Retirement Enhancement and Savings Act (RESA) Has a Good Chance of Passing in 2019

Earlier this month, the Retirement Enhancement and Savings Act (RESA) was reintroduced by by Senate Finance Committee Chairman Charles Grassley (R-IA) and Ranking Member Ron Wyden (D-OR). Both the Senate and the House appear to be onboard with the bill so it has a darn good chance of passing in 2019.

Here are some of the provisions outlined in the bill:

Allow more time to establish a plan: Permit qualified plans (e.g.,  solo 401k, profit sharing or pension plans) to be established as late as the sponsoring employer’s tax return deadline, including extensions. (effective for 2020 and later taxable years).

Raise plan start-up credit for small employers: The plan start-up credit for small plans would raise from $500 to a maximum of $5,000 per year, available for three years beginning with the year the plan is established (effective for 2020 and later taxable years).

Plan reporting failures would be more costly: Retirement plan information reporting failures would result in the following penalties (effective for returns, statements, and notices required January 1, 2020, and thereafter).

  • Form 5500 and Form 5500-EZ, $100 per day, up to a maximum of $50,000

Require quicker payout to beneficiaries: With limited exceptions, most nonspouse beneficiaries of IRAs, qualified defined contribution including from solo 401k plans, 403(b), and governmental 457(b) plans would be required to distribute inherited amounts within five years. New reporting requirements to ensure compliance would apply (effective for plan participant/IRA owner deaths occurring in 2020 or later, and to beneficiary reporting beginning with the 2021 calendar year).

Exceptions include the following.

  • Aggregate inherited IRA and employer plan balances that do not exceed $400,000
  • Disabled
  • Chronically ill
  • Beneficiaries not more than 10 years younger than the deceased participant or IRA owner
  • Minors (a five-year payout period would begin upon reaching the age of majority)

Allow for Traditional IRA contributions past age 70 1/2: Similar to Roth IRA owners, Traditional IRA owners with earned income could make IRA contributions at any age, not just before age 70½ (effective for 2020 and later taxable years).

Allow graduate student IRA contributions: Certain fellowship, stipend, and similar payments to graduate students and postdoctoral students would be treated as earned income for IRA contribution purposes (effective for 2020 and later taxable years).

Permit IRAs and S Corporation bank shares: IRAs would be permitted to hold shares of S Corporation banking entities (effective January 1, 2020).

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>

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