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2017 Qualified Plan Limits Released

November 2, 2016

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2017 Qualified Plan Limits Released

November 2, 2016

Authored by: Charles Lin

Originally posted by our employee benefits and compensation team, here.

2017 Qualified Plan Limits Released

Posted: 31 Oct 2016 12:15 PM PDT

The IRS recently released updated limits for retirement plans.  Our summary of those limits (along with the limits from the last few years) is below.

Type of Limitation 2017 2016 2015 2014 Elective Deferrals (401(k), 403(b), 457(b)(2) and 457(c)(1)) $18,000 $18,000 $18,000 $17,500 Section 414(v) Catch-Up Deferrals to 401(k), 403(b), 457(b), or SARSEP Plans (457(b)(3) and 402(g) provide separate catch-up rules to be considered as appropriate) $6,000 $6,000 $6,000 $5,500 SIMPLE 401(k) or regular SIMPLE plans, Catch-Up Deferrals $3,000 $3,000 $3,000 $2,500 415 limit for Defined Benefit Plans $215,000 $210,000 $210,000 $210,000 415 limit for Defined Contribution Plans $54,000 $53,000 $53,000 $52,000 Annual Compensation Limit $270,000 $265,000 $265,000 $260,000 Annual Compensation Limit for Grandfathered Participants in Governmental Plans Which Followed 401(a)(17) Limits (With Indexing) on July 1,

Will Inherited IRAs Be Used As A Tool for Protecting An Inheritance from Creditors?

Originally posted on the Bryan Cave Bankruptcy & Restructuring Blog, found here.

A recent decision out of a New Jersey Bankruptcy Court highlights a loophole in the Bankruptcy Code which may allow Chapter 7 debtors to keep significant assets out of the hands of trustees and creditors.

In In re Norris,[1] the Bankruptcy Court considered whether an inherited individual retirement account is property of the bankruptcy estate.  Prior to the Debtor filing her bankruptcy case, her stepmother passed away, leaving an inherited IRA naming the Debtor as the beneficiary.  In her amended schedules, the Debtor listed the inherited IRA, claiming it as fully exempt under 11 U.S.C. § 522(d)(12), but also claiming the inherited IRA was not property of the estate.[2]  The Chapter 7 Trustee objected to the exemption and requested the inherited IRA be deemed property of the bankruptcy estate.

Treasury Green Book Proposals — Inheriting IRAs

The Department of the Treasury has released the Treasury Green Book  for Fiscal Year 2017, which provides explanations of the President’s budget proposals.  One such proposal (remember…these are just proposals, not actual changes in the law) that may affect your estate planning, if passed, is found on page 164 of the Green Book and is re-printed here for your convenience:

REQUIRE NON-SPOUSE BENEFICIARIES OF DECEASED IRA OWNERS AND RETIREMENT PLAN PARTICIPANTS TO TAKE INHERITED DISTRIBUTIONS OVER NO MORE THAN FIVE YEARS

Current Law

Minimum distribution rules apply to employer sponsored tax-favored retirement plans and to IRAs. In general, under these rules, distributions must begin no later than the required beginning date and a minimum amount must be distributed each year. For traditional IRAs, the required beginning date is April 1 following the calendar year in which the IRA owner attains age 70½. For employer-sponsored tax-favored retirement plans, the

Treasury Green Book Proposal — Inheriting IRAs

459482489The Treasury Green Book provides explanations of the President’s budget proposals.  One such proposal (remember…these are just proposals, not actual changes in the law) that may affect your estate planning is found on page 165 of the Green Book and is re-printed here for your convenience:

REQUIRE NON-SPOUSE BENEFICIARIES OF DECEASED IRA OWNERS AND RETIREMENT PLAN PARTICIPANTS TO TAKE INHERITED DISTRIBUTIONS OVER NO MORE THAN FIVE YEARS

Current Law Minimum distribution rules apply to employer sponsored tax-favored retirement plans and to IRAs. In general, under these rules, distributions must begin no later than the required beginning date and a minimum amount must be distributed each year. For traditional IRAs, the required beginning date is April 1 following the calendar year

They Still Haven’t Learned…The Terms of the Plan Control

513104781Just as Mr. Dabney learned in our prior post, Dennis Bohner learned about the Plan Document Rule in Bohner v. Commissioner. Here Bohner participated in the Civil Service Retirement System as a government employee. When he retired, he received correspondence that he could increase the amount of his retirement annuity if he sent the plan administrator $17,832, which he did.

