AI Use Cases — Retirement Contributions (ACHC)

Use Cases at a Glance

R1. Contribution Limit & Eligibility Pre-Check Recommended

Problem: Today, an advisor can submit an ACHC that will be rejected later (or worse, accepted but trigger a 6% excess penalty) because it exceeds the IRS limit or the account type doesn’t support that contribution category. Rules are scattered across BETA, IRS Pub 590-A, and tribal knowledge.

What it does

• Aggregate view: sums the client’s YTD contributions across all Q*/R* accounts at LPL (plus rolling 5498 history) and compares against the applicable 2026 limit.
• Rule evaluation: checks age (catch-up eligibility), account type (IRA / SEP / SIMPLE / 401(k) / HSA have different limits), and contribution category (regular / catch-up / rollover / conversion — these have different buckets).
• LLM-authored explanation: if the check fails, the advisor sees: “This $3,000 contribution would put Jane at $7,500 for 2026 traditional IRA. Limit is $7,000 ($8,000 with catch-up — she turns 50 on Oct 12). Over-contribution of $500 triggers 6% penalty unless removed with earnings by Apr 15, 2027.”
• Cross-account coordination: if she also has a Roth IRA, the $7k limit is shared — system flags the combined total.

Where it plugs in

Implementation

R2. Prior-Year vs Current-Year Contribution Coach

Problem: Between Jan 1 and Apr 15, every contribution can be coded prior-year (2025) or current-year (2026). Advisors guess, mis-code, then have to file corrected 5498s. Clients also lose optimization opportunity — e.g., filling 2025 room before 2026.

What it does

• At submission, checks remaining prior-year room vs remaining current-year room.
• Recommends the plan year that maximizes tax benefit given the client’s situation (2025 AGI known, 2026 is projection).
• Surfaces the IRS cutoff (Apr 15, 2026 for 2025 contributions) and countdown.

Where it plugs in

Seasonal lift: this use case is highest-value Jan–Apr. Build once, activate yearly. Expect 10–30% of Q1 contribution volume to benefit.

R3. Roth vs Traditional Recommendation Engine

Problem: Roth-vs-Traditional is arguably the single highest-stakes retirement decision. Advisors default to what the client asks for; many clients don’t know which to ask for.

What it does

• Takes client inputs: current marginal tax bracket, expected retirement bracket, time horizon, existing pre-tax vs Roth balances, state tax exposure.
• LLM synthesizes a recommendation with reasoning: “Given Jake is 32, in the 22% bracket, expects higher brackets later, and has mostly pre-tax 401(k), Roth IRA would diversify his tax exposure and capture compounding at today’s lower rate.”
• Flags edge cases (near Roth MAGI phase-out, near retirement, expected relocation to no-income-tax state).

Risk

Key dependencies: LPL Compliance + Legal + Advisor Supervision; likely a 3–6 month governance runway before production.

R4. MAGI / Deductibility Calculator Assistant

Problem: Traditional IRA deductibility depends on Modified AGI + whether the client or spouse is covered by a workplace plan. The rule matrix has ~8 cells and changes yearly. Advisors get it wrong or skip the calc and let the client “figure it out at tax time.”

What it does

• Collects (or imports from CRM) filing status, MAGI, workplace-plan coverage flags.
• Evaluates the 2026 phase-out schedule (MFJ covered: $130k–$150k; MFJ spouse covered: $244k–$254k; single covered: $81k–$91k; no coverage: full deduction).
• Returns: full / partial / no deduction, with the partial-deduction dollar amount calculated.
• LLM writes the advisor-facing explanation and the “what to tell the client” version.

Where it plugs in

R5. Excess Contribution Detection & Remediation Recommended

Problem: Excess contributions incur a 6% IRS penalty per year until removed. Detection today is often retroactive — the client finds out at tax time. LPL can prevent this proactively.

What it does

• Runtime: at contribution time, R1’s pre-check rejects obvious over-contributions.
• Ongoing monitor: sidecar service scans client aggregate across accounts (including external 5498 data when available) to catch contributions made outside LPL channels.
• Remediation workflow: if detected, AI drafts the “return of excess contribution with earnings” request, pre-computes the earnings calculation, and surfaces the deadline (tax filing date + extensions).
• Alerts the advisor with a prioritized queue: “5 clients have excess contributions pending Apr 15 deadline — earliest remediation window closes in 11 days.”

Where it plugs in

Why it wins: clear client value (saved IRS penalties), clear advisor value (caught-the-error credibility), reputational risk reduction for LPL.

R6. Backdoor Roth Workflow Assistant

Problem: Backdoor Roth (nondeductible traditional IRA contribution → conversion to Roth) trips on the pro-rata rule when the client has existing pre-tax traditional IRA balances. Done wrong, it creates unexpected taxable income.

What it does

• Detects existing pre-tax balances across all traditional IRAs (including SEP, SIMPLE) — the IRS treats them as one for pro-rata.
• Calculates the taxable portion of a proposed conversion.
• Guides the two-step workflow with a checklist: step 1 nondeductible contribution (track basis on Form 8606), step 2 conversion (report on Form 1099-R and 8606).
• Warns when pro-rata would make this a bad idea (“Client has $120k in rollover IRA; a $7k Roth conversion would be 94% taxable”).

