William Byrnes' Tax, Wealth, and Risk Intelligence

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

Posts Tagged ‘401(k)’

Byrnes & Bloink’s TaxFacts Intelligence Weekly – Actionable Analysis for Financial Advisors

Posted by William Byrnes on November 18, 2019


Texas A&M University School of Law has launched its International Tax online curriculum for graduate degree candidates. Admissions is open for Spring (January) semester for the transfer pricing courses.  Texas A&M University is a public university of the state of Texas and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). 

Final 401(k) Hardship Distribution Rules Take Effect January 1, 2020

Plan participants and sponsors should note that the final regulations governing 401(k) hardship distributions take effect in 2020. As of 2020, participants who take a hardship distribution must now be permitted to continue to make deferrals within the six months following the hardship distribution. While some aspects of the new rules are optional, this new requirement is mandatory with respect to qualified plans. For more information on hardship distributions, visit Tax Facts Online. Read More
IRS Releases Proposed Regs on Accounting for Advance Payments

The IRS has released proposed regulations implementing changes made by the 2017 tax reform legislation that impact the tax treatment of advance payments. The regulations generally adopt the rules contained in Revenue Procedure 2004-34— the approach in place prior to tax reform. For more information on the tax treatment of advance payments, visit Tax Facts Online. Read More
IRS FAQ Provides for Specific Identification in Transactions Involving Virtual Currency

The recently released FAQ on the tax treatment of virtual currency confirms that transactions in bitcoin and other forms of virtual currency will be taxed as transactions in property. The guidance goes further and answers the question of whether taxpayers should identify particular virtual currency that is part of a transaction. For more information on the tax treatment of bitcoin, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com| 800-543-0874

Posted in Taxation | Tagged: , , , | Leave a Comment »

Will Trump Keep His Promise that No One’s Retirement Will Be Taken Away?

Posted by William Byrnes on November 16, 2017


The 2017 Tax Reform discussion originally was, like the 1986 discussion, about whether the Internal Revenue Code should be used for incentives and subsidy in favor of a particular activity or particular group of taxpayers. Broaden the base, lower the rates, simplify the variations, exceptions, and exemptions. But the dueling Chamber proposals are now out and tax reform based on equity and on eliminating tax-incentives was dead on arrival. It the same old ‘every interest’ vying for a portion of the pie. That’s the democratic, political “Gulchi Gulch” process. What is my interest then? I work for a public research university. I have ‘a dog in this fight’ described below. Hope that the government relations staff of NTEU, of state universities, and of other government employee stakeholder groups raise their voices like the Seraphim to the Republican members of the Finance Committee that are willing to listen.

So what’s so alarmed me to divert my attention to the retirement provisions of the Senate Chair’s mark? Did not the President state that retirement would be left alone (see his tweet here)?  Appears the Senate ignored him as usual.

The Senate Finance Committee Chair slipped in (at page 178) an explosive measure for government employees that also impacts public academic institutions. The Senate Finance Committee Tax Reform Chair’s Mark under the current status (November 9, 2017) will limit public employees to one aggregate amount of $18,500 for retirement plans 403(B) and 457 as of January 1, 2018.

Finance Committee Chair Proposal: The proposal applies a single aggregate limit to contributions for an employee in a governmental section 457(b) plan and elective deferrals for the same employee under a section 401(k) plan or a 403(b) plan of the same employer. Thus, the limit for governmental section 457(b) plans is coordinated with the limit for section 401(k) and 403(b) plans in the same manner as the limits are coordinated under present law for elective deferrals to section 401(k) and section 403(b) plans.

Government, including public educational institution, employees needs to become immediately aware that this provision will critically reduce their ability to contribute to their employer retirement plan(s) by $18,500 (or $24,500 for employees 50 years and older) as of January 1, 2018.  Thus, while there is still time to make December 1st contribution changes to preserve the last year of the additional $18,000 (or $24,000 if at least 50 years of age), these employees need to arrange with their payroll officers to contribute before December 31st any difference between what is allowed in 2017 and what has actually been contributed. As of January 1, 2018, the ability to contribute is gone forever.

