William Byrnes' Tax, Wealth, and Risk Intelligence

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

TaxFacts Intelligence November 19, 2021

Posted by William Byrnes on November 19, 2021


Leaders at the G20 summit in Rome endorsed an overhaul of the international tax rules that would impose a 15 percent global minimum tax to companies with revenues of more than $867 million. This deal is designed to discourage companies from avoiding taxes by finding havens with low tax rates. Although the pact probably won’t be fully enacted until 2023, it is something to keep an eye on as it could have implications for the global economy. Back in the United States, we have a mixed bag of retirement-related content this week.  First, the IRS took steps to help pension sponsors rehire workers who may have started receiving pension distributions due to pandemic-related retirements without risking qualified status. Second, the IRS extended its non-enforcement policy for investment advice fiduciaries who provide retirement and rollover-related relief. Third, in a surprise move, Congress dropped all retirement-related changes from the proposed spending legislation. Are your clients up to speed?

By the way subscribers, the Texas A&M graduate program for tax, wealth, and risk management is accepting applications for spring. Maximum enrollment for a course section is 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other. Learn more about it here: https://law.tamu.edu/distance-education

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

IRS Provides Relief for In-Service Pension Distributions to Help Businesses Rehire Post-COVID

The IRS has updated its FAQs to provide relief for business owners looking to rehire in the wake of the COVID-19 pandemic. Some workers chose to take an early retirement during the height of the pandemic and may have begun receiving distributions from pension plans.  Under the first question, the IRS addressed a situation where a pension did not provide for in-service distributions and began paying benefits to a participant who experienced a bona fide retirement. If the plan sponsor rehires the participant because of unforeseen hiring needs, that individual’s prior retirement will still be treated as a “bona fide retirement”. According to the IRS, a rehire due to unforeseen circumstances that do not reflect any prearrangement to rehire the individual will not cause the individual’s prior retirement to no longer be considered a bona fide retirement under the plan. The IRS has also clarified that a qualified pension can allow individuals to begin in-service distributions if the individual has either attained age 59½ or the plan’s normal retirement age.  However, distributions prior to age 59½can lead to imposition of a 10 percent penalty unless an exception applies.  For more information on pre-retirement distributions from qualified plans, visit Tax Facts Online. Read More

DOL Updates Temporary Enforcement Policy on Prohibited Transaction Rules for Investment Advice Fiduciaries

The Department of Labor (DOL) once again updated its temporary enforcement policy for investment advice fiduciaries to allow firms and advisors more time to comply with new prohibited transaction exemption (PTE) 2020-02. The PTE was set to become fully effective as of December 20, 2021.  Recognizing that allowing the temporary enforcement policy to expire next month would create practical difficulties for financial institutions, the DOL extended the policy through January 31, 2022. As a result, the DOL will not pursue prohibited transactions claims against investment advice fiduciaries who are working in good faith to comply with the impartial conduct standards under PTE 2020-02.  It will also not treat these fiduciaries as violating the prohibited transaction rules during this period. The DOL will not enforce the “specific documentation” and disclosure requirements for rollovers under PTE 2020-02 through June 20, 2022.  Aside from the rollover exception, all other requirements will be subject to full enforcement as of February 1, 2022. For more information on PTE 2020-02 and the new investment advice fiduciary standard, visit Tax Facts Online. Read More

Retirement Proposals Dropped From Framework Legislation

As negotiations over the framework spending legislation stalled last week, Congress took an unexpected turn and dropped all retirement proposals from the spending package. That includes proposals to require certain employers to enroll employees automatically in retirement savings programs and the increased credits for small businesses who adopt a retirement plan or auto-enrollment provision for the first time. All provisions that would close the “backdoor” to Roth IRAs for high earners were also dropped from the proposal, as were the changes that would impose contribution limits on high-income taxpayers with large IRA balances. The earlier proposal would have also changed the Saver’s Credit by turning it into a government-sponsored matching contribution. For more information on the current Roth conversion rules that allow higher income taxpayers to indirectly fund a Roth account, visit Tax Facts Online. Read More

Look in your Tax Facts Online app for our continuing analysis of 2021 legislative and regulatory updates, and the impact on 2022 client planning, as well as other weekly intelligence.

Wealth & Risk Management Degree for Industry Professionals – learn about the graduate degree here: https://law.tamu.edu/distance-education

Texas A&M, an 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! The law school has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)

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