In July 2006 the House and Senate passed the PPA of 2006, when Pres. Bush signs it will be law.

New permanent changes through Economic Growth and Tax Relief Reconciliation Act (EGTRRA):

The IRA contribution limit increases, increased elective deferral limits for 401(k), 403(b) and 457, catch-up contributions for ages 50 and over, the ability to make Roth contributions, enhanced rollover options, improvement to RMDs and the elimination of the 403(b)(2) Maximum Exclusion Allowance Calculations.

EGTRRA also created the Savers Tax Credit, offering a non-refundable tax credit up to 50% of IRA contributions made by taxpayers with Adjusted Gross Income (AGI) below specific thresholds. Income levels will be indexed for inflation with the amounts being rounded to the nearest $1000.

State and local gov’t employees may transfer 403(b) or 457 funds to purchase enhanced benefits for which there is no performance of actual service.

The act will implement several changes relating to IRAs, including: Rollovers to Roth IRAs: Distributions from qualified plans may be rolled directly into a Roth IRA, if the current income requirements are met. This doesn’t apply to distributions from IRAs.

Non Spouse beneficiaries may roll qualified retirement distributions into an IRA. Such IRAs will be treated as inherited IRAs subject to the required distribution rules.

Qualified charitable distributions are excluded from income, just as long as the exclusion doesn’t exceed $100k per person, per year. A qualified charitable contribution is any distribution directly from the IRA trustee to the organization. You must do this before you reach age 70 ½.

Distributions from a governmental defined benefit plan made to a qualified public safety employee who separates from service after age 50 will not be subject to the 10% premature distribution penalty.

You can now roll your tax returns directly deposited into and IRA.