Hatch Amendment #2 An amendment to the catch up contribution rules for section 401(k), 403(b) and 457)(b) retirement savings plans. Description of Amendment: This amendment would require all catch up contributions to section 401(k), 403(b) and 457(b) retirement savings plans to be Roth only, and increase the $6,000 catch up contribution annual limit applicable to such plans to $9,000.

See what he’s done here to Americans trying to save for retirement? At age 50 plus, we will pay on average – say 30 percent – for each catchup retirement dollar. How many years does it take to catchup with this 30 percent loss out the door? Based on historical annual average market returns, it will require four years to break even on the 30 percent loss. Only in year five will the 50-year-old, based on historical returns, start to earn towards retirement relative to her situation today in 2017. Where does our 30 percent loss out the door go? To pay for …. an energy credit? I don’t know. The revenue raised is relatively minuscule. The damage to retirement savings – tremendous.

Lack of Impact Analysis on Retirement and Public Employees

Curiously, I have not found many informative articles about the impact to retirement from these above-mentioned changes. Why is it silence from the public university crowd that is usually quite loud although this provision will damage their ability to attract researchers, faculty, and staff from the higher compensation opportunities of private educational institutions and for-profit industry?  Are we embarrassed to appear to be lobbying to keep a tax break? Just caught by surprise?  At least the NAGDCA has sent out an alert (Government Defined Contribution Administrators) to its members.

Instead of the beneficial retirement system, government agencies and public institutions need to find more revenue to pay competitive salaries and employee benefits to replace the loss of the retirement benefits (doubtful) Senate Finance will take away. Lacking better salaries, government agencies and public institutions will experience disproportionate employee turnover of the best performing management coupled with a declining ability to attract highly accomplished professionals and researchers to replace the pool.

Is this Payback Against the IRS?

Perhaps this provision is a Republican payback to government agencies like the IRS because Republicans think that the current government management pool is biased against Republican groups or lacks service for taxpayers? But taking out the best performing managers from government service will exasperate the challenges, not remediate them. If this is a ‘payback’, then it is “cutting off one’s nose”.  Perhaps the provision is but a Machiavellian move in a contest for talent between a state university and its private counterpart (Utah v BYU comes to mind)?

Maybe the silence from the government and public institutions employees is ‘heads in the sand’, and perhaps ‘those in the know’ think this provision will not survive because JCT scored it as only worth $100 million a year at least until 2021 (so why waste the political capital). Apportioned amongst all government employees in the US (being federal and state), state public academic institutions I suspect are less than 10 percent of this score, thus about $10 million a year for offset (inconsequential basically).

Can Public Institutions Be Saved?

A carve-out from this provision for public educational institutions would address the harmful issue and can be negotiated in response to the also proposed loss of the current carve-out for deferrals allowed for section 403(b) plan for at least 15 years of service to an educational organization, hospital, home health service agency, health and welfare service agency, and church. Seems to me that Republicans would prefer to incentivize via retirement doctors, nurses, social workers, and clergy to stay long-term in their public positions instead of paying higher government salaries.

Interested to learn the impact on your clients of the 2018 tax changes, and what to do about it?  Read the online version of Tax Facts.

Posted in Retirement Planning | Tagged: , , , | Leave a Comment »

How Did Deferred Annuities Emerge As the Preferred 401(k) Investment?

Posted by William Byrnes on November 13, 2014


Irs_logo

 

The IRS has cleared the path for 401(k) sponsors who wish to expand clients’ use of longevity insurance within 401(k)s by allowing target date funds (TDFs) to include deferred annuities, even for those plan participants who do not actively manage their investment allocations.

read about The New IRS Guidance

Posted in Retirement Planning | Tagged: , | Leave a Comment »

IRS Announces 2015 Pension Plan Limitations; Taxpayers May Contribute up to $18,000 to their 401(k) plans in 2015

Posted by William Byrnes on October 23, 2014


The Internal Revenue Service announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2015.  Many of the pension plan IRS logolimitations will change for 2015 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment.  However, other limitations will remain unchanged because the increase in the index did not meet the statutory thresholds that trigger their adjustment.  Highlights include the following:

