IRA

The House of Representatives has passed the Consolidated Appropriations Act of 2023, HR 2617, today with a 225-201-1 vote. Included in this bill is the SECURE 2.0 Act of 2022. Following the Senate’s approval on December 22, 2022, the bill will now be presented to the President for his signature.

The Senate has approved the Consolidated Appropriations Act, 2023 (CAA 2023), by a 68-29 vote. Included in this bill is the SECURE 2.0 Act of 2022.

Senate Appropriations Committee Chairman Patrick Leahy (D-VT) has released HR  2617, the Consolidated Appropriations Act of 2023, a $1.7 trillion fiscal year 2023 omnibus appropriations bill, whose provisions will fund government operations for the fiscal year. Included in this legislation, as has been anticipated by many, is the SECURE 2.0 Act of 2022.

The Securing a Strong Retirement Act of 2022 was passed by the House of Representatives earlier this year. The Senate HELP committee approved the RISE & SHINE Act and the Senate Finance committee likewise approved the EARN Act. The House and Senate worked together to combine these bills into the SECURE 2.0 Act that has now been included in the Consolidated Appropriations Act.

Inclusion in the Consolidated Appropriations Act was considered the last opportunity for passage of this retirement legislation in the current Congress. The Consolidated Appropriations Act must now be approved by the House and Senate and signed by the President, for it—and the SECURE 2.0 Act—to become law.

Among the 90 provisions in the SECURE 2.0 Act, some of the significant items include the following.

• Allowing workers to participate in employer plans after 2 consecutive 12-month periods of 500 hours of service, beginning in 2025
• Increasing the catch-up contribution limit for select age groups
• Requiring catch-up contributions to be made on a Roth basis for those earning more than $145,000, except for SIMPLE plans
• Permitting employer contributions to be made on a pre-tax or Roth basis
• Increasing the RMD age to 73 in 2023, and age 75 in 2033
• Expanding automatic enrollment in retirement plans
• Creating a Retirement Savings Lost and Found
• Creating new emergency savings accounts linked to individual account plans
• Allowing student loan payments to be treated as elective deferrals for purposes of matching contributions
• Modifying the existing saver’s credit to provide for a matching contribution to the individual’s retirement savings vehicle
• Creating a “starter 401(k) plan” with reduced contribution limits and nondiscrimination safe harbors
• Increasing the small employer startup credit to 100% for certain employers
• Increasing the age of disability onset for qualified ABLE programs to age 46
• Allowing certain rollovers to Roth IRAs from 529 college savings accounts

Additional details on the SECURE 2.0 Act will continue to be provided. Visit ascensus.com for the latest information.

The IRS has issued Revenue Ruling 2023-1, which contains the applicable federal rates (AFR) for January 2023. These rates are used for such purposes as calculating distributions from retirement savings arrangements that meet the requirements for substantially equal periodic payments (a 10 percent early distribution penalty tax exception), also referred to as "72(t) payments."

Click here to download the PDF.

The Federal Emergency Management Agency (FEMA) has issued a disaster declaration for Hurricane Ian in South Carolina, beginning September 25, 2022, and ending October 4, 2022.

Employers with qualified retirement plans may allow participants to take hardship distributions if

• they have incurred expenses and losses because of a FEMA-declared disaster, and
• their principal residence or place of employment at the time of the disaster is located in an area designated by FEMA as eligible for individual disaster assistance.

If the employer permits hardship distributions for expenses and losses related to a federally declared disaster, participants can check fema.gov/locations to determine if they are located in a disaster area designated for individual assistance.

The IRS may also issue relief related to this disaster for certain tax-related deadlines. Additional information can be found at irs.gov/newsroom/tax-relief-in-disaster-situations.

The IRS has announced the postponement of certain tax-related deadlines for victims of severe storm and flooding in Illinois. The tax relief postpones various tax filing deadlines that began on July 25, 2022. Affected individuals and households who reside or have a business in St. Clair County, as well as taxpayers with records located in the covered area that are needed to meet covered deadlines, qualify for relief.

In addition to extending certain tax filing and tax payment deadlines, the relief includes completion of many time-sensitive, tax-related acts described in IRS Revenue Procedure 2018-58 and Treasury Regulation 301.7508A-1(c)(1). Affected taxpayers with a covered deadline on or after July 25, 2022, and before February 15, 2023, will have until February 15, 2023, to complete the acts. This includes filing Form 5500 series returns that are required to be filed on or after July 25, 2022, and before February 15, 2023.

