The Slott Report

Question: According to the IRS website: Beginning in 2015, you can make only one rollover from an IRA to another (or the same) IRA in any 12-month period, regardless of the number of IRAs you own (Announcement 2014-15 and Announcement 2014-32). The limit will apply by aggregating all of an individual’s IRAs. Trustee-to-trustee transfers between IRAs are not limited. Rollovers from traditional to Roth IRAs ("conversions") are not limited. If I am reading this correctly, we can "roll over" (hand carry checks) for multiple IRA accounts, as long as we are rolling over funds to a Roth IRA. Is that correct? Thank you, Shirley Answer: Hi Shirley, The once-per-year rollover rule causes a lot of confusion. You can only do one 60-day rollover between IRAs of the same type in a 365-day period. This rule applies to your traditional and Roth IRAs in the aggregate.

As we gradually peel back the layers of this legislative onion called the SECURE Act, more and more discoveries come to light. One revelation is how qualified charitable distributions (QCDs) are potentially affected. Could a QCD become, effectively, a taxable distribution? A looming cloud could soon peer over the shoulders of otherwise generous and giving individuals. As a reminder, QCDs can be done by IRA owners (and inherited IRA owners) who are age 70½ or older. (The SECURE Act raised the age of RMDs to 72. However, the Act did not increase the age for QCDs - 70½ is the status quo.) IRA assets are transferred directly from an IRA to an eligible charity, and the dollar amount of the QCD is excluded from the account owner’s taxable income up to a maximum of $100,000 annually.

The new SECURE Act contains three provisions that are designed to promote annuities in company savings plan. The January 8, 2020 Slott Report described the first of these three changes – new protection for companies if the insurance company selected by the plan to provide annuities later runs into financial difficulties and cannot make payments. Today, we will discuss the other two new provisions. Congress believed that plan sponsors were reluctant to offer annuity products in savings plans not only because of potential liability, but also because of uncertainty over whether the company could later eliminate that option.

Question: Hoping you might be able to offer some guidance. We have a client who has two IRA accounts. The client is 80 years of age. He wants to convert the full amount in one of his IRA accounts to a Roth. The IRS says that distributions from IRA accounts are treated as satisfying the RMD first, so we need to take the RMD before we process the conversion. My questions are: 1.) The client has plenty of money in IRA #2 to satisfy the RMD for both IRA accounts. I presume that doesn't matter and we still need to take the RMD before we convert? 2.) Is the RMD that must be satisfied ONLY the RMD for IRA #1 that we plan to convert to a Roth, or is the RMD that must be satisfied the aggregate of both IRA accounts that must be met before we convert IRA #1 to a Roth? Thank you. Jamie

On December 20, 2019 the Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law. This new law includes some big changes for your retirement account. Here are the top 10 things you need to know: No more age limits for traditional IRA contributions. Beginning in 2020, the new law eliminates the age limit for traditional IRA contributions (formerly 70 ½). Required minimum distributions (RMDs) can start a little later. The new law raises the age for beginning RMDs to 72 for all retirement accounts subject to RMDs. IRA owners age 70 ½ in 2020 catch a break and will not have to take their first RMD for 2020.

The stretch IRA is on a stretcher and paramedics just loaded it into an ambulance. It is on life support. Prognosis: negative. For most new beneficiaries, the stretch will not survive. The SECURE Act is the perpetrator, and it gives no quarter. The Act stood defiantly over the stretch after inflicting its damage and made no effort to run when the sirens wailed. But all is not lost. Despite its injuries and overall dire shape, prone in a hospital bed, the stretch may still help some needy heirs. Preceding this assault, essentially two classes of beneficiaries existed. There was the all-encompassing “Beneficiary” term that comprised everyone and everything. Charities, spouses, grandkids, estates, nieces, nephews, trusts, etcetera all fell under this enormous umbrella. Additionally, there was a further subdivision dubbed “Designated Beneficiaries.”

Question: I turn 70 1/2 in 2020. Since I do not have to take a required minimum distribution (RMD), how much can I do in a qualified charitable distribution (QCD) this year? Ronnie Answer: Hi Ronnie, Even though you won’t have an RMD for 2020, that doesn’t affect your ability to take a QCD at age 70 ½. One of the benefits of taking a QCD is to have it count towards the RMD. However, QCDs can be taken in amounts in excess of the RMD (up to the $100,000 annual limit) and can even be taken in years (such as 2020 in your case) when there is no RMD. Just be sure not to initiate the QCD before you are actually 70 ½.

There are three new provisions in the recently enacted SECURE Act designed to promote annuities in company savings plans. That explains why insurance companies lobbied so hard for passage of the legislation. The three provisions are: New protection for plan sponsors who want to start offering annuities. New options for participants to keep their plan annuity investments if the plan stops offering annuities. A new requirement that benefit statements show annuity illustrations. Today, we’ll discuss the first of these three changes. A future Slott Report will tackle the other two.

The SECURE Act is here! Most of new law’s provisions kicked in on January 1, 2020, overhauling many of the rules for retirement accounts that have been with us for decades. One significant change the SECURE Act brings us is the delay in the age at which RMDs must start from 70 ½ to 72. This new rule has raised questions as to how those who reached age 70 ½ in 2019 are affected. Some had already taken 2019 RMDs. Others were waiting to take their first RMD until closer to their required beginning date of April 1, 2020. What happens now to those who reached 70 ½ in 2019? Do they still need to take an RMD for 2019? Can they then stop RMDs until they reach age 72? Would they have a new required beginning date?

Question: With the SECURE Act, can a person who is older than 70 ½ fund a 2019 Traditional IRA? The SECURE Act goes live on 1/1/2020, and an IRA can be funded up to 4/15/2020 for the previous year. Any reason they cannot? Answer: Unfortunately, the answer is no. The new rule eliminating the age limit for traditional IRA contributions is effective January 1, 2020. Prior year contributions for 2019 would be subject to the old rules, including the age limit. The bad news is that a 2019 contribution would not be allowed. The good news is that for 2020 and later years, the age limit is gone.