This one’s simple. If you have $100,000 or less - across all of your retirement plans combined - you would be exempt from required minimum distributions. Failing to take the proper RMD amount comes with one of the stiffest retirement account penalties there is, a 50% penalty on any shortfall.
This proposal would eliminate that possibility if you have $100,000 or less in retirement accounts and would allow you to take as much, or as little, as you want without a penalty.
INHERITED ASSETS: ALLOW 60-DAY ROLLOVERS FOR NON-SPOUSE BENEFICIARIES
Non-spouse beneficiaries would be allowed to move inherited retirement savings from one inherited retirement account to another inherited retirement account via a 60-day rollover (in a manner similar to which they can currently move their own retirement savings).
Unifying the rollover rules for retirement account owners and beneficiaries would greatly simplify this aspect of retirement accounts and reduce the number of irrevocable and costly mistakes that are often made by beneficiaries under the current rules.
MANDATORY IRA AUTO-ENROLLMENT FOR SMALL BUSINESSES
Employers in business for at least two years that have more than 10 employees and don’t offer another retirement plan already would be required to offer auto-enrollment IRAs to their employees. Contributions to employees’ IRAs would be made on a payroll-deduction basis.
Employees would be able to elect how much of their salary they wish to contribute to their IRA (up to the annual IRA contribution limit), including opting out entirely. In the absence of any election, 3% of an employee’s salary would be contributed to their IRA. Employees would be able to choose whether to contribute to an IRA or Roth IRA, with the Roth being the default option.
The provision would also enhance incentives, in the form of a tax credit for small businesses, to adopt a company-sponsored retirement plan.
Jeffrey Levine, CPA, is an IRA Technical Consultant with Ed Slott and Company specializing in IRA distribution planning. He is also a speaker for national conferences, CPA continuing education programs, web-based conferences and client seminars. This originally appeared on www.theslottreport.com.
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