Main Content
computer
Wealth Management
Background
White with Bottom Border

Posted: 4.3.2020

New Legislation – 2020 CARES Act Plan Sponsor Highlights

Hardship Distributions: Eliminates the 10% early withdrawal penalty tax on early withdrawals up to $100,000 from a retirement plan or IRA for an individual:

  • who is diagnosed with COVID-19;
  • whose spouse or dependent is diagnosed with COVID-19;
  • who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to COVID-19; or
  • other factors as determined by the Treasury Secretary.

 

The legislation also permits those individuals to pay tax on the income from the distribution ratably over a three year period and allows individuals to repay that amount into the plan over the next three years (subject to further guidance). Those repayments would not be subject to the retirement plan contribution limits.

 

Plan Loans: Increases the current retirement plan loan limits to the lesser of $100,000 or 100% of the participant’s vested account balance in the plan.

 

Participants with an outstanding loan from their plan with a repayment due from the date of enactment of the CARES Act through Dec. 31, 2020, can delay their loan repayment(s) for up to one year.

 

Plan Amendments: Plan Sponsors may adopt these rules immediately, even if the plan does not currently allow for hardship distributions or loans. The plan will have to be amended on or before the last day of the first plan year beginning on or after Jan. 1, 2022, or later if prescribed by the Treasury Secretary.

 

Temporary Waiver of Required Minimum Distribution(RMD) Rules: Waives RMDs for calendar year 2020 for Defined Contribution plans, including 401(k), 403(b), 457(b) and IRA plans, allowing individuals to keep funds in their retirement plans. The legislation also includes special rules regarding the waiver period to, in essence, hold harmless those individuals (and plans) who took advantage of the RMD waiver for 2020.

 

Single-employer DB Plan Funding Rules: Provides single-employer defined benefit plan funding relief by giving companies more time to meet their funding obligations by delaying the due date for any contribution otherwise due during 2020 until Jan. 1, 2021. At that time, contributions due earlier would be due with interest. The provision also provides that a plan’s status for benefit restrictions as of Dec. 31, 2019 will apply throughout 2020, such that a plan sponsor may elect to treat the plan’s adjusted funding target attainment percentage for the last plan year ending before Jan. 1, 2020, as the adjusted funding target attainment percentage for plan years which include calendar year 2020.

 

Expansion of Department of Labor (DOL) Authority to Postpone Certain Deadlines: Provides the DOL with expanded authority to postpone certain deadlines under ERISA. In general, the legislation increases the circumstances to go beyond a terroristic or military action to also include a public health emergency declared by the Secretary of Health and Human Services under the Public Health Service Act.

 

We have covered several key topics that are addressed in the act. If you are interested in adopting these new CARES Act rules and amending your plan, please contact your Midland Retirement Plan Services relationship manager.

Background
White with Bottom Border

Posted: 2.19.2020

Socially Responsible Investing

Midland Wealth Management’s Socially Responsible Portfolio is structured with high quality funds investing in the fixed income, equity and alternative markets. In addition to the normal quantitative analysis, these funds evaluate supplemental factors when reviewing profitable and growing companies. These factors can be categorized into three main groups: Environmental, Social and Governance (ESG).

 

Environmental (E)

Companies that:

  • Focus on renewable energy sources
  • Recognize impacts of climate change initiatives
  • Work towards improving environmental sustainability

Social (S)

Companies that:

  • Focus on a diverse and safe environment 
  • Monitor its supply chain and management of human capital
  • Encourage a positive community impact

Governance (G)

Companies that:

  • Provide shareholders transparency of company governance
  • Uphold policies guarding against corruption, bribery and fraud
  • Maintain guidelines regarding takeover defenses and political spending

 

The Socially Responsible Portfolio works to keep money invested in the market while balancing investor values. Allocations to each of the sectors and fixed income maturity, within your desired objective, are determined by the Midland Investment Strategy Committee based on its assessment of the economy, interest rates and relative risk/return value of each sector. With our Socially Responsible Portfolio, we do not guarantee an eradication of certain investments but rather minimized exposure.

 

Please contact your Midland Wealth Management Advisor at 888-637-2120 to discuss further.

Background
White with Bottom Border

Posted: 2.5.2020

New Legislation - 2019 SECURE Act Highlights

The rules and regulations are ever-changing and one of Midland Wealth Management’s goals is to keep clients informed. Congress passed the federal government spending bill and was signed into law on December 20, 2019. The spending package includes the Setting Every Community Up for Retirement for Enhancement (SECURE) Act of 2019.

This bill offers several positives with the purpose to simplify administration and ease the path to retirement. Some highlights of the SECURE Act include:

  • Age Increase for Required Minimum Distributions
    • A Required Minimum Distribution (RMD) is the amount of money that must be withdrawn from a Traditional IRA or qualified plan when you reach age 70½. The SECURE Act increases the age to 72. Please note that there is a transition period, so if you turned 70½ before December 31st, 2019, you fall under the prior rules and will still need to take an RMD no later than April 1
  • Age Repeal for Traditional IRA Contributions
    • Under pre-SECURE Act rules, individuals could no longer contribute to an IRA after they turn age 70½. This has now been repealed and regardless of age, you can make contributions to a Traditional IRA, as long as you are still working. Keep in mind, other limitations apply, including annual limits.
  • Inherited Qualified Plans
    • Pre-SECURE Act, it was common for non-spousal beneficiaries to take RMDs over their life expectancy. This was known as a ‘stretch IRA’. The SECURE Act now limits the ability to stretch distributions from retirement assets. Non-spousal beneficiaries must take full payout from the inherited IRA within 10 years of the account holder’s death. Note, this 10-year span can be leveraged to create flexibility on which years to pay taxes.
  • Penalty-Free Withdrawals from Retirement Plans for Birth and Adoption
    • A 10% penalty is typically assessed for withdrawals from qualified retirement plans and IRAs before age 59½. There are some exceptions to the penalty though, such as qualified higher education expenses and qualified first-time homebuyers. The SECURE Act adds qualified births and adoptions to this exceptions list and allows parents to withdraw up to $5,000 penalty-free within a year of birth or adoption for qualified expenses.

We have covered four notable changes from the SECURE Act of 2019. There are other ways that this new legislation is impacting investors and taxpayers. Please contact your Midland Wealth Management Advisor at 888-637-2120 to discuss further.

Author: Steve Hofmann

 

Midland Wealth Management does not provide tax or legal advice. Please consult your tax or legal advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your taxes are prepared.