Revised model IRA documents, once available, will fulfill the IRS requirement to amend existing IRAs for recent legislation. Unfortunately, the IRS has not indicated when new model documents will be available. Therefore, Ascensus recommends amending existing IRAs with a disclosure statement amendment for current changes as a result of the Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act of 2022.
Amendments or new plan agreements and disclosure statements capture IRA rule changes, keeping IRAs up to date with the latest laws and regulations. Typically, the IRA plan agreement and the disclosure statement may need to be amended when major tax laws cause a material change in IRA documentation. The financial disclosure is never amended.
Knowing why, when, and how to amend your IRA documents is important. Noncompliant documents and outdated information could lead to negative tax consequences for your clients and penalties for your financial organization.
SECURE 2.0 made some significant changes to IRAs. New IRAs require disclosure statements that are up to date at the time of establishment. Amendments to existing IRAs are required only when the IRS mandates it, but many financial organizations update existing IRAs as a best practice without that mandate—or if there is a significant gap in timing of when a required, complete plan agreement and disclosure statement amendment is available to be sent to account owners. Many financial organizations do this so that their IRA owners know how their accounts are governed. In general, Ascensus strongly recommends amending existing IRAs for significant legislative and regulatory events. Financial organizations generally must amend their IRA documents for SECURE 2.0 by December 31, 2026, or a later date as prescribed by the Treasury Secretary. The IRS expects to issue revised model IRA documents and an updated listing of required modifications LRMs that will contain sample language for document providers to use when updating their IRA prototype documents.
How we can help
The Ascensus IRA Full Disclosure Statement Amendment for SECURE 2.0 can be used with any Ascensus IRA document. This amendment incorporates the following changes to IRAs.
- Increased required minimum distribution age for individuals born in 1951 and later
- New early distribution penalty tax exceptions for terminal illness and qualified disaster recovery distributions; these distributions may be repaid
- Reduced excess accumulation penalty tax from 50 percent to 25 percent (and possibly 10 percent) if corrected timely
- Qualified charitable distributions may now include a $50,000 one-time payment to certain split-interest entities
- Clarified 3-year repayment deadline for qualified birth or adoption distributions
The following changes become effective in 2024.
- New early distribution penalty tax exceptions for unforeseen emergency expenses and victims of domestic abuse; these distributions may be repaid
- IRA catch-up contribution limit subject to possible cost-of-living adjustments (COLAs)
- Increased SIMPLE IRA deferral limits for employees of certain employers
- 529 plan beneficiaries may roll over their 529 plan assets a Roth IRA under certain conditions
- Qualified charitable distribution limits subject to COLAs
Ascensus' standard amendment for all Ascensus IRA document clients for SECURE 2.0 includes the Full Disclosure Statement IRA Amendment.
Are you unsure whether your documents are up-to-date, or are you ready to convert to Ascensus IRA documents?
We'll help you find an amendment solution that works for you. Call 800-346-3860 or email salessupport@ascensus.com.
For the latest news on SECURE 2.0, visit SECURE 2.0 News.
