CUNA Calls for Permanent Increased IRA Contributions, Saver's Credit, `Catch-up' Provisions

WASHINGTON – CUNA recently appealed to Congress to include certain provisions from the Pension Protection Act of 2005 in a final bill in an effort to increase the historically low national savings rate. In a June 21 letter, CUNA President/CEO Dan Mica urged members of a House and Senate conference committee on pension reform legislation to seal the deal on an increased annual contribution limit for individual retirement accounts and a catch-up provision that allows those ages 50 and older to contribute additional pre-tax dollars to those accounts. The provisions, which were first authorized by the Economic Growth and Tax Relief Reconciliation Act of 2001, are set to expire in 2010 if Congress does not extend them. The Pension Protection Act of 2005 or H.R. 2830 would make these provisions permanent. Section 618 of EGTRRA created an innovative savings account for lower-income individuals called the Retirement Savings Tax Credit, commonly referred to as the Saver's Credit. An individual who meets the eligibility requirements is able to claim a matching tax credit for the first $2,000 he or she deposits into an IRA. Due to expire at the end of this year, CUNA has also urged the pension reform committee to include the provision in H.R. 2830 that makes the Saver's Credit permanent. This year's House-passed tax reconciliation bill (H.R. 4297) included a provision to extend the Saver's Credit until the end of 2008. The Senate version (S. 2020) would have extended it to the end of 2009. However, it was not included in the conference report that ultimately became the Tax Increase Prevention and Reconciliation Act of 2005 (P.L. 109-222). CUNA also encouraged the committee to accept the House-passed provisions to assist military personnel to save for retirement and also have the flexibility to manage IRA distributions penalty-free "to meet the unique challenges that face armed forces personnel," Mica wrote. Under current law, an IRA distribution is usually subject to a 10% penalty if it is made prior to death, disability or attainment of age 59 1/2, Mica pointed out. H.R. 2830 would waive that penalty for reservists and guardsmen who are called to active duty for at least 180 days. Amounts withdrawn may be repaid to the IRA within two years of the distribution date. "I believe that these important savings provisions will increase the national savings rate and better prepare individuals for the financial needs they will face in retirement," Mica said. -msamaad@cutimes.com