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Quest Trust Company›Blog›Coverdell ESA

Tag: Coverdell ESA

HR 1865 SECURE Act Provisions Summary

Posted on January 16, 2020July 14, 2020 by Quest Trust Company
Estimated reading time: 4 minutes

Title I – Expanding and Preserving Retirement Savings

Sec. 101. Unrelated small employers may now join together in defined contribution Multi-Employer Plans (MEPs), starting in 2021.

Sec. 102. Raises the cap for automatic enrollment cap in employer-sponsored plans from 10% to 15% of pay after 1st plan year.

Sec. 104 Small business owners with up to 100 employees may receive a TAX CREDIT for starting a retirement plan, up to $5,000 ($250 per non-highly compensated employee). 

Sec. 105 Plans with automatic enrollment may receive an additional tax credit of $500.

Sec. 106 Includes in the definition of “compensation” for IRA purposes certain taxable non-tuition fellowship and stipend payments to aid the individual in the pursuit of graduate or postdoctoral study. 

Sec. 107 Age limit for making IRA contributions is repealed beginning with contributions for 2020. The age limit remains for contributions for 2019, but as long as you have working income you can still contribute for 2020 and future years. The new law also allows spousal IRAs even if the spouse is older than 70 ½.

Sec. 109 Allows “lifetime income investment” annuities to be portable, so if you leave your job they may be rolled into another 401(k) or IRA.

Sec. 112 Part-time workers working at least 500 hours per year in the last three years must be allowed to set aside funds into a company 401(k), although the company does not have to match until the normal eligibility requirements are met. Previously employees working less than 1,000 hours a year could be excluded from the plan.

Sec. 113 Up to $5,000 tax and penalty free withdrawal if within a year of birth or adoption. You can repay these distributions as a rollover contributions to an eligible defined contribution plan or IRA. 

Sec. 114 Increases the age by which you must begin taking Required Minimum Distributions (RMDs) for those who turn age 70 ½ in 2020 or later. If you turn age 70 ½ in 2019 or earlier you still must take RMDs under the old law. 

Title II – Administrative Improvements

Sec. 201 Employer plans adopted by the filing due date for the year may be treated as in effect as of the close of the year.

Sec. 203 Increases transparency into retirement income with “lifetime income disclosure statements” similar to those sent by the Social Security Administration. These statements are intended to show how much money you could potentially receive if your 401(k) balance were used to purchase an annuity.

Title III – Other Benefits

Sec. 302 A 529 savings plan may now be used to pay off student debt, up to $10,000 over the student’s lifetime. A 529 plan may also be used to pay for certain apprenticeship programs.

Title IV – Revenue Provisions

Sec. 401 Beginning in 2020, upon death of the account owner, IRA must generally be distributed to non-spouse beneficiaries by the end of the tenth year following the date of death. This rule applies to 401(k)s and other employer plans as well. No particular schedule of distributions is required, as long as all of the funds are distributed by the deadline. Exceptions exist for “eligible designated beneficiaries” including 1) the spouse of the deceased account owner, 2) disabled or chronically ill persons (as defined), and 3) persons not more than ten years younger than the account owner. Minor children of the deceased account owner have an exception to the 10-year rule, but only until they reach the age of majority, after which the account must be distributed within 10 years. Once the eligible designated beneficiary dies, the account must be distributed within the 10-year period.

