Pension Protection Act of 2006

Pension Protection Act of 2006

The Pension Protection Act of 2006 ( [ Pub. L. 109–280] ), 120 Stat. 780, was signed into law by U.S. President George W. Bush on August 17, 2006.

Pension reform

This legislation requires companies who have underfunded their pension plans to pay higher premiums to the PBGC and extends the requirement of providing extra funding to the pension systems of companies that terminate their pension plans. It also requires companies to more accurately analyze their pension plans' obligations, closes loopholes that previously allowed some companies to underfund their plans by skipping payments, and raises the cap on the amount employers are allowed to invest in their own plans. This will allow employers to deduct more money using the pension tax shield in times of high profits.

It requires actuaries to use the equivalent of the projected accrued benefit cost method for determining annual normal cost.

Other elements:
* Provides statutory authority for employers to automatically enroll workers in defined contribution plans, formerly, the authority came from DoL rulemaking
* Expands disclosure that workers have about the performance of their pensions
* Removes the conflict of interest fiduciary liability from giving self-interested investment advice for retirement accounts
* Gives workers greater control over how their accounts are invested
* Extends the 2001 tax act's contribution limits for IRAs and 401(k)s.

Charitable organization reform

The Pension Protection Act also reformed several types of tax-exempt charitable organizations including donor-advised funds, private foundations, and supporting organizations.

upporting Organizations

The Pension Protection Act cracks down on supporting organizations, particularly type III supporting organizations. This act applies further regulations and penalties that takes away several of the privileges that supporting organizations have over private foundations. This includes applying private foundation law of excess benefit transactions, excess business holding rules, and pay out requirements among others.

Tax Savings

Public Safety Officers

One tax benefit allowed under the pension protection act is that qualified retired "Public Safety Officers" may exclude from income the cost of health insurance. This exclusion is shown on the tax return as simply subtracting the exclusion from the figure shown on the 1099-R form, and placing the smaller figure on the pension income line on the 1040. The text literal "PSO" must be written on the dotted line to the left of your figure. See IRS Pub 575 for more details.

Public safety officers include Police, Firefighters, ambulance workers, and many types of federal and state employees dealing with criminals.

Early withdrawal penalty exceptions

The PPA tells the Secretary of Treasury to provide further exceptions to the 10% penalty on withdrawing from a retirement account before reaching proper retirement age. In particular, some penalty exceptions are narrowly defined to only covering IRA accounts, leaving 401(k) and other plan holders in the cold. Broadening those exceptions to cover any retirement plan is one hoped-for change. Also, relief for taxpayers who use retirement funds to protect their home and mortgage is anticipated, but again not written into law. IRS publications provide little guidance on this topic, if it has been acted on at all.

Inherited IRAs

The PPA provides a new mechanism for an IRA to be passed on to a non-spouse beneficiary. Transferring an IRA account this way can allow better control over when to withdraw (and pay taxes on) the IRA funds. An IRA account can only be passed on once, and it is not directly transferred into the beneficiary's account. Instead, a special IRA account with the heading " "Deceased Name" For the Benefit of "Beneficiary Name" " is made to keep the transfer. As this is a new rule on a subject with long term financial consequences, approach this cautiously. There are several gotchas that could invalidate the transfer, causing everything to be taxed in one year.

External links

*cite web | year = 2006 | url = | title = President Bush Signs H.R. 4, the Pension Protection Act of 2006 | format = | work = | publisher = White House| accessdate = 2006-10-21 | accessyear =
*cite web | year = 2006 | url = | title = The Pension Protection Act of 2006 | format = | work = | publisher = White House| accessdate = 2006-10-21 | accessyear =
*cite web | year = 2006 | url = | title = The President's Statement on H.R. 4, the "Pension Protection Act of 2006" | format = | work = | publisher = White House| accessdate = 2006-10-21 | accessyear =
* [ page on P.L. 109-280, The Pension Protection Act of 2006]

Wikimedia Foundation. 2010.

Игры ⚽ Поможем сделать НИР

Look at other dictionaries:

  • Pension Protection Act of 2006 — (PPA) USA A federal law providing for comprehensive pension reform that addresses a variety of employee benefit plan topics including: • Revised minimum funding requirements for defined benefit plans and multi employer plans. • Enhanced… …   Law dictionary

  • Pension Protection Act Of 2006 - PPA — An act of legislation that makes a large number of reforms to U.S. pension plan laws and regulations. This law made several pension provisions from the Economic Growth and Tax Relief Reconciliation Act of 2001 permanent, including the increased… …   Investment dictionary

  • Pension Protection Fund Ombudsman levy — (PPFO levy) One of the levies that the Pension Protection Fund (PPF) may raise from defined benefit schemes that may be eligible to receive compensation if they meet certain entry conditions. Section 209 of the Pensions Act 2004 permits the PPF… …   Law dictionary

  • Pension Protection Fund — The Board of the Pension Protection Fund (the PPF) is a Statutory Fund in the United Kingdom. It was created under the Pensions Act 2004. The Board of the PPF is a Statutory Corporation responsible for managing the Fund and for making payments to …   Wikipedia

  • Pension Benefit Guaranty Corporation — (United States) Agency overview Formed September 2, 1974 …   Wikipedia

  • Dodd–Frank Wall Street Reform and Consumer Protection Act — Full title An Act to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end too big to fail , to protect the American taxpayer by ending bailouts, to protect consumers… …   Wikipedia

  • Bankruptcy Abuse Prevention and Consumer Protection Act (US) — Bankruptcy Abuse Prevention and Consumer Protection Act Full title An Act to amend title 11 of the United States Code, and for other purposes. Acronym BAPCPA Colloquial name(s) Bankruptcy Reform Enacted by the …   Wikipedia

  • Bankruptcy Abuse Prevention and Consumer Protection Act — The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (USStatute|109|8|119|23|2005|04|20), providing for significant changes in bankruptcy in the United States, was passed by the 109th United States Congress on April 14, 2005 and… …   Wikipedia

  • Employee Retirement Income Security Act — The Employee Retirement Income Security Act of 1974 (ERISA) (USStatute|93|406|88|829|1974|09|02) is an American federal statute that establishes minimum standards for pension plans in private industry and provides for extensive rules on the… …   Wikipedia

  • Pensions Act 2008 — The Pensions Act 2008[1] Parliament of the United Kingdom Long title An Act to make provision relating to pensions; and for connected purposes …   Wikipedia

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”