SECURE ACT Flashcards
(24 cards)
Participant dies before age 73 and has not designated a beneficiary - when must account be distributed?
By Dec 31 of year containing 5th anniversary of death
Participant dies before age 73 and has designated a beneficiary - (plain, ole) when must account be distributed?
By Dec 31 of the 10th year containing the anniversary of death
Participant dies after age 73 - no designated beneficiary - when must account be distributed?
1) RMD for in year of death must ve taken
2) Distribution taken each year based on the “ghost life” based on Single Life tables by Dec 31 of year after death - SL Table more rabid and no recalculating life expectancy
3. Ghost life expectancy is only available when No Designated Beneficiary
Participant dies after age 73 - plain, old designated beneficiary - when must account be distributed?
RMDs based on life expectancy on Single Life Tables of beneficiary, but all must be taken by tenth year
Rules for Designated Beneficiaries - participant death before age 73?
Account must be distrubuted within 10 years, but no RMDs within the 10 year period.
Rules for Designated Beneficiaries - participant death after age 73?
Account must be distrubuted within 10 years, with RMDs during 10 year period
What is an “eligble designated beneficary”?
- Spouse
- a minor child of original account owner
- A person not more than 10 years younger than original account owner
- Disabled or chronically ill child of original account holder
What are the distribution requirements for an elgible designated beneficiary who is disabled or no more than 10 years younger than account holder?
Distributions may be made over the actuarial life of the beneficary beginning 12/31 of the year following death.
What are the RMD rules for a minor child?
RMDs over actuarial life until age 21, then 10 year rule based on the single life tables
What can spouse do if designated beneficary?
- If account holder died before RMD age, spouse can elect to defer distributions until April 1 of the year following account holder’s 73 birthday. (May be best of guaranteed interest rate to account holder and not beneficary or deceased spouse is significantly younger than account holder)
- SPouse can do a “spousal rollover”- now treated as spouses for date calculations and naming new beneficary
- If trust for spouse is beneficary - account paid over spouses life expectancy
When does a trust for the benefit of the spouse get treated the same as if the spouse were the designated beneficary?
Spouse must be entitled to ALL trust assets (i.e. marital deduction trust)
How does a trust qualify as a see through trust?
- Trust must be irrevocable
- The trust beneficiaries must be individuals
- The beneficiaries mmust be identifiable for the trust instrument
- The trust must be valid under State Law
- Certify list of beneficiaries as of Sept 30 of year following year of death or give plan document to plan custodian by Oct 31
If not a see through trust, what is the RMD schedule?
5 years or ghost life
What is the Secure Act 2.0?
The Secure Act 2.0 is legislation aimed at enhancing retirement savings and improving access to retirement plans.
True or False: Under the Secure Act 2.0, penalty-free withdrawals are allowed for first-time home purchases.
401K - False
IRAs- True, but no more than 10K, and can’t have owned a house in last 2 years
Fill in the blank: The Secure Act 2.0 allows penalty-free withdrawals from retirement accounts for __________ emergencies.
certain
What age must individuals be to qualify for penalty-free withdrawals under the Secure Act 2.0?
There is no specific age requirement; penalty-free withdrawals can be made under certain conditions regardless of age.
Multiple Choice: Which of the following is a reason for penalty-free withdrawals under the Secure Act 2.0? A) Medical expenses B) Vacation C) College tuition D) All of the above
A and C (Medical expenses and College tuition)
What is the maximum amount that can be withdrawn penalty-free for emergencies under the Secure Act 2.0?
Up to $1,000 per year.
True or False: Withdrawals made for the birth or adoption of a child are penalty-free under the Secure Act 2.0.
True
What types of retirement accounts are affected by the penalty-free withdrawal provisions of the Secure Act 2.0?
401(k) plans, IRAs, and other defined contribution plans.
Short Answer: Name one specific circumstance that qualifies for penalty-free withdrawals under the Secure Act 2.0.
Qualified birth or adoption expenses.
True or False: The Secure Act 2.0 eliminates the early withdrawal penalty for all types of withdrawals.
False