However, since Bohner did not have that cash available in any other account, he withdrew $5,000 from his IRA and borrowed the balance of the funds to make that payment. He then withdrew an additional amount from his IRA to pay back the borrowed funds. Like Dabney, Bohner ignored the Form 1099-R and did not report these withdrawals on his income tax return and treated them as rollovers from his IRA to

When Will They Learn? The Terms of the Plan Control

81178323The provisions of IRC § 408 do permit investment of IRA assets in any kind of asset other than those specifically prohibited, such as life insurance and collectibles. Therefore, it was somewhat reasonable for Guy Dabney to conclude that he could invest his IRA account assets in real estate. However, the Tax Court in Dabney v. Commissioner took Mr. Dabney to task for failing to follow the terms of the IRA Account Agreement that governed his IRA.

In this case, Dabney wanted to use his IRA assets to purchase a piece of undeveloped land in Utah that he considered to be priced below its fair market value. So he did what a lot of us do when we want to learn something new—he went to the Internet. Based on

The Nays Have It: Inherited IRAs are Not Exempt Assets in Bankruptcy

US Supreme CourtOn June 12, the United States Supreme Court in Clark v Rameker resolved the question that has recently split the 5th and 7th Circuits— Are inherited IRAs protected from the beneficiary’s creditors in a bankruptcy proceeding? The Court unanimously held that they are not.

An inherited IRA is a traditional or Roth IRA that has been inherited by a beneficiary after the death of the owner. This term does not include an IRA that has been “rolled over” by a spouse beneficiary into her own IRA.

In order to make their decision, the Court had to determine whether an inherited IRA constitutes “retirement funds”, which are exempt assets in a bankruptcy estate.

The Court focused on three legal characteristics of inherited IRAs that led to their conclusion that the

HERE COMES THE JUDGE: SUPREME COURT TO RULE ON CREDITOR PROTECTION IN BANKRUPTCY FOR INHERITED IRAs

US Supreme Court

In 2012, the Fifth Circuit ruled in In re Chilton that inherited IRAs constituted retirement funds within the “plain meaning” of §522 of the Bankruptcy Code and were thus exempt from the bankruptcy estate, under § 522(d)(12) (the federal exemptions). See our prior discussion of this case here.

Buy-Sell Agreements, Earlier is Better

A Buy-Sell agreement can be a useful planning tool for emerging companies as well as more stable, privately owned companies. In the context of an emerging company, the use of a Buy-Sell agreement provides a pathway for an orderly exit from the business by an owner if the owners do not see eye-to-eye with each other with respect to creative direction, allocation of responsibilities or other issues.

IRD, IRD, IRD is the Word: IRD Consequences of IRA Distribution to Charities

birdOnce again, the Internal Revenue Service reminds us in PLR 201330011 that a distribution from an IRA to a residuary beneficiary will not result in recognition of IRD (also known as income in respect of a decedent) to the estate or trust, as only the residuary beneficiary will recognize the IRD.

Here the Decedent’s Estate was the beneficiary of the Decedent’s IRA. Under the provisions of the Decedent’s Will, his Estate poured over to his Revocable Trust on his death. His Revocable Trust provided that each of two Charities were to receive a percentage of the residue of his Trust, and further provided that the Trustee could satisfy this percentage gift in cash or in kind and also could allocate different assets to different residuary beneficiaries in satisfaction of their percentage interest in

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