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Making Sense of Obama’s Proposed Budget (Part 3)

May 5, 2015

Earlier this year, President Obama unveiled 2016 budget proposals that are befuddling financial advisors, much less average people. While unlikely to be made law, I’ll attempt to make sense of them in this blog mini-series. Removing Early Withdrawal Penalties for the Unemployed President Obama would eliminate the 10% early distribution penalty on a portion of retirement assets for the long-term unemployed.


To qualify, one must be unemployed for more than 26 weeks, receive unemployment compensation and pull the retirement money while receiving the unemployment compensation (or the following year).


This is a favorable move, as even politicians don’t want to dump on the unemployed.

60-Day Rollovers OK for Non-Spouse Beneficiaries In another favorable move, this proposal would allow non-spouse beneficiary rollovers of inherited retirement accounts (to other retirement accounts) within 60 days.


There really are no downsides here since beneficiaries would have the ability to control their bequeathed assets and the overall budget effects would be minimal.


Part-Time Retirement Contributions


Americans need to save more, so the president proposed requiring employer retirement plans to allow long-term part-timer contributions. To participate, part-time workers must have worked 500 hours per year for three consecutive years. However, the proposal doesn’t require employers to provide matching funds to the part-timers.


While it’s good that these workers can save tax-deferred dollars for retirement, requiring employers to include them seems unnecessary since there’s nothing preventing employers from allowing them to contribute now.


Required W-2 Reporting


Employees would probably like seeing how much their employers contributed to their defined contribution retirement plans on the annual Form W-2.


But does that justify the additional reporting burden (and cost) to employers to provide the information?


To me, this topic doesn’t justify being on a federal budget.

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This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation.

Andrew Wood, Dan Simon and Alison Slezak are Investment Advisor Representatives. Advisory services are offered through CoreCap Advisors, LLC., a Registered Investment Advisor. CoreCap Advisors, LLC and Daniel A. White & Associates, LLC are separate & unaffiliated entities. 

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