Not all funds held in a qualified plan retirement account are eligible for a rollover to an IRA.

While there is some relief from the 50% excise tax for years 2021 and 2022 arising from confusion over the SECURE Act’s 10-year distribution rule with regard to retirement plans and accounts, there is still plenty of confusion trying to figure out which beneficiaries benefit from that penalty relief, and other designated beneficiaries who will not benefit.

While the IRS provided relief from the 50% excise tax to those designated beneficiaries who did not take a required minimum distribution from an inherited IRA if the IRA owner was age 72 or older, it provided no relief to those individuals who were conservative and knowledgeable and who took a distribution for 2021 and earlier in 2022 and paid the income tax on what they received from the inherited IRA.

Take-Away: There are strict ordering rules with regard to distributions from a Roth IRA, along with an aggregation rule that often creates some confusion when distributions are taken from a Roth IRA.

Take-Away: A lump sum distribution from a qualified plan, e.g. a 401(k) account, can override ERISA’s spousal consent rules.

There is a new election buried in the SECURE Act 2.0 that may impact spousal beneficiary designations or trusts where a surviving spouse is the sole beneficiary. This election can either produce more benefit for the surviving spouse, or it can lead to a costly mistake.

A trust reformation, not a trust modification, is required if the goal is to achieve a tax benefit under the trust, as a trust reformation is retroactive to the date the trust was created. Not so with a trust modification.

Take-Away: Medicaid self-settled qualifying trusts often lead to common law asset protection principles. While lawyers and courts are familiar with those principles, and the limits on those principles, e.g. the property rights associated with the donee of a limited power of appointment, Medicaid administrators have little or no familiarity, thus leading to some strange reasons for the denial of Medicaid benefits.

The SECURE Act 2.0 permits employers, particularly those employers who hire college graduates, to match student loan repayments made by plan participants, thus making the employer’s qualified plan more attractive and beneficial to its employees.

Take-Away: One way to avoid an early distribution 10% excise tax on a distribution from an IRA or qualified plan account is to abide by the substantially equal periodic payment exception under the Tax Code. The problem with following that exception is the longer of five years or age 59 ½ requirement.