  • The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,500 to $18,000.
  • The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $5,500 to $6,000.
  • The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500.  The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
  • The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000, up from $60,000 and $70,000 in 2014.  For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $98,000 to $118,000, up from $96,000 to $116,000.  For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $183,000 and $193,000, up from $181,000 and $191,000.  For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
  • The AGI phase-out range for taxpayers making contributions to a Roth IRA is $183,000 to $193,000 for married couples filing jointly, up from $181,000 to $191,000 in 2014.  For singles and heads of household, the income phase-out range is $116,000 to $131,000, up from $114,000 to $129,000.  For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
  • The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $61,000 for married couples filing jointly, up from $60,000 in 2014; $45,750 for heads of household, up from $45,000; and $30,500 for married individuals filing separately and for singles, up from $30,000.

Below are details on both the adjusted and unchanged limitations.

Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans.  Section 415(d) requires that the Secretary of the Treasury annually adjust these limits for cost of living increases.  Other limitations applicable to deferred compensation plans are also affected by these adjustments under Section 415.  Under Section 415(d), the adjustments are to be made under adjustment procedures similar to those used to adjust benefit amounts under Section 215(i)(2)(A) of the Social Security Act.

Effective January 1, 2015, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) remains unchanged at $210,000.  For a participant who separated from service before January 1, 2015, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant’s compensation limitation, as adjusted through 2014, by 1.0178.

The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2015 from $52,000 to $53,000.

The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of Section 415(b)(1)(A).  After taking into account the applicable rounding rules, the amounts for 2015 are as follows:

The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) is increased from $17,500 to $18,000.

The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $260,000 to $265,000.

The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan remains unchanged at $170,000.

The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5 year distribution period is increased from $1,050,000 to $1,070,000, while the dollar amount used to determine the lengthening of the 5 year distribution period remains unchanged at $210,000.

The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $115,000 to $120,000.

The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over is increased from $5,500 to $6,000.  The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over is increased from $2,500 to $3,000.

The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost of living adjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, is increased from $385,000 to $395,000.

The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) is increased from $550 to $600.

The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $12,000 to $12,500.

The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased from $17,500 to $18,000.

The compensation amount under Section 1.61 21(f)(5)(i) of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation remains unchanged at $105,000.  The compensation amount under Section 1.61 21(f)(5)(iii) is increased from $210,000 to $215,000.

The Code also provides that several retirement-related amounts are to be adjusted using the cost-of-living adjustment under Section 1(f)(3).  After taking the applicable rounding rules into account, the amounts for 2015 are as follows:

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for married taxpayers filing a joint return is increased from $36,000 to $36,500; the limitation under Section 25B(b)(1)(B) is increased from $39,000 to $39,500; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $60,000 to $61,000.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for taxpayers filing as head of household is increased from $27,000 to $27,375; the limitation under Section 25B(b)(1)(B) is increased from $29,250 to $29,625; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $45,000 to $45,750.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for all other taxpayers is increased from $18,000 to $18,250; the limitation under Section 25B(b)(1)(B) is increased from $19,500 to $19,750; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $30,000 to $30,500.

The deductible amount under Section 219(b)(5)(A) for an individual making qualified retirement contributions remains unchanged at $5,500.

The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) is increased from $96,000 to $98,000.  The applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $60,000 to $61,000.  The applicable dollar amount under Section 219(g)(3)(B)(iii) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.  The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $181,000 to $183,000.

The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(I) for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is increased from $181,000 to $183,000.  The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $114,000 to $116,000.  The applicable dollar amount under Section 408A(c)(3)(B)(ii)(III) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.

The dollar amount under Section 430(c)(7)(D)(i)(II) used to determine excess employee compensation with respect to a single-employer defined benefit pension plan for which the special election under Section 430(c)(2)(D) has been made is increased from $1,084,000 to $1,101,000.

 

Posted in Taxation | Tagged: , , | Leave a Comment »

High-income clients able to fund Roth IRAs?

Posted by William Byrnes on May 27, 2014


Roth IRAs usually do not make it into a higher-income client’s retirement planning playbook. The income limits set in place even prevent many upper-middle class clients from contributing to a Roth.

These limits do, in fact, block clients with earnings above the annual threshold level from contributing to a Roth directly, but there is an alternative route to Roths for high-income clients looking to minimize their tax burden in retirement.

