529 College Savings Plan and the Expanded Use, Non-ERISA Plans and the Golden Handcuff

On this episode, Charles Musgrove and guest Taylor Hodges from Southern Capital discuss a variety of topics including:

• The 529 College Savings Plan and how the 2019 SECURE Act has expanded the use of the plan assets
• The Safe Harbor provision
• Non-ERISA plans or the Golden Handcuff and practical examples
• Distributions from inherited retirement plans
• Balance of tax deferred vs after tax savings

1. 2019 SECURE Act:
   • Small business owners will receive a tax credit for establishing a retirement plan
     • Additional tax credit for adopting auto enrollment
   • New provisions to allow part-time employees with less than $1,000-hours to join 401K
   • Elimination of stretch provisions for beneficiaries
     • With a few exceptions, most non-spouse beneficiaries will have 10 years to withdrawal 100% from the inherited IRA – No RMDs during 10-year window
       • Will count as income to beneficiary – Shift assets to tax-free?
     • RMD age pushed back to age 72
       • Only for people who turn 70 ½ after January 1, 2020
     • Everyone should check to make sure their beneficiaries are updated
       • If beneficiary is a Trust, understand how it may effect beneficiary amounts and taxes on distributions

 

2. Executive Benefits
   • Goal for business owners is to attract, retain and reward good employees
     • ERISA – 401K, SEP, ESOP
     • Non-ERISA – NQDC, Phantom Stock, Golden Handcuff
   • Different for 8(a) companies due to program restrictions on income and net worth
     • Specialize in 8(a) – Unique planning process

 

3. Articles
   • The Hierarchy Of Tax-Preferenced Savings Vehicles For High-Income Earners:
     • https://www.kitces.com/blog/hierarchy-tax-preference-savings-vehicle-roth-high-income/
   • Tax Brackets Resource:
     • https://www.nerdwallet.com/blog/taxes/federal-income-tax-brackets/
   • 2019 SECURE Act:
     • https://www.kitces.com/blog/secure-act-2019-stretch-ira-rmd-effective-date-mep-auto-enrollment/
   • Don't Die Yet: New U.S. Law Will Muddle Estate Plans:

https://www.kitces.com/blog/tax-rate-equilibrium-for-retirement-taxable-income-liquidations-rothconversions/