I understand that many of the contribution limits impacting retirement plans were scheduled to end in 2010, but that legislation has recently been passed that would expand these benefits. Is this true?
A. President Bush did recently sign the much-anticipated Pension Protection Act of 2006 (PPA). While it focuses primarily on defined-benefit pension plans, the PPA also includes a number of significant provisions affecting IRAs, defined contribution retirement plans, and 529 college savings plans. The Act, which took federal lawmakers almost 2 years of debate to finally enact, represents the most sweeping reform of America's pension laws in over 30 years.
When the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) was signed into law, it created widespread positive changes to the provisions associated with retirement plans. Unfortunately, those provisions were scheduled to end beginning in 2011, making long-term strategic planning extremely difficult. PPA eliminated that uncertainty by making the following EGTRRA provisions permanent:
One of the most popular non-retirement components of EGTRRA that was due to expire in 2010, but has become permanent under PPA is Section 529 college savings plans. These plans, which have more than $75 billion in assets based on data from the Investment Company Institute, are sure to become even more appealing. Parents and grandparents can begin or continue to use these tax-advantaged college savings plans without concern that future distributions made to pay for higher education costs may become taxable.