Pension Protection Act of 2006

From TaxAlmanac

Pension Protection Act of 2006

Summary

On August 3, 2006, Congress passed the Pension Protection Act of 2006 (H.R. 4). President Bush signed the legislation into law on Thursday, August 17, 2006. Below is a summary of the major provisions.

Tax Provisions

• Makes permanent the provisions from the Economic Growth and Tax Relief Reconciliation Act of 2001 related to individual retirement accounts and pensions

• Increase in annual contribution limit for IRAs

• Increase in the contribution limits on 401(k) plans

• Catch-up contributions for people age 50 and over

• Tax credit for pension start-up costs

• Treatment of elective deferrals as after-tax Roth contributions

• Makes permanent the saver's tax credit aimed at lower income taxpayers

• Provides for increased flexibiility and favorable tax treatment of annuity and life insurance contracts with a long-term care insurance option

• Provides for direct deposit of tax refunds into IRAs

• Waives the 10 percent early withdrawal penalty for distributions to public safety employees over 50 who may retire early

• Waives the early withdrawal penalties on distributions from an IRA or pension plan taken by members of the National Guard and Reserves called to active duty

• Permanently extends Section 529 qualified tuition programs

Charitable Provisions

• Provides for tax-free distributions from IRAs for chariable purposes

• Provides a basis adjustment to stock of S corporation contributing property

• Extends the charitable deduction for contributions of book inventory

• Extends the charitable deduction for contributions of food inventory

• Changes the tax treatment of certain payments to controlling exempt organizations

• Raises the deduction limit for qualified conservation contributions

• Provides for an excise tax exemption for blood collector organizations

• Provides for recapture of tax benefit for charitable contributions of exempt use property

• Modifies the record keeping requirements for certain charitable contributions

• Modifies the rules for chariable contributions of clothing and household items

• Changes the rules relating to donations of a fractional interest in property

Other Provisions

• Amends the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code to establish new minimum funding standards for single-employer and multi-employer defined benefit pension plans

• Extends interest rate rules for the funding standard account that require the use of a rate based on long-term investment grade corporate bonds rather than 30-year Treasury securities

• Amends the interest rate calculation for lump-sum distributions

• Requires single-employer plans that are fully-funded to pay variable-rate premiums to the Pension Benefit Guaranty Corporation (PBGC)

• Sets forth alternative funding rules for commercial passenger airline defined benefit plans

• Sets forth requirements related to funding notices that must be provided by defined benefit plans

• Allows fiduciary advisers of a plan to give investment advice to participants or beneficiaries if certain requirements are met

• Sets forth rules that govern whether plans fail to meet requirements that prohibit age discrimination in defined benefit pension plans

• Requires defined contribution plans holding publicly traded securities to provide employees with: (1) the opportunity to divest employer securities; and (2) at least three investment options other than employer securities

• Allows employers to automatically enroll employees in defined benefit plans

• Sets forth provisions governing the division of pension benefits upon divorce

• Authorizes the Secretary of the Treasury to establish or change the Employee Plans Compliance Resolution System and any other employee plans correction policies

• Prohibits reduction of unemployment compensation as a result of pension rollovers

• Miscellaneous Trade and Technical Corrections Act of 2006

• Amends the Harmonized Tariff Schedule of the United States to adjust the duty for certain chemicals, textiles, household and sporting goods, electronics, food, equipment and other items

• Authorizes the President to adjust the Tariff Schedule as necessary to carry out certain CAFTA amendments

Links

• Summary of Tax, Trade and Other Provisions

• Summary of Charitable Provisions

• Technical Explanation

• Legislative Text - Part 1

• Legislative Text - Part 2