Bonds

Under the 2024 final RMD regulations, the surviving spouse will automatically be treated as the participant (without the need to make a special election) if all of the following are true:<br /> (1) the surviving spouse is the sole beneficiary, (2) the original participant died before their required beginning date and (3) the surviving spouse will receive payments under the life expectancy rule (rather than the ten-year rule).<a href="#_ftn1" name="_ftnref1">¹</a><br /> <br /> If the original participant died after their required beginning date, the surviving spouse must make a separate election to be treated as though they were that participant.<a href="#_ftn2" name="_ftnref2">²</a><br /> <br /> This election is only available when the surviving spouse’s first RMD would be in 2024 or later. If the original participant would have reached their required beginning date in 2024 or later, the spousal election is permitted.<br /> <br /> Whenever an election to be treated as the original participant is in effect, the Uniform Lifetime Table factor will be used to determine the amount of the surviving spouse’s RMDs up<br /> until the year of the surviving spouse’s death. Generally, this will result in smaller annual RMDs when compared to use of the Single Life Table.<br /> <br /> Also assuming an election to be treated as the original participant is in effect, upon the surviving spouse’s death, that spouse’s beneficiary must continue to receive distributions based<br /> on that spouse’s remaining life expectancy using the Single Life Table if the surviving spouse dies on or after the date they have begun to receive required distributions. The factor is determined using the surviving spouse’s remaining life expectancy in their year of death (based on age), and then reducing that by one for each subsequent year. The surviving spouse’s beneficiary has ten years to empty the account (i.e., they are not treated as an eligible designated beneficiary).<br /> <br /> The proposed regulations also propose that, although the spousal election allows the spouse to be treated as the participant for purposes of the RMD regulations, that treatment does not<br /> apply in all situations. It would, however, apply so that the spouse would not be subject to the 10% early withdrawal penalty for pre-age-59 ½ distributions. The surviving spouse’s RBD would also be determined by reference to the original participant’s age, rather than the surviving spouse. The proposed regulations also provide that when determining the account balance for RMD purposes, all amounts held in a designated Roth account and any other account under the plan are included for purposes of calculating the RMD for the year.<a href="#_ftn3" name="_ftnref3">³</a><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>. Treas. Reg. §§ 1.401(a)(9)-3(d), 1.401(a)(9)-3(e).<br /> <a href="#_ftnref2" name="_ftn2">2</a>. Treas. Reg. § 1.401(a)(9)-5(g)(3)(i).<br /> <a href="#_ftnref3" name="_ftn3">3</a>. Prop. Treas. Reg. § 1.401(a)(9)-5(g)(3)(ii).

As a reminder for clients as we approach the busy holiday season, clients who are interested in executing a Roth conversion must first take all RMDs for the year. This rule was included in the final RMD regulations released by the IRS earlier in 2024....

The IRS issued a snapshot addressing certain audit and compliance issues about qualified plan investments in third-party loans. Qualified retirement plans are not explicitly prohibited from investing in third-party loans. The IRS snapshot reminds taxpayers that the plan may not lend money to disqualified persons...

For 2025, the ACA affordability threshold was increased from 8.39% to 9.02%–meaning that employer-sponsored coverage will only be deemed affordable if the employee’s required contribution for self-only coverage does not exceed 9.02% of the employee’s household income. Now, the IRS has announced a decrease in...

by Prof. Robert Bloink and Prof. William H. Byrnes<br /> <br /> With each passing year, the American workforce has become more mobile. While employer-sponsored 401(k) plans are now an incredibly common employment benefit, it’s also incredibly common for employees to move between jobs with increasing frequency. These factors...

The IRS has released the 2025 inflation-adjusted numbers for health FSAs, qualified small employer HRAs (QSEHRAs), long-term care insurance and other valuable benefits. For 2025, the contribution limit for health FSAs will increase from $3,200 to $3,300. The carryover limit will increase from $640 in...

The U.S. Supreme Court has agreed to determine the appropriate pleading standard that will apply in litigation involving the prohibited transactions rules. By way of background, the prohibited transaction rules prevent plan fiduciaries from transacting with certain interested parties unless a prohibited transaction exemption applies....

