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Understanding the SECURE Act and IRS Regulations: What Prologis Employees Need to Know for Their Retirement Planning

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In December 2019, the 'Setting Every Community Up for Retirement Enhancement  (SECURE) Act ' introduced transformative adjustments to the taxation of post-mortem distributions from qualified retirement accounts. A pivotal element of these changes was the elimination of the 'stretch' provision for most non-spouse beneficiaries, replaced by the 10-Year Rule, which mandates the full distribution of inherited retirement assets within a decade of the account holder’s death. This shift directly affects Prologis employees planning for or managing inheritance scenarios.

By February 2022, the IRS had released Proposed Regulations extending the impacts of the SECURE Act by imposing requirements for annual Required Minimum Distributions (RMDs) over a 10-year period for beneficiaries, provided the deceased had been subject to RMDs prior to their death. This meant that annual distributions were mandatory even during the decennial distribution period, significantly altering the landscape for taxation and estate planning. This regulation demands attention from Prologis advisors to assist their colleagues effectively.

This complexity was further emphasized with the IRS’s release of the Final Regulations on July 18, 2024, which not only confirmed these stipulations but also expanded the situations in which various beneficiaries would be impacted. These regulations have strengthened the framework for both eligible and non-eligible beneficiaries, introducing nuanced rules that address scenarios ranging from undistributed RMDs at the death of an account owner to the management of inherited estates through different types of trusts. Such intricacies require careful navigation to optimize outcomes for Prologis families.

Key Provisions and Their Implications

1. Post-mortem Distribution Rules:  For beneficiaries inheriting after the Required Beginning Date (RBD) of the account holder, annual RMDs are mandatory until the end of the tenth year following the death. This rule emphasizes the IRS’s stance on reinforcing tax deduction benefits previously extended through the stretch measure. Prologis employees must be aware of these timelines to make informed decisions about their retirement assets.

2. Management of Undistributed RMDs:  The regulations stipulate that if the deceased had not taken their full RMD at death, any beneficiary can fulfill this obligation. This flexibility helps simplify compliance for beneficiaries managing inherited estates, which is particularly relevant for Prologis beneficiaries who may be navigating these waters for the first time.

3. Specific Rules for Spouses:  A new 'hypothetical RMD' rule requires surviving spouses who first opt for the 10-Year Rule and then decide to treat the inheritance as their own account, to carry out RMDs as if the assets were still in their account. This regulation highlights the importance of careful planning by surviving spouses in managing asset rotation schedules, a critical consideration for Prologis families ensuring financial stability.

4. Trusts as Beneficiaries:  The regulations outline how Passage Trusts, whether Conduit or Accumulation types, are treated under the law, specifying the beneficiaries considered for RMD calculations. This ensures that trusts designed to extend asset distributions over an extended period are meticulously structured to comply with the new rules, offering strategic insights for Prologis planners.

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5. Annuities and Retirement Accounts:  Clarifications on how annuities embedded in retirement accounts are to be treated for RMD calculations highlight the management of annual payments to meet RMD obligations. These clarifications are vital for Prologis employees who have invested in these financial vehicles as part of their retirement planning.

Strategic Perspectives for Financial Advisors

Financial advisors face these regulations with a deep understanding of their implications on estate planning strategies. This evolution highlights the need to review future plans and beneficiary designations to adapt to the new legal framework. Advisors are tasked with interpreting these complex rules to provide clear, strategic expertise that minimizes tax liabilities and ensures compliance while achieving clients’ long-term financial goals, which is especially pertinent for Prologis advisors working with their peers.

In conclusion, the latest regulations from 2024 mark a crucial evolution in managing retirement assets post-death. By strengthening rules regarding the timing and mode of distribution, the IRS aims to ensure quicker tax remedies while allowing some leeway in certain cases. For financial advisors, staying informed about these regulations is essential to effectively assist their clients, ensuring that strategic decisions are both tax-efficient and aligned with estate management goals. As this legislation continues to evolve, it will be crucial for advisors to engage proactively and continually educate themselves to deliver the best value to their clients in this complex environment. Prologis advisors are uniquely positioned to navigate these changes, providing invaluable guidance to their colleagues and families.

What is the Prologis 401(k) Savings Plan?

The Prologis 401(k) Savings Plan is a retirement savings plan that allows employees to save a portion of their paycheck before taxes are taken out, helping them prepare for retirement.

How can I enroll in the Prologis 401(k) Savings Plan?

You can enroll in the Prologis 401(k) Savings Plan by logging into the employee portal and following the enrollment instructions or by contacting the HR department for assistance.

What is the employer match for the Prologis 401(k) Savings Plan?

Prologis offers a competitive employer match for contributions made to the 401(k) Savings Plan, which can significantly enhance your retirement savings.

At what age can I start contributing to the Prologis 401(k) Savings Plan?

Employees at Prologis can start contributing to the 401(k) Savings Plan as soon as they meet the eligibility requirements, typically upon hire or after a short waiting period.

How much can I contribute to the Prologis 401(k) Savings Plan each year?

The contribution limits for the Prologis 401(k) Savings Plan are set by the IRS and can change annually. Employees should check the current limits to maximize their contributions.

Does Prologis offer a Roth option in its 401(k) Savings Plan?

Yes, Prologis provides the option to contribute to a Roth 401(k) within its 401(k) Savings Plan, allowing employees to make after-tax contributions.

Can I take a loan from my Prologis 401(k) Savings Plan?

Yes, Prologis allows employees to take loans from their 401(k) Savings Plan under certain conditions. Employees should review the plan’s loan policy for details.

What investment options are available in the Prologis 401(k) Savings Plan?

The Prologis 401(k) Savings Plan offers a variety of investment options, including mutual funds, target-date funds, and other investment vehicles to suit different risk tolerances.

How can I change my contribution percentage for the Prologis 401(k) Savings Plan?

You can change your contribution percentage for the Prologis 401(k) Savings Plan by accessing the employee portal or by contacting the HR department for guidance.

What happens to my Prologis 401(k) Savings Plan if I leave the company?

If you leave Prologis, you have several options for your 401(k) Savings Plan, including rolling it over to an IRA or a new employer’s plan, cashing it out, or leaving it with Prologis.

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For more information you can reach the plan administrator for Prologis at , ; or by calling them at .

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