Year-End Tax, Spending Bills Have Retirement Implications

By ASPPA Net Staff • January 04, 2016 • 0 Comments
Just before Christmas, President Obama signed into law H.R. 2029, a massive year-end spending and tax bill containing a number of provisions affecting health and retirement plans. Here’s what you may have missed.

H.R. 2029 — now Public Law 114-113 — includes both an omnibus appropriations bill that funds the government through Sept. 30, 2016 (the Consolidated Appropriations Act, 2016, or CAA) and an “extender” (in some cases, a permanent one) of a large number of expiring or expired tax incentives (the Protecting Americans from Tax Hikes Act of 2015, or PATH Act). While most employers have probably focused on aspects like the two-year delay of the high-cost employer-sponsored health coverage excise tax (a.k.a. the Cadillac tax), a summary of the retirement-related provisions from Groom Law notes the following provisions.

Charitable Distributions from IRAs

The PATH Act permanently extends the ability of individuals at least 70½ years of age to exclude from gross income qualified charitable distributions from IRAs, effective for 2015 and later years, though that exclusion may not exceed $100,000 per taxpayer in any tax year.

Rollovers to SIMPLE IRAs

The PATH Act allows participants to roll over their accounts from an employer sponsored retirement plan to a SIMPLE IRA, provided the participant’s SIMPLE IRA is at least two years old.

Extended Early Withdrawal Relief for Public Safety Officers

The PATH act extends the current relief from the 10% penalty on early withdrawals from retirement plans and accounts for qualified public safety employees to include nuclear materials couriers, U.S. Capitol Police, Supreme Court Police and diplomatic security special agents of the State Department for withdrawals made after 2015.

Church Plan Changes

The PATH Act includes a long-pending package of church plan changes, including:

  • a provision that the IRS cannot aggregate certain church plans together for purposes of the nondiscrimination rules;
  • flexibility for church plans to decide which other church plans with which they associate;
  • prevention of certain grandfathered church defined benefit plans from having to meet certain requirements relating to maximum benefit accruals;
  • allowing defined contribution church plans to offer automatic enrollment;
  • streamlining the rules for merging and reorganizing church plans; and
  • allowing church plans to invest in 81-100 collective trusts.
Foreign Investment in Real Property Tax Act (FIRPTA)

The PATH Act adds an exemption to withholding under FIRPTA for the disposition of U.S. real property held directly (or indirectly through one or more partnerships) by certain foreign pension funds and made after enactment. Groom notes that this new exemption should make U.S. real estate investments more attractive to non-U.S. pension plans.

Airline Employee IRA Rollovers

The PATH Act corrects an effective date problem affecting rollovers to IRAs of amounts received by qualified airline employees as a result of certain airline bankruptcies. Groom explains that those distributions generally may be rolled over within 180 days of receipt or, if later, within 180 days of the enactment of the changes, i.e., Dec. 18, 2014.

Additional information on this legislation can be found in the American Retirement Association Government Affairs Committee (GAC) update here.