Year End Legislation


Hey All!

This is becoming a trend I’m not loving BUT Santa left us a few extra thousand pages to read through over the break,
ahead of the coming tax season. We took the time to read through the portions of the bill that might
impact our clients in the short term and get those notes early while we get through the rest of the
document in the coming weeks.

The first note impacts the broadest group of people but was not a big surprise. Encouraging retirees to
leave money inside of plans can be good for many reasons but a solid resource for plenty of tax planning

– Increased RMD Age – Age increases from 72 to 73 in 2023 and then to age 75 in 2033.
Additionally, the penalty for failing to take RMDs would be reduced to 25%, and in some cases
10%, from the current 50%. Helpful, on both fronts, but not exactly a game changer.

More Roth Options!
Many of you know I’m a big fan of utilizing Roth Accounts. I feel strongly that a good solid retirement
plan includes some solid tax withdrawal strategies. Having a healthy allocation of your assets already
taxed gives you much more freedom to plan and minimize taxes in your withdrawing years. (Second
article coming on this topic.)

– Broadening uses for unused college savings money: A provision would allow for tax- and
penalty-free rollovers to Roth IRAs from 529 college savings accounts that are at least 15 years
old, within limits. This could provide for some interesting strategies to those lucky enough to
have overfunded 529 Plans. I’ve not been a fan of 529 Plans due to their lack of flexibility for
what might be a different post-secondary landscape in 10-20 years. This helps a little, but I
probably still won’t be a big fan of these anytime soon.

– Changing the required minimum distribution rules for Roth 401(k)s: Currently, while Roth
IRAs come with no RMDs during the original account owner’s life, that’s not the case for Roth
401(k)s. Starting in 2024, the pre-death distribution requirement would be eliminated. We
expected this change to come eventually. We’ve been working with many of our clients on
taking advantage of Roth conversions to take advantage of low tax rates for years. This
continues our argument that tax management as a part of your retirement plan is a large factor
in plan success. Good financial planners have been an asset in these conversations in the past
few years.

Plenty of Changes to 401k Plans:

-Helping workers who are repaying student loans save for retirement: Secure 2.0 makes it
easier for employers to make contributions to 401(k) plans (and similar workplace plans) on
behalf of employees who are making student loan payments instead of contributing to their
retirement plan. Given the fact that Student Loan Debt is at about $1.7 TRILLION dollars, it
would make sense to create an option to both encourage employees to pay down debt and start
planning for retirement. However, this might just turn into a paperwork nightmare in plan

-Improving worker access to emergency savings: One provision would let employees withdraw
up to $1,000 from their retirement account for emergency expenses without having to pay the
typical 10% tax penalty for early withdrawal if they are under age 59½. Companies also could let
workers set up an emergency savings account through automatic payroll deductions, with a cap
of $2,500. The emergency savings account is a huge deal and one that more people should take
advantage of. When I worked at Blue Beacon Truck Wash we had a similar benefit and it was a
HUGE tool in helping me save and pay off my student loans much faster.

-Increasing part-time workers’ access to retirement accounts: The original Secure Act made it so
part-time workers who book between 500 and 999 hours for three consecutive years could be
eligible for their company’s 401(k). Secure 2.0 reduces that to two years. Companies have already been required to grant eligibility to employees who work at least 1,000 hours in a year.

What didn’t make it to the Final Cut?

Safe Banking Act – This would have given some serious relief to the Cannabis Industry by
making banking a “little less difficult”. Most businesses related to the Cannabis Industry have to
create non-traditional options for banking which makes things that much more difficult in a very
“new” business. In my opinion, too many legislators saw this as a back-door approach to legalizing
marijuana nationally. This industry has too much money behind it and too much money for the
government to make on it. I would fully expect this to happen but likely in a more robust,
specific bill on the industry in the coming years. This was a huge loss for those in the industry as
unfortunately, it means more pain and strain on an already difficult environment.

Something a little fishy in the bill?
Oddly enough, this is always my favorite part of this kind of legislation. Combing through
some of the random additions that are “entertaining” – Yeah I get it, “entertaining” is probably not
the word you would’ve used.

– $70 Million Specifically Allocated for Salmon. I’m a big fan of Salmon, so I’m not complaining
but yes, this is a thing. I love fishing, I love cooking and I love eating Salmon. I’m certain that
I’ve in some way contributed to this shortage so it only seems right to spend some extra money.
Does $70M sound like a ton of money? Yes, it sure does. However, in the scope of things $70M
is essentially a “rounding error” compared to the total $1.7 Trillion. For the sake of doing to
much math while on “vacation” let’s keep it simple. There are one million, “millions” in one



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