Read >Roths for high earners: the strategy < !

2013_tf_insurance_emp_benefits_combo_covers-m_2Authoritative and easy-to-use, 2014 Tax Facts on Insurance & Employee Benefits shows you how the tax law and regulations are relevant to your insurance, employee benefits, and financial planning practices.  Often complex tax law and regulations are explained in clear, understandable language.  Pertinent planning points are provided throughout.

Organized in a convenient Q&A format to speed you to the information you need, 2014 Tax Facts on Insurance & Employee Benefits delivers the latest guidance on:

  • Estate & Gift Tax Planning
  • Roth IRAs
  • HSAs
  • Capital Gains, Qualifying Dividends
  • Non-qualified Deferred Compensation Under IRC Section 409A
  • And much more!

Key updates for 2014:

  • Important federal income and estate tax developments impacting insurance and employee benefits including changes from the American Taxpayer Relief Act of 2012
  • Concise updated explanation and highlights of the Patient Protection and Affordable Care Act (PPACA)
  • Expanded coverage of Annuities
  • New section on Structured Settlements
  • New section on International Tax
  • More than thirty new Planning Points, written by practitioners for practitioners, in the following areas:
    • Life Insurance
    • Health Insurance
    • Estate and Gift Tax
    • Deferred Compensation
    • Individual Retirement Plans

Plus, you’re kept up-to-date with online supplements for critical developments.  Written and reviewed by practicing professionals who are subject matter experts in their respective topics, Tax Facts is the practical resource you can rely on.

Posted in Retirement Planning | Tagged: , , , , | Leave a Comment »

More than 40% of big firm partners retiring over coming decade – and many will outlive retirement savings!

Posted by William Byrnes on May 5, 2014


On April 28, 2014 The American Lawyer published its annual (2014) Big Law report in which it found that 16% of partners in the US’ largest 200 law firms by revenue are 60 years old or older with at least 8% least 65.  This generally means that these partners will be retiring over the next five years.  Moreover, right behind this retiring group are 28% more of the partners that have reached at least 50 years of age.

While these thousands of retiring partners have in general been earning between $1 million and $3 million annually, most also have lifestyles that correspond to spending this level of income.  These retiring partners are now asking “Will my retirement portfolio maintain my spouse and my lifestyles if we live another 30 years?”  “Will we have enough to truly enjoy our retirement, or will we have to cut back our lifestyle to make due?”  Will plans for luxurious global travel and spas be thrown out the window?  Wealth managers and financial planners have turned attention to these retirees.

“The 10,000 baby boomer that reach retirement age each day in America are waking up to the probability that they will outspend their retirement plan designed before the financial crisis, forcing a drastic reduction in quality of life style for the ‘golden years’” shared William Byrnes, author of National Underwriter’s Tax Facts.

“The largest concern for most middle class Americans is that social security since Ronald Reagan’s presidency did not increase enough to beat actual inflation.  The average social security monthly payment in 2014 is only $1,294 for a single retiree, and $2,111 for a married couple.  And it is possible that Congress will further reduce inflation adjustments for the future.”

“Moreover, baby boomers are outliving their retirement plans by at least ten years, and thus selling off their remaining assets and relying on children”, continued Professor Byrnes. “It’s no wonder that reverse mortgages have become so popular.”

“It’s not just the middle class retirees trying to survive on $2,500 a month over at least the next 20 years as lifestyle becomes more expensive, upper middle class Americans and even the wealthy also have lifestyle challenges.  A couple who for the past twenty years is used to spending $200,000 a year after tax needs to have significant assets.”

“Let’s run an example using a National Underwriter Advanced Markets retirement calculator.  A 50 year old partner at a law firm that requires retirement by age 67 currently earns after tax $300,000.  The partner will begin saving $60,000 a year toward retirement, and already has $400,000 saved and earned in tax deferred retirement accounts.  The partner expects earnings to increase 1.5% on average per year.  The partner expects to live until 90 years old, and will cut the annual lifestyle by 30% to $210,00 a year upon retirement.  The partner expects a healthy annual rate of return on the investments until reaching 90 of 5%, and average annual inflation of only 2%.”

