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IRS Announces 2013 Limits for IRAs and Pension Plans

Posted by James M. Carlson
Oct 18 2012

IRS Announces 2013 Limits For IRAs and Pension Plans

Today, the IRS announced to 2013 limits applying to IRAs and pension plans by issuing IRS news release 2012-77.

The IRA contribution limits are changed - $5,500 (up from $5,000) if the individual is younger than age 50 in 2013, and $6,500 (up from $6,000) if he or she attains age 50 or older in 2013.

The maximum SEP contribution for 2013 will increase to $51,000 from $50,000.

The SIMPLE IRA contribution limits are also changed for 2013. The maximum elective deferral contribution amount is $12,000 for a person who is younger than age 50 in 2013 and $14,500 if he or she attains age 50 or older in 2013.

The 401(k) elective deferral contribution limits also changed for 2013. The maximum elective deferral contribution amount is $17,500 (up from $17,000) for a person who is younger than age 50 in 2013 and $23,000 (up from $22,500) if he or she attains age 50 or older in 2013.

The compensation ranges applying to deductible IRA contributions do increase.

  • The 2013 compensation range applying to a person whose filing status is single, head of household or qualifying widower is ($59,000 - $69,000) (up from $58,000 - $68,000}
  • The 2013 compensation range applying to a person whose filing status is married/joint return and an active participant is ($95,000 - $115,000) (up from $92,000 - $112,000}
  • The 2013 compensation range applying to a person whose filing status is married/joint return but not an active participant is ($178,000 - $188,000) (up from $173,000 - $183,000}
  • The 2013 compensation range applying to a person whose filing status is married but filing a separate return is unchanged at ($0 - $10,000).

The compensation ranges applying to Roth IRA contributions have increased for 2013.

  • The 2013 compensation range applying to a person whose filing status is single, head of household or qualifying widower is ($112,000 - $127,000) up from ($110,000 - $115,000)
  • The 2013 compensation range applying to a person whose filing status is married/joint return is ($178,000 - $188,000) up from ($173,000 - $183,000)
  • The 2013 compensation range applying to a person whose filing status is married but filing a separate return is unchanged at ($0 - $10,000).

The compensation ranges applying to a savers tax credit also will increase.

Categories: Governmental Reporting, Pension Alerts, Roth IRAs, Traditional IRAs

IRS Repeals Use of Letter-Forwarding Program for IRAs and Pension Plan

Posted by James M. Carlson
Oct 18 2012

In Rev. Proc. 2012-35 the IRS has chosen to revise Rev. Proc. 94-22 by removing from the purpose section letters being sent by IRA custodians and pension plan trustees to "lost" individuals. The IRS cites the internet and various relocator resources as justifying the discontinuance of its IRA/pension letter forwarding program. The technical change is - returning funds to a person no longer falls within the definition of a "humane" action and the IRS has changed the definition accordingly. That is, the IRS will not forward letters if the sole purpose of the letter is to contact a “missing person” so he or she may be paid IRA or pension funds. The IRS seems to have a strange definition of what it means to be humane in a hard economy.

IRA custodians sometimes lose contact with IRA accountholders or inheriting beneficiaries. Trustees of pension plan experience similar problems with former employees. In 1994 the IRS established a procedure where it would forward a letter to an individual on behalf of an IRA custodian or a plan trustee. In essence, the letter from the financial institution to the individual informed him or her to contact the institution as he or she had IRA funds or pension funds at the institution and the institution wished to pay these funds to the individual.

It appears that this change is being made to lower expenses. As an alternative, the IRS could have increased its fees. The IRS will process letters requesting letter-forwarding services under Rev Proc. 94-22 if postmarked by August 30, 2012. If postmarked on and after August 31, 2012, then the IRS will use the procedures set forth in Rev. Proc. 2012-35.

