IRS, Treasury Issue Guidance on New Distribution Provisions of the Pension Protection Act
IR-2007-7, Jan. 10, 2007
WASHINGTON — The Treasury Department and the IRS issued a notice today providing extensive guidance on several Pension Protection Act rules relating to distributions from tax-qualified retirement plans.
The guidance addresses many questions on PPA provisions, including:
interest rate assumptions for lump sum distributions
hardship distributions from a 401(k) and similar plans
early distributions from qualified plans to terminated public safety employees
rollovers from qualified plans to IRAs for non-spouse beneficiaries
distributions to pay for health insurance for retired public safety officers
earlier vesting of certain employer contributions
new rules for the notice and consent period for distributions
The notice also clarifies several issues concerning the provision permitting IRA owners age 70 ½ or older to directly transfer tax-free, up to $100,000 per year to an eligible charity. For example, a check from an IRA made payable to an eligible charity but delivered by the IRA holder still qualifies for tax-free treatment. IRAs held on behalf of beneficiaries, as well as IRAs held by the original owners, are eligible to use this provision. Additionally, the $100,000 annual limit applies separately for each spouse of a married couple. If both spouses have IRAs and are at least age 70 ½, the couple can transfer a combined total of $200,000.
Related Item: Notice 2007-7