“The question is: Will the partner’s retirement dollars last  until age 90? Unfortunately, the partner has only 13 years of retirement based on this scenario, and that only if including $42,937 of average annual social security.  At age 80, the $2,439,817 of retirement savings simply runs out. So given these variables, the partner must either save significantly more for retirement, have assets that can be sold down during retirement (such as the family home), or live on only $150,000 a year.  While $150,000 a year sounds like a lot to middle class retirees, for law firm partners living in New York, Miami, DC, LA, San Fran who are used to an upper class lifestyle, living on half the income with double the free time is a shock. And remember, this includes social security paying out over $40,000 of that $150,000 a year.”

“Stretching the retirement savings available for these additional ten years of life expectancy in the example above requires correctly calibrating a retirement plan over the next 20 years which includes managing the complex retirement savings and retirement plans tax rules.”

Robert Bloink added, “Baby boomers retirement taxation questions include: How are earnings on an IRA taxed? What is the penalty for making excessive contributions to an IRA? How are amounts distributed from a traditional and from a ROTH IRA taxed?  How is the required minimum distribution (RMD) calculated?”

“By example of managing the retirement taxation rules, if the baby boomer engages in a prohibited transaction with his IRA, his or her individual retirement account may cease to qualify for the tax benefits.  Thus, then baby boomer needs to understand what is a prohibited transaction?  When can the baby boomer tax pull retirement funds as a loan from a retirement account or policy without it being prohibited?”

“For complex modern families with multiple marriages and various children, a retirement and estate planner should analyze the non-probate assets”, interjected Dr. George Mentz. “Such assets may include the client’s 401k, 403b, 459, annuities, property and joint tenancy, among others.  Regarding insurance policy designations, the client may need to reexamine the beneficiaries, contingent and secondary, and percentages among them, based on current circumstances.”

“Because client’s are outliving their life expectancy and thus outliving their retirement planning, and medical expenses certainly factor into retirement planning, long term care for family members must also be addressed,” said William Byrnes.  “Moreover, recent press has focused client’s attention on tragic incident and end of life issues, such as a durable power of attorney for health care (DPA/HC), living will, or advance directives that explain the patient’s wishes in certain medical situations.  Finally in this regard, a client may require a Limited Powers of Attorney to address situations of incapacity, as well as orderly continuation of immediate family needs upon death.“

Robert Bloink included, “Other important issues to address with the client include pre-marital property contracts/pre-nuptials involving the second marriage(s), IRA beneficiary planning in blended families, spousal lifetime access trust (SLATs), and planning for unmarried domestic partners.”

tax-facts-online_medium

“Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.” said Rick Kravitz.  “The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community.”

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

 Authoritative and easy-to-use, 2014 Tax Facts on Insurance & Employee Benefits shows you how the tax law and regulations are relevant to your insurance, employee benefits, and financial planning practices.  Often complex tax law and regulations are explained in clear, understandable language.  Pertinent planning points are provided throughout.

2014 Tax Facts on Investments provides clear, concise answers to often complex tax questions concerning investments.  2014 expanded sections on Limitations on Loss Deductions, Charitable Gifts, Reverse Mortgages, and REITs.

 

 

If you are interested in discussing the Master or Doctorate degree in the areas of financial services or taxation, please contact me https://profwilliambyrnes.com/online-tax-degree/

Posted in Retirement Planning | Tagged: , , , , | Leave a Comment »

The IRS Will Pay You to Save Retirement Money !

Posted by William Byrnes on March 18, 2014


2013_tf_insurance_emp_benefits_combo_covers-m_2The IRS reported in Tax Tip 2014-28 that it will pay some taxpayers to save for retirement!

If a taxpayer contributes to a retirement plan, like a 401(k) or an IRA, then the taxpayer may be eligible for the “Saver’s Credit”. The Saver’s Credit can help save for retirement and reduce this year’s tax owed.  5 facts about this credit:

1. The Saver’s Credit is the short name for the Retirement Savings Contribution Credit. It can be worth up to $2,000 for married couples filing a joint return. The credit is worth up to $1,000 for single taxpayers.

