Compliance September 24, 2009

IRS Puts Out RMD Waiver Guidance

September 24, 2009 (PLANSPONSOR.com) - The Internal Revenue Service (IRS) on Thursday provided sponsors with two sample plan amendments to help them implement the one-year waiver of the required minimum distribution (RMD).
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According to Notice 2009-82, the amendments provide that participants and beneficiaries can choose to receive or not to receive the 2009 RMD and provide for the rollover of certain 2009 RMDs.

The tax agency document said sponsors may need to tailor the sample amendment to their plan’s particular terms and administration procedures and must adopt the amendment no later than the last day of the first plan year beginning on or after January 1, 2011 (January 1, 2012, for governmental plans).

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The RMD waiver was contained in the Worker, Retiree, and Employer Recovery Act (WRERA) of 2008 (see    Bush Signs RMD, Pension Relief Bill ).

Also in the notice, the agency acknowledges that because of the timing of the WRERA enactment, many sponsors have not been able to put the required plan amendments into place.

So, the agency said, plans will not be treated as failing to satisfy the requirement that it be operated in accordance with its terms merely because, during the period beginning on January 1, 2009, and ending on November 30, 2009:

  • distributions that equal the 2009 RMDs or that are one or more payments in a series of substantially equal distributions (that include the 2009 RMDs) made at least annually and expected to last for the life (or life expectancy) of the participant, the joint lives (or joint life expectancy) of the participant and the participant’s designated beneficiary, or for a period of at least 10 years were or were not paid.
  • participants and beneficiaries were not given the option of receiving or not receiving distributions that include 2009 RMDs, or;
  • a direct rollover option was or was not offered for 2009 RMDs or for other amounts that can be rolled over pursuant to the rollover relief provided in the following paragraph.

The IRS guidance also indicated that plan investors who have already received their 2009 RMD can still roll over the funds until the later of November 30, 2009 or 60 days after the distribution. The IRS indicated IRA owners could also take advantage of the 60-day rollover period extension.

The IRS document also presents a series of questions and answers about the RMD regulations. The latest guidance is available    here .

Benefits September 23, 2009

Bond Education a Key in Advisers' Client Contacts

September 23, 2009 (PLANSPONSOR.com) - Financial advisers have significant opportunities to help clients navigate through the turbulent waters of the economic downturn since many Americans are confused about where their investments are and where they need to go.
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A news release from the Hartford Mutual Funds Findings reveals Americans in a recent poll were less confident and more conservative about their personal finances than they were a year ago.

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Most notably, U.S. investors responding to the poll were open to fresh approaches to asset allocation. Fifty-three percent are more invested in bonds or cash.

A significant goal for many respondents: just trying to hang onto assets they have now.

“This may sound like bad news, but it’s actually a tremendous opportunity for financial advisers,” said John Diehl, senior vice president with The Hartford’s Investment and Retirement Division. “Investors admit they are unsure what path to take as we emerge from the financial crisis, and the adviser can play a crucial role in helping to identify next steps.”

According to The Hartford, respondents knew their holdings were more conservative than a year ago, but couldn’t explain exactly why.

While 30% said their portfolios are now more allocated to bonds, 28% don’t know how much of their total portfolio is allocated to fixed income. Some 72% said bond diversification is important, but when asked specifically about their fixed-income investments, they floundered. Over half don’t know which fixed-income asset classes they hold.

More than half of those surveyed said their advisers have never talked to them about holding different types of bonds in their portfolio, or they weren’t sure if they had discussed it.

“Some advisers spend a great deal of time diversifying the equity portion of their clients’ portfolios, and explaining the importance of it,” said Diehl, in The Hartford news release. “They may spend less time discussing bonds even though fixed-income diversification is just as important as equity diversification. This survey shows that investors need the guidance of their adviser to execute a diversified fixed-income strategy.”

The Hartford survey, which was conducted via the Internet by Zoomerang in June 2009, interviewed 530 individual investors over 30 who work with financial advisers. Fifty-one percent of those surveyed are retired, 32% work full-time, 12% work part-time and 5% do not currently work.

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