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IRA Legislation

Dear Clients & Friends,


This article might be a little dry compared to our usual earth shattering, breath

taking, epically inspiring weekend reading. But it is important, and we’ve

already fielded quite a few questions about it. So, here’s the breakdown:


The “Securing a Strong Retirement Act of 2022” has passed almost

unanimously in the House. A similar bill, the “Enhancing American Retirement

Now Act”, has been drafted in the Senate; however, it will have to wait until

Congress is back in session in November for further consideration. If the

Senate passes its bill, the House and the Senate will need to reconcile the two

bills and vote.


Here is a summary:

Contributions

House

Senate

​Starting in 2024, the $1,000 IRA

catch-up contribution limit for

individuals aged 50 and older will be

indexed for inflation.

Starting in 2023, the $1,000 IRA

catch-up contribution limit for

individuals aged 50 and older will be

indexed for inflation.

For workplace retirement plans such

as a 401(k): starting in 2024, the

catch-up contribution limit will be

increased to $10,000 (indexed for

inflation) for eligible participants

aged 62 to 64.

​For workplace retirement plans such

as a 401(k): starting in 2025, the

catch-up contribution limit will be

increased to $10,000 (indexed for

inflation) for eligible participants

aged 60 to 63.

​For SIMPLE plans: starting in 2024,

the catch-up contribution limit will

be increased to $5,000 (indexed for

inflation) for eligible participants

aged 62 to 64.

For SIMPLE plans: starting in 2025,

the catch-up contribution limit will

be increased to $5,000 (indexed for

inflation) for eligible participants

aged 60 to 63.

Starting in 2023, an employer will be

able to make matching contributions

to a defined contribution plan (such

as a 401(k)) on behalf of an

employee who is making qualified

student loan payments.

Starting in 2024, an employer will be

able to make matching contributions

to a defined contribution plan (such

as a 401(k)) on behalf of an

employee who is making qualified

student loan payments.

Distributions

House

Senate

The current starting age of 72 for

required minimum distributions

(RMDs) from retirement accounts

will be increased to age 73 starting

in 2023, age 74 starting in 2030,

and age 75 starting in 2033.

The current starting age of 72 for

required minimum distributions

(RMDs) from retirement accounts

will be increased to age 75 for 2032

and beyond.

Starting in 2023, the penalty for

failing to make an RMD will be

reduced from 50% to 25%. In

addition, the penalty will be reduced

to 10% if the taxpayer corrects an

RMD shortfall and submits a

corrected tax return prior to either

(a) when the IRS demands

payment, or (b) the end of the

second taxable year after the

taxable year in which the penalty is

imposed.

Starting in 2023, the penalty for

failing to make an RMD will be

reduced from 50% to 25%. In

addition, the penalty will be reduced

to 10% if the taxpayer corrects an

RMD shortfall and submits a

corrected tax return prior to either

(a) when the IRS demands

payment, or (b) the end of the

second taxable year after the

taxable year in which the penalty is

imposed.

Qualified charitable distributions

(QCDs) for individuals aged 70½

and older will be expanded to allow

a one-time election to be made for a

QCD of up to $50,000 (to be

adjusted for inflation) to a charitable

remainder unitrust, a charitable

remainder annuity trust, or a

charitable gift annuity.

Qualified charitable distributions

(QCDs) for individuals aged 70½

and older will be expanded to allow

a one-time election to be made for a

QCD of up to $50,000 (to be

adjusted for inflation) to a charitable

remainder unitrust, a charitable

remainder annuity trust, or a

charitable gift annuity.

An exception to the penalty for early

distributions from a retirement plan

would be available for up to $10,000

if distributions were made to a

domestic abuse victim after the date

of enactment.

An exception to the penalty for early

distributions from a retirement plan

would be available for up to $10,000

if distributions were made to a

domestic abuse victim after the date

of enactment.

Other

House

Senate

Roth Style SIMPLE and SEP IRAs

would be allowed starting in 2023.

SIMPLE and SEP Roth IRAs would

be allowed starting in 2024.

If a retirement plan permits it, an

employee would be able to elect to

have employer matching

contributions treated as Roth

contributions, starting with

contributions made after the date of

enactment.

If a retirement plan permits it, an

employee would be able to elect to

have employer matching

contributions treated as Roth

contributions, starting with

contributions made in 2023.


Hopefully this gives a bit of insight into what’s been going on behind the

scenes in Congress. We will update our family of clientele as more progress is

made.


Have a lovely weekend, everyone. If you’re a sports fan, you won’t be

surprised if I sign off by saying- Go Birds! Go Phils!!


--Matthew


*Data provided by Broadridge Financial Solutions

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