Earlier this year, President Donald Trump signed an Executive Order that directs the Departments of Labor and Treasury to review two regulations related to retirement. The first relates to small businesses’ ability to band together and offer retirement plans to employees. Only about half of businesses with fewer than 100 employees offer retirement plans, exacerbating a growing national crisis in retirement savings.
The fewer retirees able to stay on employersponsored pension and healthcare plans, the more individual taxpayers are forced to save and also bear responsibility for others via contributions to Social Security, Medicare, and other programs. Keeping retirees on employer-sponsored health insurance is a major legislative goal of our sister organization, ProtectSeniors.Org.
Furthermore, allowing small companies to pool investments might lower their overhead costs, incentivize offering retirement plans to employees, and enable them to compete with larger companies for talent in the hiring process. e overall idea has broad bipartisan support on Capitol Hill, but there have been no details released about the Administration’s plan. The regulations up for review make it difficult for multiple businesses to set up a single retirement plan, restraints meant to ensure oversight and transparency.
The second issue addressed in the President’s Executive Order directs the Treasury Department to look into increasing the life expectancy estimates it uses to calculate how much money retirees must take out of their 401(k) after a certain age, which would allow older Americans to keep more inside their retirement savings accounts sheltered from taxes. Currently, retirees must begin withdrawing a minimum amount of money from their tax-free retirement accounts— 401(k)s—when they turn 70 and a half.
Increasing the life expectancy rates, or “mortality tables,” associated with the minimum distribution rules, would prevent retirees from being required to take too much, too early, thus allowing those who don’t immediately need the funds the ability to continue shielding them from taxes.
While these rules are not yet in place, they are certainly on the horizon for 2019, as the Departments of Labor and the Treasury are currently hard at work reviewing and crafting new regulations at the President’s direction. As you may remember from Robert Gaglione’s article in our last newsletter, those with an IRA retirement account can donate some or all of their required minimum distribution (RMD) to a charity like the Association of BellTel Retirees tax-free, without even needing to itemize.
This can be done in the form of a qualified charitable distribution (QCD) and can reduce your income tax bill regardless of the size of the donation. Furthermore, the QCD does not increase adjusted gross income, which means your Social Security and Medicare premiums will remain unchanged.
The Association, as well as ProtectSeniors.Org, will keep a close eye on all announcements moving forward, as they may have a significant impact on the way our members manage their retirement savings