1. Welcome to "Current Issues With Using IRAs and Employer-Provided Retirement Benefits to Fund Retirement" Chicago Bar Association Elder Law Committee Monthly Meeting, November 23, 2015 Presented by Barry Kozak, Law Office of Barry Kozak

2. Agenda 1.Qualified Longevity Annuity Contracts 2.Roll-Overs as Business Startups 3.The end of Group Legal Plans 4.2016 Medicare Out-of-Pocket Costs 5.Presumptively Void Transfers for non-family- member caregivers 6.Inherited IRAs 7.Time permitting, a general Q&A on your issues 2

3. 1. QLACs First, reminder of Required Minimum Distributions Then, a discussion of QLACs 3

4. 1. QLACs First, reminder of Required Minimum Distributions RMD for 2016 from individual account plan account in 2015 = Life Expectancy factor 4

5. 1. QLACs Then, a discussion of QLACs If offered in an IRA or 401(k) plan: 1.Max premium, lesser of 25% or $125,000 2.deferred annuity, but starting by 85th B’day 3.other requirements on insurance company 5

6. 2. ROBS Using an IRA Roll Over account, or a 401(k) plan account, as investment capital for a new business… can be done, but very complicated not listed as an Abusive Tax Avoidance Transaction, but the IRS is currently scrutinizing was it truly a distribution, triggering tax was if a prohibited transaction, triggering a penalty if employees are hired, do they properly participate Tax Court is siding with IRS 6

7. 3. Group Legal Plans IRC §120 repealed through TIPA 2014 Therefore, employer loses deduction (other than ordinary and necessary business expense under IRC §162) employee will be imputed with income if any portion of the fees are paid by employer on behalf of employee, spouse or dependent 7

8. 3. Group Legal Plans Exciting new opportunity for “Retirement Planning” As a fringe benefit under IRC §132(a)(7), “Qualified retirement planning services” provided to an employee and his or her spouse by an employer maintaining a qualified plan are excludible from income and wages” under IRC §132(m)(3), “any retirement planning advice or information provided to an employee and his spouse” no hard guidance 8

9. 3. Group Legal Plans Other provisions expiring December 31, 2104 Qualified charitable distribution Certain eligible educator expenses Certain qualified transportation fringe benefits Local sales tax deduction instead of local income tax Certain qualified tuition and related expenses 9

10. 3. Group Legal Plans Other changes in TIPA 2014 New IRC §529A, “Achieving a Better Life Experience” (ABLE) plans State-wide programs allowing funds to help pay for expenses incurred by people with disabilities Similar to IRC §529 qualified tuition plans At federal level, Proposed Regs At Illinois level, no enacting legislation authorizing Treasurer to develop plan 10

11. 4. 2016 Medicare Part B Costs Monthly Premiums for Part B low income, then either $104.90 or $121.80 tier 1, then $170.50 tier 2, then $243.60 tier 3, then $316.70 tier 4, then $389.80 Other costs for 2016 also published by CMS 11

12. 4. 2016 Medicare Part B Costs Other major changes through Bipartisan Budget Act of 2015 No auto-enrollment under ACA Changes to payments from Medicare to providers now it is harder to qualify and maintain disability status under Social Security For Social Security beneficiaries who turn 62 after 2015, the strategy of “file and suspend” is eliminated 12

13. 5. Presumptively Void Transfers If a non-family member caretaker, or certain relatives of that caregiver, receives a gift with a fair market value exceeding $20,000, and if a civil lawsuit is filed within 2 years of the date of death of the transferor, then the transfer instrument is assumed to be void. rebuttable presumption if caregiver loses, then responsible for costs (including attorneys fees) only for civil actions, but no independent duty imposed on any “financial institution, trust company, trustee, or similar entity or person related to any transfer instrument.” 13

14. 5. Presumptively Void Transfers On the other hand… any spouse, parent, brother, sister, or child of a person with a disability who dedicates himself or herself to the care of the person with a disability by living with and personally caring for the person with a disability for at least 3 years shall be entitled to a claim against the estate upon the death of the person with a disability. The claim shall take into consideration the claimant's lost employment opportunities, lost lifestyle opportunities, and emotional distress experienced as a result of personally caring for the person with a disability.... Must read: Estate of Mendelson v Mendelson (2015 IL App (2d) 14

15. 6. Inherited IRAs Clark v. Rameker (USSC 2014) held that once an IRA account-holder dies, and it becomes an “inherited IRA,” it has the potential to lose its favored status as “retirement funds” which can be excluded from a bankruptcy estate. However, for terms other than “retirement funds” in the federal bankruptcy laws, and under certain state bankruptcy laws, some lower courts are protecting inherited IRAs from creditors 15

16. 6. Inherited IRAs Revisit naming a trust as a beneficiary: Under Treas. Reg. §1.401(a)(9)-4, Q&A-5: 1.The trust is a valid trust under state law. 2.The trust is irrevocable or will become irrevocable upon the death of the employee. 3.The beneficiaries of the trust are “identifiable.” 4.The documentation has been provided to the plan administrator: either— the trust itself or a trust certification with certain information. 16

17. 7. Your Turn Are there any questions, comments or concerns you have with a client’s IRA or employer-provided retirement plan benefits? I will need to repeat your thoughts into the microphone, so please keep them brief, or feel free to join me at the podium. 17

18. 18 Thank you

19. Welcome to "Current Issues With Using IRAs and Employer-Provided Retirement Benefits to Fund Retirement" Chicago Bar Association Elder Law Committee Monthly Meeting, November 23, 2015 Presented by Barry Kozak, Law Office of Barry Kozak