The Slott Report | Ed Slott and Company, LLC

The Slott Report

CARES Act Expands HSAs

The recently passed CARES Act includes some changes that impact your HSA. These changes will allow you to access more medical services without worrying about your deductible, and also enable you to take more tax-free distributions from your HSA. Here’s what you need to know. Telemedicine Without Meeting Deductible HSAs are designed to work with a high-deductible plan. To be considered a high-deductible plan, a health plan must meet certain requirements. One of them is that the health plan cannot waive the deductible for medical expenses, unless they are considered preventative.

CARES Act RMDs, Inherited IRAs and IRA Rollovers: Today's Slott Report Mailbag

Question: I have been taking my RMDs on a monthly basis in 2020. Since the Cares Act has suspended RMDs for 2020, I would like to rollover my past 2 distributions. I would like to aggregate those two distributions and roll them over. I have not performed any rollovers within the last 12 months. This is where it gets hairy. Some people are telling me I cannot aggregate the past two months distributions and roll them over as ONE rollover. However, those people who have taken their entire RMD as one lump sum vs. monthly are allowed to rollover the entire amount, which doesn't seem fair.

IRS Issues Q&As on Coronavirus-Related Distributions

Under the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), certain individuals can take up to $100,000 of distributions from IRAs and company plans during 2020 and receive special tax relief. Those distributions are known as coronavirus-related distributions (CRDs). On May 4, the IRS released a set of Q&As pertaining to CRDs. The IRS did not address many of the questions about CRDs left unanswered in the CARES Act itself. However, the IRS did promise additional guidance “in the near future.”

THE MEGA BACKDOOR ROTH IS USUALLY TOO GOOD TO BE TRUE

For a number of years, the “mega backdoor Roth” strategy has been touted as a way for employees to convert large amounts of after-tax employee contributions to Roth IRAs. Unfortunately, in most cases the strategy won’t work. Here’s why. First, a little background. The mega backdoor Roth is simply the company retirement plan version of the backdoor Roth IRA. The backdoor Roth IRA is designed for individuals whose income exceeds the IRS limit for making Roth IRA contributions directly. The backdoor strategy allows for higher income employees to make Roth contributions indirectly by making a traditional IRA contribution and subsequently converting it to a Roth IRA.

IRA Contributions and RMD Withdrawals Under the CARES Act: Today's Slott Report Mailbag

Question: Dear Mr. Slott, I seem to have gotten myself into a jam with my 2020 RMD withdrawal and the CARES Act, as it stands now. Hoping you are able to help, or make a suggestion on how to proceed. In January, over three withdrawals, I took my entire 2020 RMD from an IRA. Then the CARES Act seemed to forgive/not require distributions during 2020. I returned the money to my IRA. Now the law has made a determination that RMD withdrawals beginning February 1, 2020 through May 15, 2020 and placed back into IRA accounts are forgiven. Well, my January RMD withdrawal was not forgiven, but I had already placed it back into the IRA account.

SECURE Act Rules for Some Special Needs Trusts

The SECURE Act was a game changer for trusts named as an IRA beneficiary. Most trusts will be limited to a 10-year payout rule, just like most other non-spouse beneficiaries. However, Congress was careful to carve out some exceptions for some trusts with special needs beneficiaries, specifically eligible designated beneficiaries who meet the definition of either being disabled or chronically ill. When certain requirements are met, required minimum distributions to these trusts may still be done over the beneficiary’s life expectancy.

Technology, Roth Conversions and a Squirming Son

77 and sharp - that’s my dad. A voracious reader. Daily crossword puzzles. Curious. Engaged with the community. But he gets a little loose with technology. Comedic evidence suggests he is blissfully unaware if he is having a personal text conversation with me, or if the communication is part of a larger group text with his extended family. He is also too trusting, which is a sad commentary on society in general. This can be perilous when combined with tech. For example, not long ago his computer was infected with malware (“malicious software”). The glowing blue screen offered a phone number and a quick fix. He dialed. When a voice on the other side said the problem could be corrected, my dad willfully shared his credit card information.

SECURE ACT 10-YEAR RULE AND CARES ACT RMD ROLLOVERS: TODAY’S SLOTT REPORT MAILBAG

Question: Did the SECURE Act change the rules for designated non-spouse inheritors of a Roth IRA? I believe they used to be able to take distributions based on their life expectancy. Does the 10-year rule also apply to Roth IRAs? Thanks, Dave Answer: Hi Dave, Yes, the SECURE Act did change the payout rules for most beneficiaries if the IRA owner dies in 2020 or later. With certain exceptions, most beneficiaries cannot stretch out required minimum distributions (RMDs) over their lifetime like before. Instead, they must receive the entire IRA by December 31 of the 10th year following the year of the IRA owner’s death.

4 CARES Act Misconceptions

The Coronavirus Aid, Relief and Economic Recovery Act (CARES Act), signed into law on March 27, includes several important retirement-related provisions. Because some of these provisions are confusing, several misconceptions about the new law have arisen. In this edition of the Slott Report, we will attempt to set the record straight. Misconception #1: Everyone is eligible for a CRD. The CARES Act allows individuals to withdraw up to $100,000 of IRA and company plan funds during 2020 and receive special tax breaks. These withdrawals are called “coronavirus-related distributions” (CRDs). However, not everyone is eligible to take these withdrawals and qualify for the relief. Under current rules, you are eligible only if you are in one of these categories:

QCDs – Still Available in 2020 and Still a Good Strategy

As the coronavirus pandemic has raged on, we have seen devasting images of overwhelmed hospitals and long lines of cars at food banks. If you are fortunate enough to have money to spare, you might be thinking about how you can help. One option to consider is a qualified charitable distribution (QCD). QCDs Still Available for 2020 In response to the pandemic, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by Congress. Included in this giant relief package was a provision that waives required minimum distributions (RMDs) for 2020 from retirement accounts.
 

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