RITA Conference Brings the Retirement Industry Together

RITA Conference Brings the Retirement Industry Together

Having recently celebrated their 30th anniversary, the Retirement Industry Trust Association (RITA) held their spring conference in Washington D.C. From March 27 - 29, representatives of the self-directed retirement business came together to compare approaches to common challenges and gauge the overall climate of the retirement industry. Our principals, Bill Humphrey and Catherine Wynne, as well as our Chief Operating Officer, Jessica Loza, represented New Direction IRA at the conference. They came away with several key insights:

Government investigation into self-directed retirement will continue

Last year, Senator Ron Wyden of Oregon tasked the Government Accountability Office (GAO) with investigating self-directed retirement accounts and with providing recommendations based on their analysis. The overall process of administering accounts, fair market valuations, and unrelated business income tax remain popular topics of research. The correct reporting of conversions and the proper administration of “checkbook” IRAs have also received special attention in recent months.

Checkbook IRAs provide account holders with direct access to retirement funds upon establishment and funding of a qualified business entity within an IRA or 401(k). This direct access increases the likelihood of prohibited transactions, regardless of intention. The IRS is therefore faced with the unique challenge of creating and enforcing a clear set of regulations to prevent offenders from circumventing tax law, while also upholding the freedom of responsible individuals to take full advantage of checkbook IRAs.

Although specific courses of action regarding these matters remain unclear, the GAO has observed that further IRS instruction is needed to promote a uniform process among custodians, administrators, and trustees. These instructions will likely manifest through amendments and additions to IRS Publication 590 and other such regulatory publications.

Implementation of the Department of Labor Fiduciary Rule may be delayed

The White House has proposed a 180-day delay for the Department of Labor Fiduciary Rule that was meant to take effect this month. The rule was designed to protect investors by assigning fiduciary responsibility to any individual or entity that recommends, endorses, or provides any measure of advice toward an investment strategy. This would mean that brokers, dealers, or any other investment intermediaries must act in the best interest of their clients and have reasonable belief that their proposals will yield positive results.

Opponents of the rule suggest that regulating businesses in this manner will do more harm than good. Certain interpretations suggest that any investment transaction could be construed as a fiduciary exchange, creating new obstacles for businesses and limiting consumer access to asset marketplaces. In an effort to prompt further review, President Trump issued a memorandum to delay the implementation of the rule by another six months.

While the memorandum itself is not in full effect, the Department of Labor has agreed not to assess any penalties applicable to violations of the rule until the memorandum is either applied or repealed. Ten days after the Department of Labor made their decision, the IRS followed suit by also agreeing to withhold punitive measures for the time being. Therefore, while the rule is set to take hold in the coming days, its potential impact on the self-directed retirement industry is yet to be fully realized.

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