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January 10, 2007
HP-222
Treasury and IRS Issue Guidance on New Distribution
Provisions of the Pension Protection Act
Washington, DC- The Treasury Department and the IRS issued a notice today providing extensive guidance on several Pension Protection Act rules relating to distributions from tax-qualified retirement plans.
The guidance addresses many questions on PPA provisions, including:
- interest rate assumptions for lump sum distributions
- hardship distributions from a 401(k) and similar plans
- early distributions from qualified plans to terminated public safety employees
- rollovers from qualified plans to IRAs for non-spouse beneficiaries
- distributions to pay for health insurance for retired public safety officers
- earlier vesting of certain employer contributions
- new rules for the notice and consent period for distributions
The notice also clarifies several issues concerning the provision permitting IRA owners age 70 ½ or older to directly transfer tax-free, up to $100,000 per year to an eligible charity. For example, a check from an IRA made payable to an eligible charity but delivered by the IRA holder still qualifies for tax-free treatment. IRAs held on behalf of beneficiaries, as well as IRAs held by the original owners, are eligible to use this provision. Additionally, the $100,000 annual limit applies separately for each spouse of a married couple. If both spouses have IRAs and are at least age 70 ½, the couple can transfer a combined total of $200,000.
REPORTS