On August 31, 2012, CWF was sent an email from the IRS under its IRS Guidewire program wherein tax practitioners are sent IRS guidance in advance of its publication in the Internal Revenue Bulletin. Note that CWF was notified on August 31, the day after the August 30 deadline. It is unfortunate that this letter forwarding program has been discontinued. It was one tool which allowed an IRA custodian or pension plan trustees to find some “unlocated persons” and to pay them their account balances.

Categories: Pension Alerts

Gold Within a Self-Directed IRA

Posted by James M. Carlson
Oct 17 2012

An IRA custodian/trustee will have clients and potential clients who will ask about using his or her IRA funds to buy gold. An IRA custodian/trustee should at least consider rendering this service. The answer need not be an automatic, “no.” It may be that individuals are willing to pay fees to make the rendering of this service worth while. Such fees are negotiable.

In January of 2004 gold was selling for around $400 per ounce. On September 12, 2012, the price was around $1,725 per ounce.

Code section 408(m)(3) authorizes that certain gold may purchased as an IRA investment and that such aninvestment will not be a prohibited transaction.

An IRA custodian/trustee should consult with its attorney before establishing procedures to buy and sell gold on behalf of IRA accountholders. Here is are some suggestions to be considered when establishing the policies and procedures applying to gold as an IRA investment.

  1. Ownership must be by the financial institution as the IRA custodian/trustee. For example, SecondThird Trust Department as IRA trustee for John Doe’s traditional In. The seller of the gold needs to acknowledge this is in writing and that the seller is not authorized to discuss this investment with the individual. The trust department could choose to not even tell the seller about the individual
  2. The seller of the gold should certify that the gold being sold/purchased does meet the requirements of Code section 408(m)(3) so that the purchase of this gold will not be a prohibited transaction
  3. Physical possession of the gold. Most conservative is that the trust department hold possession, but this is not required. The trust department could retain a third party to hold the gold. The individual cannot have access to the gold
  4. The purchase of the gold must be by the trust department as the IRA truste
  5. There should be a basic discussion of the prohibited transaction rules with the individual regarding the gold investment and possibly other investments. Furnishing a written discussion would be a good idea.

Gold may be a permissible investment for IRAs. Each institution will need to decide if it can charge sufficient fees to make it a worthwhile business endeavor. There are individuals who want to invest in gold.n IRA custodian/trustee will have clients and potential clients who will ask about using his or her IRA funds to buy gold. An IRA custodian/trustee should at least consider rendering this service. The answer need not be an automatic, “no.” It may be that individuals are willing to pay fees to make the rendering of this service worth while. Such fees are negotiable.

In January of 2004 gold was selling for around $400 per ounce. On September 12, 2012, the price was around $1,725 per ounce.

Code section 408(m)(3) authorizes that certain gold may purchased as an IRA investment and that such aninvestment will not be a prohibited transaction.

An IRA custodian/trustee should consult with its attorney before establishing procedures to buy and sell gold on behalf of IRA accountholders. Here is are some suggestions to be considered when establishing the policies and procedures applying to gold as an IRA investment.

Ownership must be by the financial institution as the IRA custodian/trustee. For example, SecondThird Trust Department as IRA trustee for John Doe’s traditional In. The seller of the gold needs to acknowledge this is in writing and that the seller is not authorized to discuss this investment with the individual. The trust department could choose to not even tell the seller about the individual

The seller of the gold should certify that the gold being sold/purchased does meet the requirements of Code section 408(m)(3) so that the purchase of this gold will not be a prohibited transaction

Physical possession of the gold. Most conservative is that the trust department hold possession, but this is not required. The trust department could retain a third party to hold the gold. The individual cannot have access to the gold

The purchase of the gold must be by the trust department as the IRA trustee

The should be a basic discussion of the prohibited transaction rules with the individual regarding the gold investment and possibly other investments. Furnishing a written discussion would be a good idea.

Gold may be a permissible investment for IRAs. Each institution will need to decide if it can charge sufficient fees to make it a worthwhile business endeavor. There are individuals who want to invest in gold.

Categories: Pension Alerts, Self-Directed IRAs