RESA Status

Submitted by Herm Brames on Wed, 2019-07-17 14:07

Why are most folks posting on this site seeming to “roll over” and accept that passage of the RESA as a DONE DEAL? Are not tens of millions of IRA owners and beneficiaries of IRA’s going to be adversely affected if the Senate Finance Committee passed this act as written? Why are not many owners of IRA’s utilizing their knowledge of “Social Media “ getting the word out to “keep your hands off my retirement account, and how I leave anything that is left after I’m gone”? Why must Congress screw me and my beneficiaries “ to help others enhance their retirement benefits?



Submitted by Alan - IRA critic on Wed, 2019-07-17 15:28

GIven the situation in Washington, nothing is a done deal until the final bill is passed and signed into law. But you are basically right that the main benefit of these bills (SECURE and RESA) are to enhance current retirement savings opportunities and this is being paid for by partial elimination of the non spouse beneficiary stretch. The path to this legislation was enhanced when SCOTUS ruled that inherited retirement accounts are not protected in bankruptcy because they are not effectively the retirement accounts of beneficiaries, just the original owners. That started the ball rolling to reduce the benefits to beneficiaries including collecting the taxes sooner rather than later. It is also a way to increase tax revenue without actually increasing tax rates. The financial industry is also supporting this legislation as they apparently think that it will result in the additional retirement savings revenue they will receive from Day 1 being more than enough to offset faster payout to non spouse beneficiaries. Another point they make is that those that need the money most are likely to cash out the inherited accounts in a short period anyway. And even the distributions due to the shorter stretch taken by those that do NOT need the funds will often be used to reinvest in maxing out the beneficiary’s OWN retirement plans (eg 401k). Remember that there are exceptions for minors, disabled beneficiaries, and beneficiaries who are not more than 10 years younger than the account owner.



Submitted by Herm Brames on Thu, 2019-07-18 19:24

Thank you Alan for responding to my post. Yes, while SCOTUS ruled that inherited retirement accounts of non-spouse beneficiaries are not protected in bankruptcy proceedings, the ruling did not have any direct effect on the legality or ability of non-spouse beneficiaries to “stretch “. I have, since my first TIRA to ROTH conversion in 1999, viewed this “stretch “ as our children’s TRUST to fund in part today’s exorbitant cost of college education for their children which many parents today must dip into their retirement savings to fund. Congress in passing the ROTH 1998 Legislation encouraged me to convert taxable IRAs to ROTHs by providing an incentive to convert by allowing taxes due on those conversions to be paid in equal installments over 4 subsequent years. Congress never told me to be careful because they were doing a bait and switch and might double cross me in the future. With that Congressional encouragement and promise, I and my wife paid approximately $125,000 in additional Federal Income Tax over the years to assist our children beneficiaries in their retirement years through our designation of them as non-spouse beneficiaries. The Senate is planning an approximate 4 to 6 week summer recess around the end of next week (July 26, 2019) when they return home to, among other things, having listening sessions with their constituents. I, as an IRA owner, will be accessing my FL Senators (Rubio and Scott) calendars on Google and will be attending and speaking to this issue at any public session in the Tampa Bay area (dressed in a red shirt signifying the RESA leaving me and my beneficiaries financially bloody if this Act passes). I invite hundreds of other IRA owners in the Tampa Bay Area of FL to join me in “red” to exercise their voice against this Act. I encourage others around the country to organize and do likewise if they oppose this legislation. The Wall Street Journal published an article by Philip DeMuth on July 10, 2019 detailing many of the problems for IRA owners should this Act pass. Google DeMuth to access his WSJ article. The Journal yesterday (July 17, 2019) also published an editorial cautioning against Congress breaking the CONTRACT with retirement savers.



Submitted by Bruce Steiner on Fri, 2019-07-19 13:49

  • The bill has hit several snags.
  1.  Mitch McConnell won’t take it up in the Senate without unanimous consent, and Ted Cruz objects to it because it would preclude the use of 529 plan money for home schooling.
  2.  The word is getting out that the main purpose of the bill is to allow annuities in 401(k) plans.  Annuities aren’t needed in 401(k) plans.  When you retire, if you need or want an annuity, you can roll over your 401(k) benefits into an IRA and buy an annuity.
  3. The Wall Street Journal editorial opposes the bill:  https://www.wsj.com/articles/iras-in-political-sights-11563318661. 

 



Submitted by Chuck 2009x on Sat, 2019-07-20 17:15

  • Because “tens of millions” of IRA owners are NOT affected.  In designing the payfor, the art of the game is to raise the most from the fewest, in order to lessen the amount of opposition.  That’s why RESA had and has an exemption amount.  “Go find me the (exemption) number where 99% of the CURRENTLY existing accounts fall under it.”
  • Cruz and a few others are holding up unanimous consent of the SECURE Act in the Senate for various reasons, none of which is the fairness or unfairness of the accelerated distributions.
  • There has been talk this week of getting rid of the Senate problem by attaching SECURE to some other must-pass bill.  That’s always been a possibility.  You just wake up one morning and find out it got done yesterday.
  • You never know what’s gonna happen.  RESA never got to the floor in the two previous Congresses.  So SECURE has gotten a lot farther so far.
  • It’s good that the tax grab is finally getting some mainstream (ie. WSJ) attention.  It might move the needle a little.
  • Social media doesn’t mean jack for stuff like this and no one affected uses social media anyway.
  • Two years ago, I wrote a snail mail letter to every member of the Senate Finance Committee, my two Senators, and my House rep about RESA.  I got a single reply, from my House rep.  This year, as soon as SECURE was introduced, I wrote to Richie Neal (who’s not my rep, but is from my state).  No reply.
  • In my case, I am a prospective bene,  and none of the typical alternatives (Roth conversion, life insurance, CRUT, etc.) are viable.  So there’s nothing I can do but wait and hope that the works stay gummed up.
  • The annuity-sellers want this real bad, they can taste it and see the finish line.  But shame on the rest of the investment community who seem to be looking at it as just taking money out of one pocket (tax-deferred) and putting it into the other (taxable), when they are actually going to be dropping a lot on the floor in the process.


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