Risk

R7. Spousal IRA Optimization

Problem: A nonworking spouse can contribute to their own IRA based on the working spouse’s earned income. This is routinely missed — hundreds of MFJ households at LPL never fund the nonworking spouse’s IRA.

What it does

• Identifies MFJ households where only one spouse has earned income AND only one spouse has YTD IRA contributions.
• Surfaces the opportunity to the advisor: “Client’s spouse has $7k of untapped spousal IRA room.”
• Pre-drafts the contribution request if advisor accepts.

Where it plugs in

R8. Rollover Intent Classifier & 1099-R Coder

Problem: An incoming ACHC can be: a regular contribution, a direct rollover (trustee-to-trustee), an indirect 60-day rollover, or a conversion. Each has different 1099-R / 5498 coding and IRS limits (e.g., one-rollover-per-year-per-IRA rule for indirect).

What it does

• At intake, LLM reads free-text intent from advisor + check/ACH metadata + originating-custodian info.
• Classifies: regular contribution, direct rollover (code G), indirect 60-day rollover (code 7), conversion (code 2), recharacterization, etc.
• Checks one-per-year rule against 12-month rolling window.
• Surfaces the 5498 / 1099-R codes that will be applied and lets the advisor confirm.

Risk

Key dependencies: Babujee Arumugam (BETA 1099-R integration), Tax Operations team.

R9. 5498 Pre-Close Review

Problem: IRS Form 5498 (contribution reporting) is filed in May for the prior year. Errors at filing time trigger corrected 5498s, which are painful and visible to clients. By the time errors are caught, the tax-filing window may have closed.

What it does

• In early January, agent sweeps all 5498-bound contributions for the prior year.
• Flags anomalies: unusual prior-year codings past Apr 15, total contributions near limit, rollovers without source documentation, excess-contribution candidates, missing basis on non-deductible.
• LLM summarizes: “3,412 accounts; 47 flagged. 12 near-limit, 8 suspected excess, 27 rollover source unclear.”
• Generates remediation worklist for Tax Ops team.

Where it plugs in

R10. Saver’s Credit & Catch-Up Opportunity Alerts

Problem: Two tax-advantaged opportunities routinely go unclaimed:

• Saver’s Credit — low/moderate-income clients get a 10–50% credit on first $2k contribution; most advisors don’t track this.
• Catch-up contributions — turning 50 unlocks $1k additional IRA, $7.5k additional 401(k); turning 60–63 unlocks SECURE 2.0 super-catch-up of $11,250.

What it does

• Birthday-triggered alerts: “Client turns 50 next month — catch-up contribution eligibility unlocks.”
• Income-triggered alerts: “Client’s reported AGI qualifies for Saver’s Credit; a $2k Roth contribution captures a $400 credit.”
• Proactive outreach templates drafted by LLM.

Where it plugs in

Pipeline: Where Retirement-Contribution AI Inserts

Dependencies & Data Sources

Governance & Risk

• Tax advice boundary: R3, R4, R6 cross into advice territory. Explicit disclaimers + Compliance/Legal signoff required. Classify these as “advisor decision-support,” not “recommendations to the client.”
• Audit trail for limit decisions: R1’s limit matrix is a point-in-time rule reference. Version the matrix (with effective dates) so that audits can reconstruct what the system believed the limit was at contribution time.
• PII handling: never send SSN, DOB, or full account numbers to LLM. Use tokens ({AGE_BAND}, {FILING_STATUS}, {LIMIT_BUCKET}).
• Model risk: R1/R5 should fall open to manual Tax Ops review on timeout — never auto-block a valid contribution because the AI timed out.
• Regulator audit (IRS): log every limit calculation with inputs, matrix version, output. Retention per SEC 17a-4 (6 years).
• SECURE 2.0 tracking: rules are changing annually through 2027. Rule matrix owner must commit to a refresh cadence; AI explanations should cite the rule version.

Next Steps (Retirement Contribution Track)

1. Week 1: Own the 2026 retirement-limit matrix. Michael Mcguire + Tax Ops sign off; store as versioned config in cam-movemoney-system-api.
2. Week 2: Prototype R1 (Limit Pre-Check) using deterministic rules + Claude Haiku explanation on 10 real YTD-contribution samples.
3. Week 3: Prototype R5 (Excess Detection) as a read-only dashboard. Identify 20 historical excess cases from BETA 5498 data; verify the agent catches all 20.
4. Week 4: R2 (Prior-Year Coach) ready for Q1 2027 season; turn on Jan 1. Measure advisor adoption.
5. Month 2–3: R4 (MAGI Calc) scoped; Compliance review of prompt templates for R3 (Roth/Trad).
6. Month 3+: R8 (Rollover Classifier) — partner with Tax Ops on accuracy bar; pilot against 100 historical rollovers.
7. Deferred to 2027: R6 (Backdoor Roth) — requires tax-law-change monitoring; R9 (5498 Pre-Close) — align to Tax Ops annual cycle.