Ask the Experts October 25, 2022

How Would A Change in RMD Rules for 403(b) Plans Apply to Participants With Multiple Plans?

Experts from Groom Law Group and CAPTRUST answer questions concerning retirement plan administration and regulations.

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“I read your 2015 Ask the Experts column that cautioned against forcing required minimum distributions in 403(b) plans, partially because a plan participant could satisfy his or her RMD requirement for one 403(b) plan by taking an RMD from a different 403(b) plan. I’m hearing, however, that this may change. Is that true, and, if it is, would that change your response on forced RMDs at all?”

Kimberly Boberg, Taylor Costanzo, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

It is true. The IRS is “considering additional changes to the required minimum distribution rules for section 403(b) plans so that they more closely follow the required minimum distribution rules for qualified plans.” See Proposed Required Minimum Distribution Regulations; 87 Fed. Reg. 10504 (Feb. 24, 2022). While only the subject of a request for comments at this point, if the IRS moves forward with this change, an RMD would have to be taken from each 403(b) contract, rather than a participant being able to request his total RMD amount from one 403(b) account. To date, a decision has not been announced on the change, such that the rule has yet to be drafted and incorporated (never mind finalized), so the status quo remains for now.

If the proposed change is adopted, 403(b) plans would be required to provide an RMD from each 403(b) contract, such that the employer would be legally obligated to require a distribution from their plan.

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NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice. 

Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to Amy.Resnick@issgovernance.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future column.

 

Investing October 24, 2022

Pandemic Era Stimulus Is Haunting the U.S. Economy

Bank of America analyst says outsized federal aid led to inflation and rate increases.

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The amount of liquidity pumped into the U.S. economy since the pandemic’s outset was a stunning $13.5 trillion, or 59% of gross domestic production in 2021—and that has come back to haunt us, according to a Bank of America research note.

For the stock market, all this rocket fuel was a propellant up to this year, when the stimulus, both fiscal and monetary, went away, argues Lauren Sanfilippo, senior investment strategist. In her estimation, “The bigger the stimulus, the bigger the hangover.”

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By detailing the precise dollar amounts, she illustrates the dimensions of today’s woes, embodied by surging inflation and Federal Reserve tightening. This represents “one of the greatest capital surges/injections into the economy is U.S. history,” she writes. It certainly eclipsed what others did elsewhere in the world. Last year, the comparable figure for the eurozone was 50%, and for China, 18%.

The ratio of U.S. equities (using the Russell 3000) to GDP soared to 200% last fall, up from 57% during the 2008-09 financial crisis, Sanfilippo says. Now, given the stimulus retreat, it’s back down to 150% of GDP, but that’s still above the 122% average this century, she observes.

As a result, her report says, “fading public sector spending suggests added risk to the downside over the near term.”

Hence, BofA is neutral on stocks going forward, meaning that it isn’t advocating selling them, but not buying them either. Fixed income gets an overweight designation from the bank.

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