2. Eligibility depends on a taxpayer’s filing status and the amount of yearly income.  2013 tax return eligibility for the credit depends on:

  • Married filing separately or a single taxpayer with income up to $29,500
  • Head of household with income up to $44,250
  • Married filing jointly with income up to $59,000

3. Other special rules that apply to the credit include:

  • Must be at least 18 years of age.
  • Can’t be a full-time student in 2013.
  • Can’t be claimed as a dependent on another person’s tax return.

4. The taxpayer must have contributed to a 401(k) plan or similar workplace plan by the end of the year to claim this credit. However, a taxpayer can contribute to an IRA by the due date of a tax return (April 15, 2014) and still have that contribution count for 2013.

5. File Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit. Tax software includes this form for e-file.

The Saver’s Credit is in addition to other tax savings for setting aside money for retirement.  For example, a taxpayer may be able to deduct contributions to a traditional IRA.

Authoritative and easy-to-use, 2014 Tax Facts on Insurance & Employee Benefits shows you how the tax law and regulations are relevant to your insurance, employee benefits, and financial planning practices.  Often complex tax law and regulations are explained in clear, understandable language.  Pertinent planning points are provided throughout.

Posted in Retirement Planning, Taxation | Tagged: , , , , | Leave a Comment »

Net unrealized appreciation tax break: Still a tax break in 2013?

Posted by William Byrnes on September 4, 2013


The tax break provided for net unrealized appreciation (NUA) on 401(k) account distributions once provided a powerful tax savings strategy for clients with large 401(k) balances — allowing some clients to reduce their taxes on these retirement funds by as much as 20 percent.

Today, as high-net-worth clients are increasingly seeking strategies to help minimize their tax burdens in light of higher 2013 tax rates, the NUA strategy may have become more complicated than ever.   Read the full analysis of William Byrnes & Robert Bloink at > Life Health Pro <

Posted in Retirement Planning, Taxation | Tagged: , , , , , , , , | Leave a Comment »

GAO Report Touts Annuities in Uncertain Retirement Environment

Posted by William Byrnes on March 26, 2012


Want some free marketing material for your annuities business? Look no further than the U.S. Government Accountability Office (GAO), which recently released a report touting annuities for their ability to provide retirement income sufficiency in an increasingly uncertain environment.

The GAO recommends that retirees delay their receipt of Social Security Benefits and either draw down savings and purchase an annuity or select annuity options from their defined benefit (DB) plan instead of electing to receive their benefits in a lump sum.

According to the GAO, the shift from defined benefit pension plans to defined contribution (DC) plans like 401(k)s necessitates a heightened focus on annuities and other options for guaranteeing income during retirement . And even if workers are saving more for retirement through their DC plans, they are still at greater risk than employees with DB pensions.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of annuities in Advisor’s Journal, see How Much to Allocate to Annuities: A Critical Analysis (CC 11-109) & Drama Over the “Drawbacks” of Annuities (CC 11-62).

For in-depth analysis of the taxation of annuities, see Advisor’s Main Library: A—Amounts Received As An Annuity & B—Amounts NOT Received As Annuities.

Posted in Wealth Management | Tagged: , , , , , , , | Leave a Comment »

Do Your Clients’ International Assets Create Criminal Tax Exposure?

Posted by William Byrnes on August 12, 2011


Retirement plan sponsors face increasing regulatory scrutiny and significant liability as plan fiduciaries. Can you leverage off these fiduciary concerns and generate advisory business for your firm?

There are a couple of key approaches you can use to address sponsors’ concerns about their fiduciary responsibilities and sell to the plans and their sponsors.

Believe it or not, there are a number of plans that don’t use an advisor—with the plan sponsor choosing to go it alone to save a few dollars. As reported in a previous edition of the Advisor’s Journal, a significant of number of employee retirement plans (19%) don’t use an outside investment advisor.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

Posted in Wealth Management | Tagged: , , , , , , , | Leave a Comment »

Target Date Funds on Top of the Defined Contribution World

Posted by William Byrnes on April 8, 2011


Why is this Topic Important to Wealth Managers? This topic discusses a relatively new form of retirement investment offered by companies to their employees. The topic presents information about target date funds, what they are, who may use them and how they work. The defined contribution retirement market is a prime location for wealth managers to earn fees and commissions. Thus, staying informed about new market updates is provided to give managers an edge when exploring retirement benefits.

