Wealth management

The Internal Revenue Service has issued Notice 2005-5 providing guidance on the new automatic (or default) rollover rules for qualified retirement plans. These new rules were added to the Internal Revenue Code as part of the Economic Growth and Tax Relief Reconciliation Act of 2001, but they will not be effective until March 28, 2005, which is the effective date of related final regulations published by the Department of Labor. The guidance answers questions regarding the application of the new requirement and will make it easier for plan sponsors to comply in a timely manner. The new automatic rollover rule requires that mandatory distributions of more than $1,000 from a qualified retirement plan be paid in a direct rollover to an Individual Retirement Account unless the distributee elects to have the amount rolled over to another retirement plan or to receive the distribution directly. EGTRRA also requires that the plan administrator notify the distributee in writing that the distribution may be paid in a direct rollover to an IRA. The guidance responds to comments received by the Department of Labor, Treasury, and the IRS. For example, the guidance clarifies that the automatic rollover requirement applies to governmental and church plans although a transition rule is provided for these plans to comply. The guidance provides that all plans have until the end of 2005 to establish administrative procedures for processing the automatic rollovers and clarifies that rollover IRAs can be set up without the participant's participation. Finally, the guidance includes a sample amendment that plan sponsors can use to amend their plans to comply with the new rule.

The Internal Revenue Service has released final regs totaling over 230 pages with rules for plans that permit employees to make pre-tax contributions and for plans that have employer matching contributions or employee after-tax contributions. The existing regulations covering these plans were last updated in 1994. Since then, there have been significant statutory changes. The new regs will be fully effective for plan years beginning on or after Jan. 1, 2006, although employers are permitted to use the new rules for any plan year that ends after Dec. 28, 2004. These comprehensive final rules are the result of a long effort of input gathering from retirement plan participants, sponsors, and service providers. Specifically, they address many of the concerns raised by comments submitted in response to the proposed regulations. These final regulations will make it easier for employers to sponsor plans to help employees save for their retirement and will assist administrators in keeping the plans qualified. The final regulations update and simplify many of the current rules for 401(k) plans. In addition, the new regulations strengthen the nondiscrimination rules that ensure benefits for rank-and-file employees. They require certain employer contributions to be spread over a large group of rank-and-file employees before they can boost the ability of high-paid employees to defer income under the plan.

Douglas Hill, managing general partner of embattled brokerage house Edward D. Jones & Co., intends to leave the company roughly one week after the firm agreed to pay $75 million to settle charges of improper disclosure of revenue-sharing payments. Hill, 60, will retire as managing general partner Dec. 31, but would remain as managing partner through 2005. In addition, Hill is expected to pay $3 million of the agreed-upon fine, while the firm's general partners are expected to shoulder an aggregate of $44 million. Last week, the brokerage firm reached a settlement with the SEC, the New York Stock Exchange and the National Association of Securities Dealers as a result of arrangements that Edward Jones entered into with seven fund groups. The firm had not disclosed the fact that it received millions from the fund families each year for selling their respective products.

H&R Block Financial Advisors, the investment arm of the tax prep giant, agreed to pay a $500,000 fine and to return $325,000 in clients' mutual fund trading profits to settle charges brought against it by the National Association of Securities Dealers related to the market-timing of mutual fund shares by two of its former financial advisors.

Section 331 of the American Jobs Creation Act included a provision that could potentially have a big impact on some investors.

COLLEGE TUITION INCREASES SMALLER THAN LAST YEAR: Average tuition and fees at four-year public colleges and universities for the 2004-2005 year climbed 10.5 percent from last year's levels, to $5,132, while fees at four-year private schools rose 6 percent, to $20,082, the College Board reported.

A recent merger in wealth management has observers wondering if this time around, the cultures of banking and investment advisors will successfully mesh.

A taxpayer generally may exclude up to $250,000 ($500,000 for certain married couples filing joint returns) of gain realized on the sale or exchange of a principal residence. To be eligible for the exclusion, the taxpayer must have owned the residence and used it as a principal residence for at least two years during the five-year period ending on the date of the sale or exchange.

There may be no phrase in the English language more satisfying to say or hear than, "Problem solved!"For accounting and information technology professionals, it embodies a special meaning, in that someone, or something, has enabled their business to sidestep a potential hurdle and continue their strategy of providing client services to reach the ultimate goal of any business - profitability.

HIGH-END AND MID-MARKET ACCOUNTINGACCOUNTMATE 6.5

Contact information for the vendors of the Accounting Today 2005 Top 100 Products and Ones to Watch.AccountantsWorld

Filomeno & Company PC, an eight-partner CPA firm based here, has expanded its financial planning practice with the merger of fee-only planning firm Thibodeau Financial Advisors LLC into its fold.

The majority of tax professionals who enter the financial planning business do so by hooking up with an independent broker/dealer firm, according to a report by market research and consulting firm Tiburon Strategic Advisors.

To help fund President Bush's reform plan to add personal retirement accounts to the Social Security program, the White House admitted that it would probably use government borrowing to cover the oft-debated "transition financing" phase of a new program.

Filomeno & Company PC, an eight-partner CPA firm based here, has expanded its financial planning practice with the merger of fee-only planning firm Thibodeau Financial Advisors LLC into its fold.

As part of its multi-pronged educational effort on financial literacy, the American Institute of CPAs has launched a consumer Web portal that offers information and articles organized by a series of life stages, such as college, entrepreneurship, marriage, parenthood, home ownership and retirement.

The American Jobs Creation Act of 2004 limits the deduction allowed for entertainment, amusement and recreation provided to certain specified individuals to amounts treated as income to the recipient for federal income tax purposes.

There's good news for accounting and finance professionals - starting salaries are expected to increase an average of 2.4 percent next year. But the news is far better for internal auditors and professionals focused on Sarbanes-Oxley and other corporate governance-related initiatives - they're poised to see huge boosts in base compensation, according to staffing giant Robert Half International Inc.

The American Institute of CPAs has named Thomas J. Purcell III to a two-year term as chairman of its Tax Executive Committee, the tax policy and standards-setting body of the AICPA.

Strong revenue and market share growth don't guarantee a financially healthy independent investment advisor practice -- but being focused and deliberate about the types of clients served and the services offered can drive profitable growth, according to a study of the top firms by Schwab Institutional and Moss Adams.