William Byrnes' Tax, Wealth, and Risk Intelligence

William Byrnes (Texas A&M) tax & compliance articles

TaxFacts Intelligence Nov 20, 2020

Posted by William Byrnes on November 20, 2020

This week we look at the three sets of updates from the IRS regarding various SECURE Act changes (subscribers will find our coverage the same week as the release in Tax Facts Online). First, we have guidance for employers on vesting schedules for long-term part-time employees. Next is an update on how QCDs are affected by (newly) deductible qualified plan contributions made after age 70½. Finally, we have guidance that accepting contributions from plan holders who are past age 70½ is not mandatory, and may be disallowed by financial institutions.

Prof. William H. Byrnes         Robert Bloink, J.D., LL.M.

IRS Offers Guidance on Vesting Rules for Long-Term, Part-Time Employees Post-SECURE Act

The SECURE Act generally amends the 401(k) qualification rules to allow participation for certain long-term, part-time employees. IRC Section 401(k)(15)(B)(iii) provides special vesting rules for employees who become eligible to participate solely by reason of having completed three consecutive 12-month periods where the employee completed at least 500 hours of service (long-term, part-time employee). The rule providing that 12-month periods beginning before January 1, 2021 are not taken into account does not apply for purposes of the vesting rules. Generally, all years of service with the employer maintaining the plan must be taken into account for purposes of determining a long-term, part-time employee’s nonforfeitable right to employer contributions under the special vesting rules in § 401(k)(15)(B)(iii). For purposes of determining whether a long-term, part-time employee has a nonforfeitable right to employer contributions (other than elective deferrals), each 12-month period for which the employee has at least 500 hours of service is treated as a year of service. For more information, visit Tax Facts Online. Read More

IRS Provides Details on Reducing Excludable QCDs Caused by Deductible Post-70½ Contributions

The SECURE Act amended the rules governing qualified charitable distributions (QCDs), which are distributions from an individual’s IRA, made directly to charity on or after age 70½. The amendment provides that the excludable amount of QCDs for a taxable year is reduced by the aggregate amount of IRA contributions deducted for the year and any earlier taxable years in which the individual was age 70½ or older by the last day of the year (post-age 70½ contributions). The excludable amount of QCDs for a taxable year is not reduced by the amount of post-age 70½ contributions that caused a reduction in the excludable amount of QCDs for earlier taxable years. For more information on the IRS guidance, visit Tax Facts Online. Read More

IRS Provides Clarity on SECURE Act Post-70½ IRA Contributions

The IRS has released guidance clarifying that while the SECURE Act removed the age 70½ restriction on making traditional IRA contributions, the provision is not mandatory. In other words, financial institutions can choose whether or not to accept IRA contributions after the account owner has reached age 70½. If the financial institution does choose to accept post-70½ contributions, the institution must amend its contracts to provide for the change. The IRS has announced that it plans to release revised model IRAs and prototype language to help reflect these changes. Further, the IRS guidance clarifies that post 70½ contributions cannot be used to offset RMDs—the contributions and distributions are treated as separate transactions. For more information on the IRA contribution rules, visit Tax Facts Online. Read More

Texas A&M University School of Law’s online wealth and international tax risk management graduate curricula for industry professionals has attracted over 160 enrollment this fall semester. Apply now for courses that begin on January 18 spring semester. See the international tax course list by > weekly topic here. <

Texas A&M, annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!

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