“Affected taxpayer” automatically includes any individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Those who reside or have a business located outside the covered disaster area, but have been affected by the disaster, may contact the IRS to request relief.

The IRS has issued Revenue Ruling 2022-22, which contains the applicable federal rates (AFR) for December 2022. These rates are used for such purposes as calculating distributions from retirement savings arrangements that meet the requirements for substantially equal periodic payments (a 10 percent early distribution penalty tax exception), also referred to as "72(t) payments."

The IRS has issued its 2022-2023 Priority Guidance Plan, in which it describes guidance projects in the current fiscal year. Many items in the plan have appeared in prior years’ Priority Guidance Plans. A number of the guidance items deal with retirement savings arrangements, including the following, which have been included in previous plans.

• Regulations and guidance relating to the 10 percent early distribution tax
• Comprehensive IRA regulations
• Final regulations on the application of the normal retirement age regulations under Internal Revenue Code Section (IRC Sec.) 401(a) for governmental plans
• Regulations and guidance updating electronic delivery rules for providing applicable notices and making participant elections
• Final regulations regarding RMD requirements under the SECURE Act (proposed regulations were published in February 2022)
• Regulations relating to SECURE Act modifications to certain rules governing 401(k) plans
• Guidance on student loan payments and their interplay with qualified retirement plans and 403(b) plans
• Guidance on closed defined benefit plans and related matters
• Regulations on the exception to the unified plan rule for IRC Sec. 413(e) multiple employer plans (proposed regulations were issued in July 2019)
• Regulations on the definition of "governmental plan"
• Final regulations updating minimum-present-value requirements for defined benefit pension plans (proposed regulations were issued in November 2016)
• Regulations on mortality tables to determine present value for single-employer defined benefit pension plans
• Final regulations for withholding on distributions when payments are made to a non-U.S. address (proposed regulations were issued in May 2019)
• Regulations relating to the IRC Sec. 6057 reporting requirements (proposed regulations were issued in June 2012)
• Guidance updating electronic filing requirements for employee plans to reflect changes made by the Taxpayer First Act

 Two new noteworthy items include

• Regulations relating to the timing of the use or allocation of forfeitures in qualified retirement plans
• Regulations on the definition of church plan under IRC Sec. 414(e)

The IRS has released Notice 2022-53, announcing its intent to issue final regulations related to required minimum distributions (RMDs) that will apply no earlier than the 2023 distribution calendar year.

As previously announced, the IRS issued proposed regulations in February 2022. The proposed regulations clarify distribution requirements when an account owner dies after the required beginning date (RBD). The IRS proposal requires beneficiaries subject to the 10-year rule to deplete their account balance by the end of the year that contains the tenth anniversary of the original account owner’s death, and take annual distributions based on the normal single life expectancy calculation.

As this requirement applies to beneficiaries of such account owners who died in 2020 or later, the IRS acknowledges that beneficiaries were not aware of the requirement to take an RMD in 2021 and, pending the issuance of final regulations, were unsure of the requirements for 2022. Therefore, the IRS provides that a defined contribution plan that failed to make this specified RMD will not be treated as having failed to satisfy the RMD requirements. Additionally, designated beneficiaries of a plan participant or IRA owner who failed to take this specified RMD will not be assessed a missed RMD excise tax.

This specified RMD relief is limited to distributions required to be made in 2021 or 2022 under the new 10-year rule in a defined contribution plan or IRA for a designated beneficiary if

• the account owner died on or after the RBD in 2020 or 2021, and
• the designated beneficiary is not taking life expectancy payments.

The same relief under the new 10-year rule also applies to the beneficiary of an eligible designated beneficiary if

• the eligible designated beneficiary died in 2020 or 2021, and
• that eligible designated beneficiary was taking life expectancy payments.

This guidance provides plan sponsors and beneficiaries with specified RMD relief for 2021 and 2022 while the IRS finalizes its RMD rule for the 2023 distribution year. However, the Notice does not provide any additional guidance on the status of the rest of the proposed RMD rules for the 2022 distribution year. While the proposed RMD regulations required beneficiaries to apply existing rules and a reasonable, good faith interpretation of the proposed rule for 2021, neither the proposed rule or the Notice state such reasonable, good faith interpretation can be applied for 2022.