News & Information

 

FEATURED PRODUCT

5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.

Learn More »

CCH® PENSION AND BENEFITS — 10/10/06

Tax technical corrections bills introduced in House and Senate

Sen. Chuck Grassley (R-IA), Chairman of the Finance Committee, and Sen. Max Baucus (D-MT), Ranking Member, have introduced the Tax Technical Corrections Bill of 2006 (S. 4026). A companion bill (H.R. 6264) has been introduced in the House by Bill Thomas (R-CA), Chairman of the Ways and Means Committee. The legislation contains technical corrections to prior tax acts, including the Tax Increase Prevention and Reconciliation Act of 2005, the American Jobs Creation Act of 2004, and the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA).

Roth 401(k) rules would be clarified

The technical corrections bill would make two clarifying changes to the rules, enacted under EGTRRA, that apply to designated Roth contributions to 401(k) and 403(b) plans.

One change concerns the special elective deferral limit of Code Sec. 402(g)(7) to designated Roth contributions. Code Sec. 402(g)(7) provides a special rule allowing certain employees to make additional elective deferrals to a 403(b) plan, subject to an annual limit of $3,000 and a cumulative limit of $15,000 minus the amount of additional elective deferrals made in previous years under the special rule. Present law provides a rule to coordinate the cumulative limit with the ability to make designated Roth contributions, but inadvertently reduces the $15,000 amount by all designated Roth contributions made in previous years. The technical corrections bill would clarify that the $15,000 amount is reduced only by additional designated Roth contributions made under the special rule of Code Sec. 402(g)(7).

A second change involves the application of FICA taxes to designated Roth contributions. Under Code Sec. 3121(v)(1)(A), elective deferrals are included in wages for purposes of Social Security and Medicare taxes. The technical corrections bill would clarify that wage treatment applies also to elective deferrals that are designated as Roth contributions.

Technical corrections to PPA '06 will be accepted

The legislation does not contain any technical corrections to the Pension Protection Act of 2006. However, according to a press release issued on September 29, 2006 by the Senate Finance Committee, "although the legislation does not contain any technical corrections to the Pension Protection Act of 2006, proposals for technical corrections to this legislation will also be accepted." The release notes that the staffs of the Senate Finance Committee and the Committee on Ways and Means, in consultation with the staffs of the Joint Committee on Taxation and the Department of the Treasury, are continuing to assess proposals for other technical corrections that may be needed to achieve congressional intent with respect to enacted tax legislation.

For more information on this and related topics, consult the CCH Pension Plan Guide.

Visit our News Library to read more news stories.