Topic: Regulatory Impact

  • CARES Act Explained: What You Need to Know

    From rebate checks to small business support, there is quite a bit packed into the Coronavirus Aid, Relief, and Economic Security (CARES) Act that was signed into law on Friday. The $2+ trillion emergency fiscal stimulus package is intended to mitigate some of the economic effects caused by the COVID-19 outbreak.

    We have all been working to gain an understanding of the law so that we can act as a resource for our friends and family looking to take advantage of the applicable provisions. We have been reading numerous articles, participating in webcasts hosted by industry experts and large accounting firms, and talking with banks to understand the process for various provisions. New information is still coming out daily, but please do not hesitate to use us as a resource as we work through this pandemic.

    Here is a look at some of the key provisions in the CARES Act that may be of interest to you:

    1. A check – Based on income and family makeup, most Americans can expect to receive $1,200 individually ($2,400 for joint filers) and $500 per dependent. Amounts phase out for those who reported adjusted gross incomes over $75,000 for individuals and $150,000 for joint filers in 2018 or
    2. A buffer – The CARES Act eliminates the 10% early withdrawal penalty for coronavirus-related distributions from retirement accounts. Withdrawn amounts can be repaid to the plan over the next three years. In addition, required minimum distributions (RMDs) are waived for 2020. Investors who have already taken an RMD for 2020 have options that may include returning the amount or rolling it over, as long as the distribution was not made from a beneficiary
    3. Support for small businesses – In the form of more than $350 billion, including forgivable loans (up to $10 million) to help keep the business afloat, a paycheck protection plan and
    4. Expanded unemployment benefits – Unlimited funding to provide workers laid off due to COVID-19 an additional $600 a week, in addition to state benefits for up to four months. This includes relief for self-employed individuals, furloughed employees and gig economy workers who have lost work during the
    5. Fortified healthcare – $100 billion is allocated to hospitals and other health providers to help offset costs and provide relief. In addition, the legislation provides funding for numerous other areas including state and local COVID-19 response measures, an increase to the national stockpile for medicine, protective equipment, medical supplies and additional FEMA disaster relief
    6. Enhanced education – $30 billion to bolster state education and school funding, as well as the deferral of federal student loan payments through the end of September.

    What’s next? Treasury Secretary Steven Mnuchin has targeted early April to deliver the funds. Discussions are starting in D.C. around a possible next phase of economic relief, although it’s just talk for now.

    We’ll continue to keep you updated with relevant and timely information. In the meantime, please don’t hesitate to reach out. These are difficult times in which we are living, but we are confident that we will get through them together.

    The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Confluence Financial Partners is not a registered broker/dealer, and is independent of Raymond James Financial Services. Investment Advisory Services are offered through Raymond James Financial Services Advisors, Inc. Investing involves risk, and investors may incur a profit or a loss. Some expressions of opinion reflect the judgment of Raymond James and are subject to change. There is no assurance that any of the forecasts mentioned will occur. Economic and market conditions are subject to change.  Some of the material was prepared by Raymond James for use by its advisors.

    •

    Randy Holcombe

    •

  • 2 Things Every Investor Should Know About SECURE Act 2.0

    In late December, a $1.7T omnibus spending package was passed in Congress and subsequently signed into law by President Biden. This bill included some significant updates to the landmark 2019 SECURE Act, such that this portion of the legislation is being referred to as SECURE Act 2.0.

    While there are many important updates in the law, I’d like to focus on two items that we believe are especially significant

    1. Required Minimum Distribution (RMD) Age Increase

    Beginning 1/1/2023, the new beginning age for RMDs will be 73. By 2033, the age for RMDs will be pushed back further to 75.

    This means that investors who will turn 72 in 2023 received a pass on what would have been their first RMD! It also means that the window of opportunity for income planning in retirement is extended.

    Some of the most opportune years in terms of income planning are the years between retirement and when RMDs begin. In these years, individuals tend to be in a relatively low tax bracket, because they no longer have high employment income and they also don’t yet have required income coming from their retirement accounts.

    If these retirees are able to live on Social Security and income from taxable brokerage accounts, they could end up in an unusually low tax bracket. These years can then be used to “harvest” capital gains at a 0% tax rate, or convert portions of a traditional IRA to a Roth IRA. The lower adjusted gross income can also help retirees save on things like Medicare and Social Security taxes.  

    Pushing the RMD age out to 73 and then 75 will give retirees additional time to take advantage of these opportunities.

    2. 529 accounts to Roth IRAs

    For the first time, 529s will be allowed to rollover tax-free to Roth IRAs, albeit with significant restrictions.

    The total amount allowed to be rolled over in aggregate is $35,000, and the rollovers must be done in accordance with the annual Roth contribution limits (currently $6,500 for those under age 50). In addition, the 529 must have been established for at least 15 years.

    This change will help to alleviate investor fears of what may happen to 529 funds if the beneficiary chooses not to pursue higher education.

    The change also allows for a strategy whereby investors begin planned rollovers to a Roth IRA once the beneficiary turns 16. At today’s limits (which will be adjusted up for inflation), a 529 beneficiary could have $35,000 plus earnings saved in a Roth IRA before graduating from college. That is a solid head start!

    If you have questions about how these opportunities could affect your financial planning, please call one of our offices to speak with a wealth manager today.

    See below for additional key provisions in SECURE Act 2.0:

    Randy Holcombe
    About the Author

    The opportunity to make a positive difference in people’s lives is why Randy chose a career in wealth management. He is passionate about helping his clients achieve their goals and cut through the constant noise of the day-to-day financial markets.

    Grove City, Pittsburgh

    724-458-5233
    randall.holcombe@confluencefp.com
    Email Randy

    •

    Randy Holcombe

    •

  • SECURE ACT 2.0 – What Employers Need to Know

    In late December, a $1.7T omnibus spending package was passed in Congress and subsequently signed into law by President Biden. This bill included some significant updates to the landmark 2019 SECURE Act, such that this portion of the legislation is being referred to as SECURE Act 2.0.

    The legislation is far-reaching and offers several enhancements intended to strengthen American’s retirement and financial readiness.

    While there are many changes that impact personal savers, I’d like to focus on one change that will have a significant impact on 401(k) plans, and the companies that sponsor retirement plans.

    Automatic Enrollment

    • The new legislation requires businesses creating new 401(k) and 403(b) plans beginning in 2025, to automatically enroll eligible employees, starting at a contribution rate of at least 3%, up to 10% of employee compensation.
    • Contribution rates must increase by 1% each year until at least 10% is reached, but not more than 15%. Employees have the option of declining to participate or adjusting their personal savings rate.   

    Why is this impactful?

    Roughly 25% of working adults have no retirement savings, and fewer than 4 in 10 believe their retirement savings are on track, according to the Federal Reserve’s Report on the Economic Well-Being of U.S. Households in 2019.

    • Proponents are hopeful that the provision will increase 401(k) participation rates and raise the amount workers save for retirement.

    Signing up for a 401(k) is simple – filling out a form isn’t a difficult task, but research has shown that workers need a nudge. As the data have repeatedly shown, auto enrollment is indeed that nudge.

    • According to a Vanguard Research study, among newly hired employees, participation rates were at 91% under auto enrollment, versus 28% under voluntary enrollment. 

    The future impact of Automatic Enrollment can be significant. Employees benefit from these automated plan design options. Employers benefit by having engaged employees that are financially fit. 

    If you have questions about how this plan design enhancement could affect your retirement program, please call (412)815-4721 to speak with our Retirement Plan Services team today.

    See below for additional key provisions in SECURE Act 2.0 for employers:

    •

    Brian Stout

    •