Several years ago, the SECURE Act was passed, which had major changes to the tax rules relating to retirement plan distributions. Another act on that subject is working through Congress – the Enhancing American Retirement Now (EARN) Act. A version has passed the House of Representatives, with the Senate working on its own version. Given the almost unanimous passage by the House, there is a very good chance that the Act will make its way into law.
We cannot tell what all the provisions will be, but here is a list of items that are in one or both of the House and Senate bills and thus have a reasonably good chance of being in the final version:
- extending the date on which the required beginning date is based, from the year in which the employee or IRA owner reaches age 72 to the year in which he or she reaches age 75, effective after 2031
- allowing up to $2,000 per year of 401(k) assets to be used for long-term care insurance
- reducing the Code Sec. 4974 50% excise tax on the failure to take a required minimum distribution to 25% and reducing it to 10% for an individual who, during a correction window, corrects the shortfall and submits a return reflecting the tax
- indexing for inflation the $100,000 limitation on qualified charitable distributions from an IRA and permitting a one-time election to treat up to $50,000 in distributions (also indexed for inflation) from an IRA to a charitable remainder trust or charitable gift annuity as if they were made directly to a qualifying charity
- excluding from the additional 10% tax on early distributions under Code Sec. 72(t), distributions made to a terminally ill individual;
- excluding from the additional 10% tax on early distributions under Code Sec. 72(t), distributions of up to $1,000 per year to meet expenses relating to personal or family emergencies
- excluding from the 10% additional tax on early distributions under Code Sec. 72(t), eligible distributions of up to $10,000 (or, if less, 50% of the account balance) for distributions to domestic abuse victims