Several FINRA and NASAA test concepts related to retirement plans, securities regulations, and IRS rules are changing in 2023. Good news – the Achievable team has you covered! Learn more about the updates to our courses here.
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Several FINRA and NASAA test concepts related to retirement plans, securities regulations, and IRS rules are changing in 2023. Good news – the Achievable team has you covered! We will always keep you up to date on substantial securities licensing exam changes. There are three primary reasons for the updates:
The Internal Revenue Service (IRS) updates many tax-related rules annually. The important 2023 updates are:
The IRS perpetually makes changes to contribution limits, and there were several 2023 updates. Some of the increases were notable, primarily due to the inflation levels in 2022. These are the most important changes that are likely to be tested on FINRA & NASAA exams:
Traditional & Roth IRAs
Keogh (HR-10) plans
401(k), 403(b), and 457 plans
Links to relevant Achievable chapters:
Gifts to non-spouses can be subject to gift taxes unless it falls under exemption thresholds. In 2023, a person can now gift up to $17,000 (up from $16,000 in 2022) to any person while avoiding taxation. Additionally, gifts to 529 plans (e.g., a grandmother contributing to their grandson’s 529 plan) are eligible for the five year gift rule. A person can now contribute $85,000 ($17,000 x 5 years) to another person’s 529 plan without taxation (up from $80,000 in 2022).
Links to relevant Achievable chapters:
Estates of deceased persons valued above certain thresholds are subject to the federal estate tax. In 2023, an estate worth $12.92 million or less is not subject to estate taxes (up from $12.06 million in 2022).
Links to relevant Achievable chapters:
Federal income tax brackets change annually to make adjustments for inflation. These relate to a person’s marginal tax rate, which could be as high as 37%. These are the 2023 tax brackets for individuals filing single and married couples filing jointly:
Rate | Individuals | Married filing jointly |
|---|---|---|
10% | $0 | $0 |
12% | $11,001 | $22,001 |
22% | $44,726 | $89,451 |
24% | $95,376 | $190,751 |
32% | $182,101 | $364,201 |
35% | $231,251 | $462,501 |
37% | $578,126 | $693,751 |
Links to relevant Achievable chapters:
From time to time, the Financial Industry Regulatory Authority (FINRA) updates rules related to securities firms and their employees. In 2023, they made some substantial changes to :
FINRA requires registered representatives to stay educated on rules, regulations, and hot topics within the industry. They accomplish this by requiring individuals to complete ongoing continuing education (CE). Two types exist – Regulatory element (CE imposed by FINRA) and Firm element (CE imposed by the employing firm). While there were updates for both CE types, test questions are most likely to focus on Regulatory element CE changes.
Prior to 2023, Regulatory element CE was required to be completed two years after initial registration, then every three years after. Starting in 2023, it must be completed annually. Additionally, CE is digital and mobile-friendly. Registered representatives can access and complete their required CE through FINRA’s FinPro system.
Links to relevant Achievable chapters:
When an individual leaves their licensed job or moves to a role that doesn’t require registration, they become unregistered. Before 2023, FINRA licenses (e.g., Series 6, 7) lapsed if a person was unregistered for two or more years. This lapsing rule applied to all FINRA licenses except for the SIE, which maintained a four year lapse period.
While these lapsing rules are still in place, FINRA introduced a program allowing individuals to keep their licenses (meaning they are not required to re-take licensing exams) for longer periods. The Maintaining Qualifications Program (MQP) enables participating individuals to preserve their licenses for up to five years. To qualify, a person must sign up for the program within two years of their registration withdrawal and complete ongoing continuing education.
Links to relevant Achievable chapters:
Last, the SECURE Act 2.0 was signed into law on December 29th, 2022 by President Biden. This new law built on the changes enacted by the original SECURE Act, which was signed into law by President Trump in 2019. While most of the SECURE Act 2.0’s changes won’t take effect until 2024 or later, these updates take effect this year:
Older investors with qualified plans and traditional IRAs are subject to annual IRS withdrawal requirements. Known as a required minimum distribution (RMD), this requirement prevents investors from keeping their retirement money tax-sheltered for unlimited periods.
The new SECURE Act increased the required beginning date for RMDs to age 73 (from age 72). Additionally, penalties for not taking an RMD have been significantly reduced. Starting in 2023, the general penalty is 25% (it was 50%), and can be reduced further to 10% if the investor takes the RMD within two years. For example, assume an 80 year old investor calculates a $20,000 RMD in 2023, forgets about it, and fails to take it by the end of the year. If they were to take the distribution by December 31st, 2025, the penalty would be 10%.
Two types of 401(k) plans exist – the pre-tax traditional 401(k) and the after-tax Roth 401(k). Like a Roth IRA, Roth 401(k)s allow investors to contribute funds after-tax, which then grow on a tax-sheltered basis. As long as the investor waits until they reach age 59 1/2 and the account is five years old, withdrawals are tax-free.
Some employers match employee contributions made to their retirement plans. For example, a company offers to match 100% of employee contributions, up to 5% of their salary. If an employee saves 5% of their salary, the employer matches the contribution (allowing the employee to effectively save 10% of their salary).
Before the new SECURE Act, company matches on Roth 401(k)s were required to be placed into a traditional 401(k). In this scenario, the employee ends up with two separate 401(k)s – one pre-tax (traditional 401k with the employer’s match) and one after-tax (Roth 401k with the employee’s contributions). Starting in 2023, employer matches can now be after-tax, allowing them to be placed alongside employee contributions.
Links to relevant Achievable chapters:
With inflation persisting into 2023, we expect additional increases to contribution limits and IRS rules starting in 2024. Additionally, new SECURE Act 2.0 rules “go live,” which will impact several FINRA & NASAA test topics. If you’re sitting for your licensing exam(s) in 2023, you won’t need to worry about them. If your studies creep into 2024, we’ll update the Achievable material when necessary.
Cheers!
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