Contribution Limits for 2020

Traditional IRA – Up to $6,000 or $7,000 if you reach age 50 by the end of the year (same as 2019)

Roth IRA – Up to $6,000 or $7,000 if you reach age 50 by the end of the year (same as 2019)

Roth IRA Income Limits for Contributions:

If Married Filing Jointly or Qualifying Widow(er)

Less than $196,000 – Up to the limit

From $196,000 but less than $206,000 – a reduced amount

From $206,000 and above – Zero 

If Married Filing Separately (and you lived with your spouse at any time during year)

Less than $10,000 – a reduced amount

From $10,000 and above – Zero

If Single, Head of Household, or Married Filing Separately (and you did NOT live with your spouse during the year)

Less than $124,000 – Up to the limit

From $124,000 but less than $139,000 – a reduced amount

From $139,000 and above – Zero 

Simplified Employee Pension (SEP) IRAs – Up to $57,000 ($56,000 in 2019)

SIMPLE IRA – Employee salary deferrals can be $13,500 ($13,000 for 2019) or $16,500 if you reach age 50 by the end of the year ($16,000 for 2019) plus the employer contributes a matching contribution up to 3% of salary

401(k)/Profit Sharing Plan – Roth or Traditional 401(k) salary deferrals up to $19,500 ($19,000 for 2019) and catch-up contribution of $6,500 ($6,000 for 2019) if you reach age 50 by the end of the year plus an employer profit sharing contribution of up to $37,500 (based on your income) for a total of up to $57,000 if you are under age 50 or $63,500 if you reach age 50 by the end of the year.

Health Savings Account (HSA):

Self-only coverage $3,550 ($3,500 for 2019)

Family coverage $7,100 ($7,000 for 2019)

Catch-up contribution for those age 55 or older by the end of the year $1,000 (no change)

Coverdell Education Savings Account (CESA) – Up to $2,000 per child per year until the child reaches age 18 or if the child is disabled

Posted in 401k Education, Contributions, Coverdell ESA, Health Savings Account, Health Savings Account (HSA), How To Retire Well | Self Directed IRAs, Roth IRAs and Roth Conversions, Self-Directed IRA Contributions, SEP and SIMPLE IRAsTagged 401k education, Contributions, Coverdell ESA1 Comment

2020 Investment Account Contribution Limits

Posted on January 6, 2020July 13, 2020 by Quest Trust Company
Estimated reading time: 2 minutes

If you have a 401k, SEP IRA, simple IRA, or HSA, you’ll be able to contribute more to your account(s) next year, which can help you build your retirement savings! The limit on contributions changes from one year to the next due to inflation. However, the limits don’t change every year, and this year they don’t impact all types of retirement accounts.

How have the contribution limits changed?

The contribution limits have increased slightly for some types of accounts, and they have stayed the same for others. 

2020 Investment Account Contribution Limits:

Account2019 Limit2020 Limit
Traditional, Roth IRA$6,000$6,000
ESA$2000$2000
401(k)$19,000$19,500
Individual HSA$3,500$3,550
Family HSA$7,000$7,100
SEP IRA$56,000$57,000
Simple IRA$13,000$13,500

What will these changes mean for investors?

These changes will mean that investors will be able to put more money aside for the future, which will lead to a potentially larger nest egg. 

Furthermore, it will help to reduce the tax burden on the retirement funds of millions of Americans. In fact, these changes have significantly increased the contribution limits for many investment accounts!

What changes can you expect in the future?

The contribution limits are expected to continue increasing in the future due to inflation. The specific amount that contribution limits will increase by depends on the inflation rate at the time as well as other economic factors, which are difficult to predict. 

Therefore, it’s important to stay up to date on future changes to investment account contribution limits, which will allow you to make the most of your retirement accounts every year.

Luckily, opening a Quest account can allow you to easily deposit checks into your investment accounts as quickly as possible, and we’ll do it for free within 24-48 hours. Furthermore, our specialists can ensure that you stay up to date on the latest contribution limits. So, open a Quest account today!

Posted in 401k Education, Contributions, Coverdell ESA, Health Savings Account, Health Savings Account (HSA), IRA Education, Roth IRAs and Roth Conversions, SEP and SIMPLE IRAsTagged 401k education, Contributions, Coverdell ESA, Health Savings Account, Health Savings Account (HSA), IRA Education, Roth IRAs and Roth Conversions, SEP and SIMPLE IRAsLeave a comment
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