Article:
Pension Protection Act of 2006
by Paul H. Roskoph
June 1, 2007
The Pension Protection Act of 2006 included many provisions and two very important items for many individuals.
1. Temporary Direct Gifts from IRA Accounts: Somewhat akin to the "Katrina" charitable gift opportunity, Congress has allowed individuals who are 70-1/2 years or order to make direct contributions from IRA accounts of up to One Hundred Thousand Dollars per year. This is only a two year provision that expires with the 2007 tax year. These gifts must be directly to a qualified public charity. If made in this manner, the withdrawal is not included in the income of the donor, but it does count against the minimum distribution requirements for the year of distribution. This may be an important planning opportunity for many individuals who have substantial IRA accounts. Please note these gifts must be to a qualified public charity and cannot be to a donor advised fund or the individual's own private foundation.
2. Rollover: Of great importance is the extension of the "rollover concept." Under current law an IRA or other pension account can be rolled over without tax consequences only to a surviving spouse of the retirement plan owner. Under the new law, any individual who receives a retirement plan distribution will have the opportunity to roll them over and defer the income tax on the distribution. It will still be subject to minimum distribution rules, but over the lifetime attributable to the beneficiary.
NOTES OF CAUTION:
- The account must be an "Inherited IRA" and maintained in the name of the prior deceased owner.
- The beneficiary must still qualify under the strict IRS definition of a "designated beneficiary," not the estate of the decedent.
- The account must be a direct trustee to-trustee transfer. Only a spouse may receive the benefit and then transfer it to a rollover account.
We strongly recommend you confer with your financial, tax or legal advisor about this provision.
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