As unbelievable as it sounds, we're now approaching the busy year-end holiday season. At the same time, IRA owners should be advised about some valuable – and often required – year-end action items for their IRAs. First and foremost, taxpayers who reached age 74 or...

Beginning in 2024 and beyond, employers are entitled to make matching contributions to an employer-sponsored retirement plan based on an employee’s qualified student loan payments because of new options introduced by the SECURE Act 2.0. Employers are subject to certain certification rules to ensure that employers are, in fact, making the student loan payments. Under IRS guidance, employers can independently certify (1) the amount of the loan payment; (2) the date of the loan payment; (3) that the payment was made by the employee.  The Department of Education, however, has adopted new regulations via The Stop Student Debt Relief Scams Act that require student loan servicers to prevent third parties from accessing student borrowers’ data in an effort to prevent fraud.<br /> <br /> We asked two professors and authors of ALM’s <em>Tax Facts </em>with opposing political viewpoints to share their opinions about whether the Department of Education regulations will negatively impact the availability of the employer-sponsored student loan match.<br /> <br /> Below is a summary of the debate that ensued between the two professors.<br /> <br /> <strong>Their Votes:</strong><br /> <br /> <img class="alignnone size-medium wp-image-62920" src="https://cms-taxfacts.thinkadvisor.com/wp-content/uploads/2024/07/ByrnesThumbsUp-300x105.png" alt="" width="300" height="105" /><br /> <br /> <img class="alignnone size-medium wp-image-62922" src="https://cms-taxfacts.thinkadvisor.com/wp-content/uploads/2024/07/BloinkThumbsDown-300x105.png" alt="" width="300" height="105" /><br /> <br /> <strong>Their Reasons:</strong><br /> <br /> <strong>Byrnes:</strong> The Department of Education regulations are almost certain to have a chilling impact on employers' ability to offer the student loan matching option post SECURE 2.0. Student loan servicers are completely unable to provide third parties (meaning employers) with information about a student borrower's debt. That makes it impossible for the employer to verify that the employee is actually making valid student loan payments as required by law.<br /> <br /> <strong>Bloink:</strong> These DOE regulations serve a critical function of protecting access to student borrowers' private information. While they may present an administrative hurdle for employers in offering the student loan match, it's certainly not a burden that is insurmountable or severe enough that it will deter employers from offering this valuable new benefit option.<br /> <br /> ___________________________<br /> <br /> <strong>Byrnes:</strong> Without clearly enumerated exceptions, the student loan matching option will become yet another new employment benefit option that employers are simply unwilling to undertake given the risks. Employers simply won’t be willing to take the risk that their entire program could be disqualified based on failure to properly certify that the employer is making valid student loan payments as required.<br /> <br /> <strong>Bloink:</strong> We have to weigh the benefits against the burdens in situations like this where we have potentially conflicting sets of regulations. We should also remember that employers can request documentation directly from the employee and still satisfy their certification obligations under the current IRS guidance. Self-certification is a completely valid option that eliminates the problems posed by the DOE’s restrictions on granting third parties access to private information.<br /> <br /> ___________________________<br /> <br /> <strong>Byrnes:</strong> When employees are required to manually provide their information, we greatly increase the risk that errors will occur. It’s almost certain to happen. The risk of mistakes is likely to deter employers from offering the student loan matching benefit. The added burden of self-certification may even stop employees from taking advantage of the new option. The simpler we can make the process, the more likely it is that participation will be widespread. Service providers are in the best position to certify that any given employees is really paying down their student debt.<br /> <br /> <strong>Bloink:</strong> It's entirely possible to set a workable application process for trusted third parties that will allow employers the access to information they require to verify compliance with the student loan matching rules. Protecting student borrowers’ personal information is a necessary and valuable step to preventing fraud. We can’t simply abandon the DOE’s protective provisions because it might be inconvenient for student borrower-employees to independently provide their employers with the documentation necessary to satisfy the IRS’ certification requirements.

Now that the October 15 deadline for fixing excess IRA contributions has passed, taxpayers who have missed the deadline may be wondering whether they still have options.  The excess contribution can still be withdrawn from the IRA, but the client will have to pay a...