2023 Marcum Year-End Tax Guide

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“Due to a drafting error, the text of the law eliminated language permitting catch-up contributions for those earning under $145,000.”

In Notice 2023-62, the IRS grants a two-year transition period through 12/31/2025, where catch up contributions for those earning $145,000 can be made to non-Roth accounts. More significantly, the Service is interpreting the law to allow pre-tax catch-up contributions for those making less than $145,000 Inherited IRAs: The Service provided additional relief for beneficiaries of inherited IRAs of participants who had reached their required beginning date before death. Under the SECURE Act, most designated beneficiaries of inherited retirement plan accounts must take a total payout from the plan by the end of the tenth calendar year following the year of death. Special rules apply to certain “eligible designated beneficiaries” – i.e., the participant’s spouse, a minor child, a disabled or chronically ill beneficiary, or an individual not more than ten years younger than the participant. Most practitioners believed that a beneficiary could defer taking any payments from the qualified plan account until the end of the tenth year following the participant’s death in all circumstances. However, the Service issued proposed regulations which provided that if required minimum distributions had begun for the deceased participant prior to death, the non-eligible designated beneficiary had to be paid at least as rapidly as payments would be made

to the participant during the 10-year period. Then, any balance would be payable in the tenth year after death. The Service deferred the application of this rule previously for 2021 and 2022. The Service has extended this rule for the 2023 tax year. The penalty for failure to make a required minimum distribution will not apply. Additionally, this will not constitute an operational failure of the plan. Plan Forfeitures: The Service also issued guidance dealing with the treatment of plan forfeitures in proposed regulations, which are intended to apply to plan years beginning on or after January 1, 2024. Plan can rely on these regulations for prior periods. • Defined Benefit Plans: Old rules require forfeitures to be used as soon as possible to reduce employer contributions under reg sec 1.401-7(a). This no longer accords with the new minimum funding standard. The proposed regulations provide that forfeitures are considered part of the reasonable actuarial assumptions in determining the amount of contributions made under the plan. The plan must expressly provide that forfeitures cannot be used to increase the benefit of any employee before termination of the plan or if the plan is frozen. This could require a plan amendment.

• Defined Contribution Plans. A common practice has been to put forfeited amounts into a suspense account, which accumulates over the years. IRS has previously indicated that this is not explicitly permitted under the Code. The proposed regulations state that the plan should describe how funds should be used. Suggestions are: 1) to pay plan administration expenses; 2) reduce employer contributions under the plan; or 3) increase the benefits of other participant accounts per plan terms. While not all uses are required, the regulations indicate there can be an operational problem with the plan if the forfeited funds are not absorbed within twelve months after the end of the plan year of forfeiture. Consequently, it may be advisable to permit all of these uses. Under the regulations, forfeitures incurred in a plan year that begins before 1/1/2023 will be treated as being incurred in the plan year beginning on or after 1/1/2024, CORPORATE TRANSPARENCY ACT Starting January 1, 2024, the new Corporate Transparency Act (CTA) requires certain “reporting companies” to file a report of “beneficial owners” with FinCEN. A reporting company is either (a) a

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