1. ADP and the ADP logo are registered trademarks of ADP, LLC. ADP – A more human resource. is a service mark of ADP, LLC. Copyright © 2016 ADP, LLC. ALL RIGHTS RESERVED. Welcome CPE Webinar

2. Copyright © SmartPros (A Kaplan Company) 

3. The following program is authored by Barbara Weltman and is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed and sold with the understanding that ADP and SmartPros Ltd. are not engaged in rendering legal, tax, accounting, investment or other expert advice. If expert assistance is required, the services of a competent professional should be sought. The views and conclusions expressed herein are those of the speaker and not necessarily those of ADP and SmartPros Ltd. 3

4. ADP and the ADP logo are registered trademarks of ADP, LLC. ADP – A more human resource. is a service mark of ADP, LLC. Copyright © 2016 ADP, LLC. ALL RIGHTS RESERVED.

5. Copyright © SmartPros (A Kaplan Company) EXPERT COMMENTATOR: Barbara Weltman, J.D. President, Big Ideas for Small Business 5

6. Copyright © SmartPros (A Kaplan Company) Introduction Copyright © SmartPros (A Kaplan Company)

7. Introduction

8. Copyright © SmartPros (A Kaplan Company) Saving on a Tax- Advantaged Basis

9. Copyright © SmartPros (A Kaplan Company) Advising clients about retirement savings: −Making contributions to employer plans to optimize employer matching contributions −Deciding where to save: employer plan or personal plan −Coordinating contributions by spouses −Contributions for nonworking spouses Saving on a Tax- Advantaged Basis

10. Copyright © SmartPros (A Kaplan Company) Issues for retirement savings: −Income limits for personal accounts Limits adjusted annually for inflation If excess contributions are made, use options for minimizing/avoiding the 6% excise tax −Conversions to Roth IRAs −Need to save for other purposes (children’s education, buying a home, starting a business) Saving on a Tax- Advantaged Basis

11. Copyright © SmartPros (A Kaplan Company) Making Wise Investments Retirement nest egg depends on clients’ investment returns Choosing from a menu of investment options Self-directed IRAs

12. Copyright © SmartPros (A Kaplan Company) Making Wise Investments New fiduciary rule –What the rule says: Brokers held to fiduciary standard (replaces suitability standard) –What the rule does: Requires brokers to recommend only the best option (not merely an investment that’s suitable) Impacts retirement accounts (401(k)s, IRAs) Impacts rollovers Likely will force smaller accounts into managed accounts (flat management fee versus fee per transaction)

13. Copyright © SmartPros (A Kaplan Company) Making Wise Investments New fiduciary rule –When is it effective: Generally April 10, 2017 (some requirements January 1, 2018). Find links here: https://www.dol.gov/ebsa/regs/ conflictsofinterest.html https://www.dol.gov/ebsa/regs/ conflictsofinterest.html

14. Copyright © SmartPros (A Kaplan Company) Making Wise Investments What’s happening with the rule –Congress voted to repeal it; President Obama vetoed the measure –Lawsuit seeking an injunction (decision expected in August)

15. Copyright © SmartPros (A Kaplan Company) Avoid Using Retirement Savings for Other Purposes Misconception: The fact that there’s no penalty on distributions before age 59½ for certain reasons (health, homebuying, education) does not avoid other issues: –Tax on the distribution –Permanent diminution of retirement savings

16. Copyright © SmartPros (A Kaplan Company) Avoid Using Retirement Savings for Other Purposes Using retirement savings (without paying tax on distributions) to start a business –Rollovers as business startups (ROBS) are not per se prohibited (https://www.irs.gov/retirement- plans/rollovers-as-business-start-ups- compliance-project)https://www.irs.gov/retirement- plans/rollovers-as-business-start-ups- compliance-project –But extreme caution is advised If the business goes under, client loses the business AND retirement savings Tax traps for ROBS (see next slide)

17. Copyright © SmartPros (A Kaplan Company) Avoid Using Retirement Savings for Other Purposes Unrelated business income tax (UBIT) –Retirement plan needs to file Form 990-T Pays tax at trust rates (top bracket in 2016 starts at $12,400 Prohibited transactions (Code Sec. 4975(c)) –Example: Setting owner’s salary considered a prohibited transaction (Ellis, TC Memo 2013- 245) –Example: Owner guaranteeing loan by company owning part of his self-directed IRA a prohibited transaction (Peek, 140 TC No. 12 (2013))

18. Copyright © SmartPros (A Kaplan Company) Avoid Using Retirement Savings for Other Purposes Abusive Roth IRA transactions –Example: Arrangement resulted in excess contributions subject to the 6% excise tax and other penalties (Polowniak, TC Memo 2016-31)

19. Copyright © SmartPros (A Kaplan Company) Avoid Using Retirement Savings for Other Purposes Are ROBS dead? –Still being advanced by some promoters –Alternative financing today (e.g., crowdfunding) may make ROBS unnecessary

20. Copyright © SmartPros (A Kaplan Company) Smart Distribution Planning When to start distributions −Early retirement? −What to withdraw for steady retirement income? Does the 4% rule still work? −Wait until age 70½? Deadline for first RMD Coordinate distributions with Social Security benefits?

21. Copyright © SmartPros (A Kaplan Company) Special concerns for spouses −Options for spousal protection −Spousal consent for rollovers Smart Distribution Planning

22. Copyright © SmartPros (A Kaplan Company) Direct transfers from IRAs to public charities −Option for those age 70½ −Provision is now permanent −Limited to $100,000 annually −Advantages: Reduces AGI (helpful for optimizing other tax breaks and minimizing Medicare surtax) Enables non-itemizers to benefit their favorite charities on a tax-advantaged basis Smart Distribution Planning

23. Copyright © SmartPros (A Kaplan Company) Taking RMDs −Who should figure this (plan administrator? custodian? tax advisor?) −Figuring distributions per account IRA exception: can aggregate IRAs and take distributions from one or more accounts Smart Distribution Planning

24. Copyright © SmartPros (A Kaplan Company) Paying tax on distributions −Withholding? −Estimated taxes? Smart Distribution Planning

25. Copyright © SmartPros (A Kaplan Company) Conclusion The earlier that clients begin to save, the easier it is to amass a good retirement nest egg Retirement funds should be left for retirement purposes Watch for developments that could impact retirement planning advice