The Pension Protection Act was created in August of 2006. The most important benefit for retirees is the revision of many sunset provisions of a previous act, the Economic Growth and Tax Relief Reconciliation Act of 2001.
Roth IRA
Previously, people with more than $100,000 adjusted gross income were unable to convert their traditional IRA into a Roth IRA. In 2010 all people, regardless of their income bracket, are eligible to transfer funds from a 401k to either a traditional or a Roth IRA
Enrollment
Congress wants to encourage more people to save for their retirement instead of relying on government retirement systems. Towards that end, they have made it possible for companies to enroll employees automatically in the company 401k plan. They can also deduct between three and ten percent of an employee’s gross income depending on the length of time the employee has been with the company. The catch is that the company must match all contributions. If employees are unwilling to participate they are given ninety days to opt out. The automatic contribution and matching employer funds makes this an attractive savings option.
529 Plans
The 2001 act had made withdrawals from these college plans tax exempt. However, that feature was to go away in 2010. The Pension Protection Act has made this a permanent feature. While the withdrawals may only be used for education expenses, there are no taxes upon withdrawal. Another nice feature of the 529 plan is that the funds are controlled by the owner of the plan rather than the beneficiary. This ensures that the money saved by mom or grandpa is used for junior’s books, computer, and lab fees.
These are just a few of the ways the Pension Protection Act of 2006 have helped make some of the best provisions of the 2001 Act permanent.