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In 2006, the Pension Protection Act was signed into law. The law encourages taxpayer contributions and penalizes companies who under-fund their pensions. Some of the changes have affected taxpayers of all ages, regardless of their retirement status. Here is some of what happened.
The IRS now allows tax rebates to be direct deposited into IRAs.
You can now make withdrawals from 529 college savings plans without tax penalties. This was enacted as part of the Pension Protection Act to help cash strapped parents from tapping into their IRAs.
Contribution levels to employer-sponsored retirement accounts were increased to $ 5000 annually.
When an employee leaves a job, they can now rollover their employee-sponsored retirement accounts directly into a Roth IRA. Before, they were required to cash out their employer-sponsored retirement accounts and pay the tax penalty before rolling over to the Roth IRA.
Charitable giving regulations were increased, making it tougher on seek seeking deductions for charitable giving. Taxpayers must now fill out a form detailing non-monetary charitable gift giving. Any home appliance that is donated to a charity and valued above $ 500 must be appraised before the deduction can be taken. Monetary donations of any sum now require documentation like a receipt, canceled check, or a credit card statement. Donors of age 70 ½ and older can make charitable donations directly from an IRA for the next two years. This change will benefit many older taxpayers who take the standard deduction. Since the donation comes directly from an IRA, it will not be considered income. This is helpful because taxpayers usually cannot donate more than 50% of their income.
Business owners can sign up employees for 401Ks automatically, although the employee may opt out.
Employees can receive investment advice on their 401K. This is done because some 401K depositors might want to participate in riskier investments in order to win bigger rewards.
Two new provisions allow non-spousal benefits. A non-spousal rollover allows retirement benefits to roll over to a designated beneficiary instead of a spouse. A hardship distribution also allows for emergency distribution of funds from a retirement account to be used to help with medical or financial emergencies of a designated beneficiary who is not a spouse or dependent.
You need to be aware of these changes and how they affect your personal retirement savings. Before taking any actions based upon these changes, it is good advice to consult with a financial planner or your attorney. These are your retirement accounts that we are discussing and your future depends on them being properly managed and coordinated.