California Estate Planning Blog by Kevin Staker

December 28, 2016

The Retirement Enhancement and Savings Act Would Limit IRA Stretch Out by Kevin Staker

Filed under: IRA stretch out,Kevin Staker — Kevin Staker @ 9:57 am

The Retirement Enhancement and Savings Act Would Limit the Stretch Out of Inherited IRA Distributions

On September 21, the Senate Finance Committee unanimously approved an important retirement bill. The Retirement Enhancement and Savings Act (the “RESA”) would ease the rules for nondiscrimination for closed defined benefit plans, allow open multiple employer plans, increase the limits in saving in automatic enrollment arrangements, and promote options for lifetime income.

None of the above would affect estate planning.  However, to pay for the revenue losses of the Act, it would also require beneficiaries of any IRA or other retirement account of over $450,000 to take all distributions from account or plan over the five year period after the death of the plan participant.  This would apply to inherited individual retirement accounts (IRAs) and defined contribution (DC) plans.

The bill was not approved in the final flurry of legislation in Congress in December.  However, it is anticipated the bill will be reintroduced in the  Congress in the next session in 2017.