The Government Accountability Office recently published a report stating that financial security of millions of Americans in their retirement years will substantially depend on their savings in 401(k) and other defined contribution (DC) plans. [1]The GAO notes, to help ensure adequate financial resources for retirement, participants in DC plans should make adequate contributions during their working years and invest contributions in a way that will facilitate adequate investment returns over time.

To that end, the Pension Protection Act of 2006 (PPA) included various provisions designed to encourage greater retirement savings among workers eligible to participate in 401(k) plans, such as provisions that facilitate plan sponsors’ adoption of automatic enrollment policies. [2]

Under such policies, eligible workers are automatically enrolled unless they explicitly decide to opt out of participation. Because an automatic enrollment program must also include a default investment—a vehicle in which contributions will be invested absent a specific choice by the plan participant—the act also directed the Department of Labor to assist employers in selecting default investments that best serve the retirement needs of workers who do not direct their own investments. Since that time, target date funds (TDF)—that is, investment funds that invest in a mix of assets, and shift from higher-risk to lower-risk investments as a participant approaches their “target” retirement date—have emerged as by far the most popular default investment.

TDFs are designed to provide an age appropriate asset allocation for plan participants over time.    However, target date funds vary considerably in asset structures and in other ways, largely as a result of the different objectives and investment philosophies of fund managers. In the years approaching the retirement date, for example, some TDFs have a relatively low equity allocation—35 percent or less—so that plan participants will be insulated from excessive losses near retirement. Other TDFs have an equity allocation of 60 percent or more in the belief that relatively high equity returns will help ensure that retirees do not deplete savings in old age.

TDFs also vary considerably in other respects, such as in the use of alternative assets and complex investment techniques. In addition, allocations are based in part on assumptions about plan participant actions—such as contribution rates and how plan participants will manage 401(k) assets upon retirement—which may differ from the actions of many participants. These investment differences and differences between assumed and actual participant behavior may have significant implications for the retirement security of plan participants invested in TDFs.

Read the analysis at AdvisorFYI

Posted in Retirement Planning | Tagged: , , , , , , , | Leave a Comment »

Retirement Plan Approved and Prohibited Investments

Posted by William Byrnes on February 15, 2011


Why is this Topic Important to Wealth Managers? Discusses retirement plan investments with regards to client retirement planning.  Provides types of investments retirement plans can and cannot make.

What types of investments can a retirement plan make?

Although there is no list of approved investments for retirement plans, there are special rules contained in the Employee Retirement Income Security Act of 1974 (ERISA) that apply to retirement plan investments.

In general, a plan sponsor or plan administrator of a qualified plan who acts in a fiduciary capacity is required, in investing plan assets, to exercise the judgment that a prudent investor would use in investing for his or her own retirement.

In addition, certain rules apply to specific plan types.  For example, there are different limits on the amount of employer stock and employer real property that a qualified plan can hold, depending on whether the plan is a defined benefit plan, a 401(k) plan, or another kind of qualified plan.

Read the entire analysis at AdvisorFYI.

Posted in Retirement Planning | Tagged: , , , , , , , | Leave a Comment »

The Department of Labor Releases Final 401(k) Disclosure Rules

Posted by William Byrnes on November 9, 2010


Fee disclosure rules for 401(k) plans were expected out of the Department of Labor in early 2011, but the Department beat its own estimates, releasing a final rule on plan fee disclosures on October 14, 2010.   The rules impose significant disclosure requirements that are important for everyone associated with self-directed employee retirement plans, including employees and their advisors and plan fiduciaries.

The new rules apply to plan years beginning after November 1, 2011. Although plan administrators have over a year to comply with the new requirements, the disclosure requirements are very extensive—the release that includes the regulations is over 150 pages long—and will require significant action on the part of most plan fiduciaries, so time is of the essence.  Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For in-depth analysis of 401(k) retirement plans, see Advisor’s Main Library: Section 17.5  401(k) Plans.

Posted in Wealth Management | Tagged: , , , , , , , | Leave a Comment »

 
%d bloggers like this: