Pension reform pioneers representatives Rob Portman (R-OH) and Ben Cardin (D-MD) have just introduced their newest bill, the Comprehensive Retirement Security and Pension Reform Act (H.R. 1776).
The bill is filled with juicy pension changes, which many planners said should prove beneficial, including making the savings and other pension reforms from the 2001 Act permanent. Currently, theyre set to expire in 2010.
The bill also would fully accelerate increased 401(k) and IRA limits next year to their 2009 limits. Individuals would be able to contribute up to $15,000 in their 401(k), $10,000 to a SIMPLE plan and $5,000 to an IRA. Catch-ups increase to $5,000 for 401(k)s and $1,000 for IRAs.
It would also permanently allow a tax credit for low-income savers who contribute to an IRA or defined contribution plan. Also, the bill increases the adjusted gross income eligibility for this credit to $30,000 from $15,000 and joint filer eligibility to $60,000 from $30,000.
The bill would also eliminate the marriage penalty on traditional and Roth IRAs, and would use a new interest rate benchmark for pension calculations to replace the nonexistent 30-year Treasury bond rate.
It would raise the minimum distribution age to 75, up from 70 ½, and reduce the penalty for those who fail to take their distributions from 50% to 20% of the amount not distributed. Further, it would allow individuals with incomes up to $90,000 to exclude up to $2,000 in annuity income per year from taxation.
Finally, it would allow individuals to roll over a portion of assets in a retirement to their spouses IRA.
"A lot of this is not going to become law this year but its certainly the starting point of the next generation" of pension regulation, said Brian Graff, executive director of the American Society of Pension Actuaries.