Compliance March 20, 2018

IRS Reduces Fee for Terminating Plan Determination Letter

Plan sponsors who have already submitted an Application for Determination for Terminating Plan in 2018 will receive a refund of $700.

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In Revenue Procedure 2018-19, the Internal Revenue Service (IRS) announced a change in the Schedule of User Fees, with respect to applications on Form 5310, Application for Determination for Terminating Plan.

When the agency ended its determination letter program for individually designed plans, it stated that a plan can only apply for a determination letter in three cases—one of which is when a plan is terminating.

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The IRS explains that Appendix A of Revenue Procedure 2018-4 sets forth the specific fee applicable with respect to each category or subcategory of submission under the revenue procedure.  Section .06 of Appendix A sets forth the fees applicable to determination letters.  The user fee applicable to a determination letter request submitted on Form 5310 provided in section .06(1)(c) of Appendix A was increased from $2,300 for 2017 to $3,000 for 2018.

However, the new Revenue Procedure reduces the fee back to $2,300, effective January 2, 2018.  The agency says applicants who paid the $3,000 user fee listed in Revenue Procedure 2018-4 will receive a refund of $700.
Data and Research March 20, 2018

Three in Ten Baby Boomers Haven’t Prepared a Retirement Budget

Sixty-five percent have not budgeted for unforeseen health-related expenses.

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Seventy-three percent of non-retired Americans aged 50 and older expect to delay retirement, The NHP Foundation, a not-for-profit provider of affordable housing, learned in a survey of 1,000 Americans in that age group.

Thirty-one percent haven’t prepared a retirement budget. Among those that have tried to figure out a retirement budget, 62% say that Social Security will comprise half or more of their monthly income. Sixty-five percent have not budgeted for unforeseen health-related expenses. Among those who have no retirement budget and plan on Social Security to provide half or more of their retirement income, 72% said they haven’t accounted for unforeseen health-related expenses.

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There is a disconnect between what kind of lifestyle Boomers expect to lead in retirement and how poorly they are preparing for retirement, NHP says. Seventy percent said they are at least confident they will experience the retirement they aspire to, and among the 73% who are planning to delay retirement, 63% are at least somewhat confident in the retirement lifestyle they will be able to enjoy.

“There is a disconnect between Baby Boomers’ current financial status and where they perceive themselves in retirement,” says Richard Burns, president and CEO of The NHP Foundation. “This wishful thinking carries potential consequences that will likely have a large impact throughout all areas of the economy.”

Citing data from the Consumer Financial Protection Bureau, NHP noted that older homeowners owe almost double on their current mortgage that the same group did 10 years ago. Nonetheless, 60% said the most essential housing aspect of retirement is affordability. Asked what worries them the most about retirement, 36% said the ability to afford quality health care, 28% said having to be dependent on their children, and 22% said being forced to live in an inferior living situation. Eighty-five percent said they would like to continue living in their current home.

Of the 66% who rent or have a mortgage, 76% either have no retirement budget or will rely on Social Security for at least half of their monthly income. Displaying another disconnect, 83% will believe they will be able to age in place, and only 17% of those with no retirement budget or who expect to rely on Social Security for at least half of their income think they will have to move.

“Renting quality affordable senior housing may be the best answer for many older Americans,” Burns says. “NHP and the entire affordable housing industry have made it a priority to create an adequate supply of affordable senior rental housing for Boomers entering the market now and in the future.”

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