It’s August 2007 and Congress is not in session, but once they return, they have some very interesting legislation to [re]consider (the bill was originally introduced in the fall of 2006).

According to analyses by Towers Perrin and the American Benefits Council, this bill dubbed the “Women’s Retirement Security Act of 2007” would, among other things:

(i) require employers to allow part-time employees that meet age and service requirements over three consecutive 12-month periods to make elective deferrals to their 401(k) plans (this change benefits those whose family responsibilities take them out of the fulltime workforce for long periods of time – and all part-time workers would benefit as well);

(ii) require employers (other than certain very small employers) that currently do not sponsor a retirement plan to allow employees to contribute a portion of their pay to an IRA;

(iii) permit the transfer of up to $500 of unused benefits under flexible spending arrangements (FSAs) to certain retirement plans (like a 457 retirement plan or an IRA);

(iv) provide favorable tax treatment for a portion of the annuity payments made from certain tax-qualified retirement plans and nonqualified annuities; and

(v) exclude from taxation certain retirement planning services (would allow employees to exclude from income up to $1,000 for qualified retirement planning services in situations where the employee has a choice between cash or the services);

(vi) expand the Saver’s Credit (a tax credit for certain low and moderate-income individuals who contribute to workplace retirement plans and IRAs. Many lower income taxpayers are ineligible for the credit because they don’t have any tax liability. The bill would make the credit refundable and require the refund to be deposited into a qualified account, like an IRA);

(vii) expand access to IRAs for people on disability and those who have taken a short time off from the workforce, and revise IRA rules to count disability income, unemployment compensation and other “wage replacement” income in determining allowable contributions;

(viii) provide incentives for lifetime payments allowing individuals to exclude from taxation a portion of payments from qualified (retirement plan or IRA) or nonqualified (after-tax) annuities that last a lifetime;

(ix) equalize tax treatment of retirement plan contributions of the self-employed(employer contributions to a qualified retirement plan on behalf of an employee are generally excluded from both income and employment taxes while contributions to a qualified plan by self-employed generally are not excluded from employment taxes).

For professional investment advice on this topic contact:
Allgen Financial Services, Inc.
888.6ALLGEN (888) 625-5436