2006 Pension Protection Act or H. R. 4

[dyne]

This will be signed into law in a few days by the President. It is 591 pages long. It makes MAJOR changes in the pension and retirement rules. It will require employers to automatically enroll all employees in a retirement plan unless the employee opts out of the plan. The first year 3% contributions are requireds, 4% for the second year, 5% for the third year and 6% for the fourth and subsequent years. The provisions of the Economic Growth and Tax Reconcilation Act of 2001 relating to retirement and pension plans which were temporary are made permanent. The employee will no longer have to make decisions about how much to contribute and where the money is to be invested. This responsibility will be shifted to the employer. A new professional entitled fidicuiary adviser is created who will aid the employees.Plans that contain company stock must offer not less than 3 additional investement options.There are many more provisions in this new law.
I recommend that everyone access GOOGLE to learn more. The savers credit on form 8880 is made permanent.
This same act also states that a RECEIPT will be required to claim a deduction for clothing donated to charity (such as Salvation Army or Goodwill) and the clothing must be in GOOD condition. It also says that old socks and underwear will NOT be allowed as a deduction.

[Unregistered]

A good place to look (in readable English) is the Joint Committee on Taxation report. It describes current law and the provisions of the new law. Also, gives the dates when the various provisions take effect.

http://www.house.gov/jct/

New York Enrolled Agent.

[Uncle Sam]

Pension Protection Act

While I'm not an reliable authority on Pensions, and can't really comment on the provisions relating to mandatory employer compliance, I truly believe that a number of these other provisions are outright ridiculous.
After curbing the abuse on auto donations, now they're going after used clothing? Looks like a gradual withdrawal of permitting non-cash donations and the Salvation Army dumpsters won't be getting filled up anymore like they used to.
Then how about the permitting of tax refunds going into IRAs - what happens if there's a mistake made in the return processing and the wrong amount goes into the IRA - who's going to fix the mistake (without penalty), and just gives another opportunity for the innocent taxpayer to overcontribute without realizing it.
And of course, don't forget- only food businesses can make inventory contributions.
Pharmaceuticals, medicines, furniture, construction materials, education supplies, paper, reading materials, clothing - they don't count.

[veritas]

Here is something worthwhile from the act

For those taking charitable deductions for your stuffed pets bad news,


"For purposes of determining a taxpayer’s basis in taxidermy property that is contributed
by the person who prepared, stuffed, or mounted the property (or by any person who paid or
incurred the cost of such preparation, stuffing, or mounting), the provision provides a special rule
that the basis of such property may include only the cost of the preparing, stuffing, or mounting.
For purposes of the special rule, it is intended that only the direct costs of the preparing, stuffing,
or mounting may be included in basis. Indirect costs, not included in the basis, include the costs
of transportation relating to any aspect of the taxidermy or the hunting of the animal, and the
direct or indirect costs relating to the hunting or killing of an animal (including the cost of
equipment and the costs of preparing an animal carcass for taxidermy)."

[Brad Imsdahl]

We are currently working on our coverage of the new law, which will be posted on our updates page as well as being covered in the next edition of TheTaxBook. For those of you who have signed up on our updates page for email notification, you will receive an email telling you when our coverage has been posted.

[Brad Imsdahl]

Detailed coverage of the new law is now posted on our updates page at:

http://www.thetaxbook.com/updates_view.asp?ID=59

[Jiggers]

This link works

This link works to the tax update.

The link in your e-mail, http://www.thetaxbook.com/updates.asp, doesn't.

[Jiggers]

Where in the new law?

[QUOTE=dyne]This will be signed into law in a few days by the President. It is 591 pages long. It makes MAJOR changes in the pension and retirement rules. It will require employers to automatically enroll all employees in a retirement plan unless the employee opts out of the plan.
QUOTE]

Where in the new law does it state that it will require employers to automatically enroll all employees?

Even businesses that don't have a plan?

Or, am I reading this wrong? Or, did the original poster read it wrong?

[Unregistered]

I think it may refer to 401(k) plans. This is a part of Sec 902 of the pension bill.

SEC. 902. INCREASING PARTICIPATION THROUGH AUTOMATIC CONTRIBUTION ARRANGEMENTS.

(a) In General- Section 401(k) of the Internal Revenue Code of 1986 (relating to cash or deferred arrangement) is amended by adding at the end the following new paragraph:

`(13) ALTERNATIVE METHOD FOR AUTOMATIC CONTRIBUTION ARRANGEMENTS TO MEET NONDISCRIMINATION REQUIREMENTS-

`(A) IN GENERAL- A qualified automatic contribution arrangement shall be treated as meeting the requirements of paragraph (3)(A)(ii).

`(B) QUALIFIED AUTOMATIC CONTRIBUTION ARRANGEMENT- For purposes of this paragraph, the term `qualified automatic contribution arrangement' means any cash or deferred arrangement which meets the requirements of subparagraphs (C) through (E).

It goes on and on

New York Enrolled Agent

[Bees Knees]

From TTB Update under “Other Provisions Applicable to Pension Plans”

The 7th bullet says: “Allows qualified automatic contribution arrangements where eligible employees are treated as having elected to have the employer make elective contributions for purposes of meeting certain top heavy rules and other tests.”

I think what this means is, if the plan wishes to do this, they can set it up that way so that they don’t have to mess with having excess contributions to highly compensated employees when they find out later that certain employees decided not to enroll.

It is a problem companies have had to deal with for years. If a highly compensated employee wanted to contribute the max, he or she was always subject to a limitation based on how many employees elected to participate at what percentage. Often, they wouldn’t find out until later that their elective deferral percentage exceeded the amount allowed based on the average employee elective deferral percentages, usually due to new employees joining the plan mid-way through the year.

Now it appears they can automatically enroll the new employees at a certain percentage so that other employees know their percentages, regardless of whether they actually decide to stay enrolled. The employee doesn't have to make elective deferrals. That is still elective. But the other employees are not punished if the new employee decides not to.

I think that is what it might mean. The employer plan does not have to set it up this way. The law just gives them the option to.

[Bees Knees]

From the TECHNICAL EXPLANATION OF H.R. 4, Prepared by the Staff of the JOINT COMMITTEE ON TAXATION

http://www.house.gov/jct/x-38-06.pdf

Explanation of Provision

In general Under the provision, a 401(k) plan that contains an automatic enrollment feature that satisfies certain requirements (a “qualified automatic enrollment feature”) is treated as meeting the ADP test with respect to elective deferrals and the ACP test with respect to matching contributions. In addition, a plan consisting solely of contributions made pursuant to a qualified automatic enrollment feature is not subject to the top-heavy rules. A qualified automatic enrollment feature must meet certain requirements with respect to: (1) automatic deferral; (2) matching or nonelective contributions; and (3) notice to employees.

It then goes on and on and on....

[Unregistered]

printing the Pension protection Act

How can I print the update for the Pension Protection Act of 2006 without cutting off the right side of the text?

[taxfun]

taxfun

Drag the whole message for a "selection, then print "selection".

[Brad Imsdahl]

We have now added a printer friendly version.

We also added links to the actual text of the legislation, along with a link to the Joint Committee report, for those who wish to do further research.