Experience
and have a delayed liquidity feature as a March that they may be able to claim (ABLE) account may be able to claim
default investment vehicle for a portion of a deduction on their 2021 tax return the Saver’s Credit, the IRS said.
contributions made by a retirement saver for contributions to their individual “Also known as the Retirement
who has not made investment selections. retirement account made through April Savings Contributions Credit, the
• In the absence of voluntary action by 18, 2022. Contributions for 2021 can be amount of the credit is generally based
the Securities and Exchange Commission, made to a traditional or Roth IRA until on the amount of contributions, the
Congress should enact legislation such the filing due date, April 18, but must adjusted gross income and the tax-
as the Registration for Index-Linked be designated for 2021 to the financial payer’s filing status … The lower the
Annuities (RILA) Act, S. 3198/H.R. 4865, institution, the IRS said. taxpayer’s income (or joint income, if
to direct the SEC to remove a barrier Eligible taxpayers can contribute up applicable), the higher the amount of
inhibiting the use of the products by to $6,000 to an IRA for 2021. For those the tax credit,” the IRS explained.
developing a new registration form bet- 50 years of age or older at the end of While contributions to a Roth IRA
ter suited for insurance products. 2021, the limit has increased to $7,000. are not tax-deductible, qualified distri-
• Enacting legislation, such as the “Qualified contributions to one or butions are tax-free. “Roth IRA contri-
E-SIGN Modernization Act, S.4159, more traditional IRAs may be deduct- butions may be limited based on filing
to streamline how consumers receive ible up to the contribution limit or status and income,” according to the
electronic communications by remov- 100% of the taxpayer’s compensation, IRS. “Contributions can also be made
ing outdated requirements while ensur- whichever is less,” the IRS said. “There to a traditional and/or Roth IRA even if
ing retirement savers can continue to is no longer a maximum age for making participating in an employer-sponsored
choose how they want to receive and IRA contributions.” retirement plan (including a SEP or
access their financial information. Those who make contributions SIMPLE IRA-based plan).”

Lawmakers Want to Block Spouses From Emptying 401(k)s
The lawmakers, Reps. Lucy McBath, D-Ga., and Lauren Because the rules governing married 401(k) plan participants
Underwood, D-Ill., are seeking co-sponsors for a draft bill that are so weak, “the participant could withdraw his retirement
could require a married 401(k) plan participant to get permis- savings and make a risky investment or an extravagant pur-
sion from the other spouse before taking lump sums of cash chase or a gift that the other spouse did not consent to,” Matsui
out of a 401(k) plan. said. “Or he could squander the funds gambling … Practitioners
McBath talked about the bill in early March, during a hear- have reported instances where participants’ spouses have
ing organized by the House Health, Employment, Labor and drained their retirement savings accounts to prevent the other
Pensions Subcommittee. She said the draft bill would require spouse from receiving a share during divorce proceedings.”
a married participant’s permission to withdraw assets in the A married plan participant also could roll 401(k) plan
form of a lump sum of cash, or to roll assets into an arrange- assets into an IRA and name a child, a sibling or a girlfriend
ment beyond the reach of the other spouse. as the beneficiary, because federal law does not require a
A married participant would not have to get consent from the married IRA holder to name the spouse as the beneficiary,
spouse to receive plan benefits in the form of a joint and survi- Matsui said. In theory, the other spouse could get the assets
vor spousal annuity, or to roll the assets into another employer- back through divorce proceedings, but, in the real world, if
sponsored retirement plan or individual retirement arrangement the funds are spent, there may be no practical way to get the
that provided protection for the spouse, McBath said. assets back, Matsui said.
Amy Matsui, director of income security at the National “Spouses may be deprived of the retirement savings when
Women’s Law Center, said federal legislation is necessary they need them the most,” Matsui said. “They may not even
because of the gap between the current rules for defined ben- find out that the retirement savings they were counting are
efit pension plans and defined contribution retirement plans. gone until their spouse dies.” —Allison Bell

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