Protecting America's Savings Act of 2002, HR 5553 Summary
Thursday October 03, 2002
Expanding and Making Permanent Tax Credits for Low & Moderate Income Savers - "The Savers Credit" enacted in the 2001 Economic Growth and Relief Reconciliation Act (EGTRRA) is currently set to expire in 2006. This credit reduces the tax bill for individuals who contribute to a workplace retirement plan or IRA. Under the current credit, single filers with incomes of up to $25,000 and joint filers with incomes of up to $50,000 are eligible for a non-refundable tax credit of up to $2,000. The Protecting America's Savings Act would make this credit permanent, expand the percentage of the credit, and increase the income level of eligible beneficiaries to $32,500 for single filers and $65,000 for joint filers.
Accelerating IRA Contribution and Catch-Up Amounts - The Protecting America's Savings Act would speed the increases in IRA contribution and catch-up amounts enacted in EGTRRA. Individuals would be able to make the full $5,000 IRA contribution in 2002 (rather than in 2008), and individuals age 50 and older would be able to make the full $1,000 IRA catch-up contribution in 2002 (rather than 2006).
Accelerating Retirement Plan Catch-Up Contributions - The Protecting America's Savings Act would also speed up the amount of catch-up contribution that those age 50 and older can make to their workplace retirement plans [401(k)s, 403(b)s, 457s]. Participants would be able to make the full $5,000 catch-up contributions beginning in 2003 (rather than 2006).
Eliminating IRA Marriage Penalties - The Protecting America's Savings Act would remedy two types of effective marriage penalties. First, the bill would correct the current law that prevents some spouses without workplace retirement plans from making their own deductible IRA contributions solely because their spouse is covered by a retirement plan. Second, the bill would adjust the current income eligibility level for deductible and Roth IRAs for joint filers to be twice the income eligibility level for single filers.
Allowing Rollovers for Non-Spouse Beneficiaries - The Protecting America's Savings Act would allow non-spousal beneficiaries to rollover inherited retirement plan savings into an IRA and take the money out as an annuity, instead of forcing non-spousal beneficiaries to take lump-sum payouts with immediate taxation on the full amount (as in current law). Currently only surviving spouses may use a rollover in this manner.
Allowing Lifetime Spousal Rollovers - The Protecting America's Savings Act would allow individuals to rollover or transfer retirement plan assets to a spouse's retirement plan or IRA.
Preventing Golden Parachute Payments When a Company Goes Belly-Up - The Protecting America's Savings Act would create a 50% excise tax on golden parachute payments to executives when a company goes bankrupt.
Allowing Additional Employer Contributions to SIMPLE Plans - The Protecting America's Savings Act would allow small businesses to make additional employer contributions to their employees' retirement accounts. Small businesses would be able to contribute up to 10% of pay on behalf of all plan participants during a profitable year.
Accelerating Income Eligibility for Deductible IRAs - The Protecting America's Savings Act would speed the increases in income levels eligible to make tax-deductible IRA contributions. Individuals earning below $50,000 and couples earning below $100,000 would be fully eligible to make deductible IRA contributions beginning in 2002.
Accelerating Workplace Retirement Plan Contribution Amounts - The Protecting America's Savings Act would speed the increases in workplace retirement plan contribution limits from EGTRRA. Employees would be able to save the full $15,000 in their 401(k)s, 403(b)s or 457 plans beginning in 2003 (rather than 2006). Small business workers with SIMPLE plans would be able to save the full $10,000 in 2003 (rather than in 2005).
Allowing Catch-Up Contributions for Federal Employees - The Protecting America's Savings Act would allow federal employees to make catch-up contributions.
Providing Relief from Minimum Required Distributions - The Protecting America's Savings Act would change the existing requirements that force workplace pension plan participants and IRA holders to begin drawing down their savings at age 70½, to allow payments to begin at age 75 without penalty. The Protecting America's Savings Act would also exclude $300,000 in retirement savings from these minimum distribution rules. Finally, the bill would reduce the excise tax for failure to take the required annual distribution from 50% to 25% of the amount that should have been distributed.
Allowing Periodic Payment Reductions - The Protecting America's Savings Act would direct the Secretary of the Treasury to allow retirement plan participants and IRA holders who opt to take substantially equal periodic payments over their life expectancy (in order to avoid a 10% penalty tax for withdrawals made under age 59½ ) to reduce those payments without penalty.
Creating New Solutions for Pension Protection - The Protecting America's Savings Act would direct the Secretary of the Treasury to study and report to Congress on new ways to protect savings in defined contribution plans.
