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Treasury, IRS Issue Guidance on New Distribution Provisions Under Pension Protection Act

JAN. 10, 2007

IR-2007-7

DATED JAN. 10, 2007
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Citations: IR-2007-7
IRS, Treasury Issue Guidance on New Distribution Provisions of the Pension Protection Act

 

Jan. 10, 2007

 

 

WASHINGTON -- The Treasury Department and the IRS issued a notice today providing extensive guidance on several Pension Protection Act rules relating to distributions from tax-qualified retirement plans.

The guidance addresses many questions on PPA provisions, including:

  • interest rate assumptions for lump sum distributions

  • hardship distributions from a 401(k) and similar plans

  • early distributions from qualified plans to terminated public safety employees

  • rollovers from qualified plans to IRAs for non-spouse beneficiaries

  • distributions to pay for health insurance for retired public safety officers

  • earlier vesting of certain employer contributions

  • new rules for the notice and consent period for distributions

 

The notice also clarifies several issues concerning the provision permitting IRA owners age 70 1/2 or older to directly transfer tax-free, up to $100,000 per year to an eligible charity. For example, a check from an IRA made payable to an eligible charity but delivered by the IRA holder still qualifies for tax-free treatment. IRAs held on behalf of beneficiaries, as well as IRAs held by the original owners, are eligible to use this provision. Additionally, the $100,000 annual limit applies separately for each spouse of a married couple. If both spouses have IRAs and are at least age 70 1/2, the couple can transfer a combined total of $200,000.
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