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November 2018

Are IRA Amendments Required For 2018-2019?

The governing IRA regulation requires an IRA custodian to furnish an IRA amendment when the IRA plan agreement provisions are changed or when one or more of the topics discussed in the IRA disclosure statement is no longer correct and it needs to be revised to set forth a current explanation.

More lRA changes have occurred in 2018 then many people realize. There were also a number of changes in 2016 and 2017.

There are two types of IRA amendments - one which amends the IRA plan agreement and one which amends the IRA disclosure statement. An IRA custodian/trustee may indeed to furnish both amendments. Regulation 1.4 08-6(4)(ii)(C) requires that an IRA amendment be furnished no later than the 30th day after the amendment is adopted or becomes effective.
The following are the primary changes which occurred in 2018:

  1. In October of 2018 the IRS announced that the maximum annual contribution limits for traditional IRAs and Roth IRAs are increasing
    in 2019 to $6,000 (under age 50) and $7,000 (age 50 or older). The limits for 2018 are $5,500 (under age 50) and $6,500 (age 50 or older). These limits are adjusted under the law when there has been a $500 change under a cost of living adjustment formula.
  2. Special tax relief was enacted in both the Tax Cuts and Jobs Act of 2017 (December 22, 2017) and the Bipartisan Budget Act of 2018 (February 2018) to assist the victims of Hurricanes Harvey, Irma, Maria, victims of the California wildfires and other federally declared natural disasters. In general, such tax relief permits a victim to include a distribution in income over a 3 year time period rather than having to include it all in income for the year of withdrawal and allows an individual to repay a distribution over a 3 year time period and receive tax-free rollover treatment rather than under the standard 60 day rule.
  3. On March 15, 2018, the U.S. Court of Appeals vacated the Department of Labor’s Fiduciary Rule. Vacated means the Fiduciary Rule is treated as if it had never gone into effect. Under the vacated rule, the DOL’s new definition of a fiduciary investment adviser had gone into effect on June 9, 2017. Because CWF’s IRA Plan Agreement forms did explain that the new definition went into effect on June 9, 2017, an IRA amendment should be furnished discussing the vacating of the 2017 definition and that the old definition again applies.
  4. There are certain income limits applying to traditional IRAs and Roth IRAs for 2018 and 2019 and the Savers Tax Credit. Many of these limits change each year as a result of being adjusted to reflect a cost of living adjustment. More individuals may be eligible to make deductible traditional IRA contributions or Roth IRA contributions or to claim the tax credit.

In order to determine which amendment should be furnished, an IRA custodian/trustee wants to understand when was the last time an IRA amendment was furnished and what did if cover. In April of 2017 the Internal Revenue Service (IRS) issued revised model IRA Forms, 5305, 5305-A, 5305-R and 5305-RA. In 2019, many lRA custodians will furnish a comprehensive IRA amendment because it amends the IRA plan agreement and also furnishes an IRA disclosure statement discussing the IRA rules as they apply in 2018 and 2019. Furnishing the 2018-2019 comprehensive IRA amendment by January 31, 2019 or May 31, 2019 provides current accurate IRA information allowing individuals to hopefully
make informed IRA decisions.

Combining the 2018-2019 IRA Amendment with other IRA statements and notices can be cost effective as mailing costs can be