Perpetual IRA Rollover and Other Underreported Goodies in House Pension Bill

Some very exciting things are in the defined contribution side of the pension bill, most of which's attention has focused on the defined benefit side.

Currently, only a spouse may roll over an inherited IRA into their own IRA.  As part of the defined contribution end of the House pension reform bill (which represents the consensus formed in committee), this rollover ability would be allowed for any IRA beneficiary.

This means that, in theory, an IRA could be rolled over from person to person, and from generation to generation.  In the case of Roth IRAs, this represents a significant opportunity to shield large amounts of assets from the double taxation of the death tax.

Other aspects of the defined contribution side of the equation include:

1. Making permanent the small employer startup credit, IRA and 401(k) provisions of EGTRRA
2. Making the Savers Credit permanent and indexing it to inflation
3. Creating a new exception to the 10% IRA penalty for servicemen called into service for more than 180 days (this can be repaid up to two years after withdrawal)
4. Allowing employees to sell employer stock provided as matches with 401(k) plans three years after receiving them
5. Prohibits companies from forcing employees to invest any of their elective deferrals into company stock
6. Increased legal responsibility of employers to be fiduciarily responsible during blackout periods
7. Requiring that quarterly statements contain value of assets, the rights to diversify, and information about the importance of maintaining a diversified portfolio
8. Permits 401(k) advice, so long as that advice is based on a "computer model"
9. Permits IRA advice for a flat fee for the first year, and computer modeled for subsequent years
10. Encourages auto-enrollment with opt-out.  This auto enrollment has a ceiling of 10% and a floor based on employee longevity (1st year 3% up to 4th year 6%).  Current employees are grandfathered in.
11. Allows direct rollovers from defined contribution plans into Roth IRAs
12. Inflation indexes income limits for Traditional IRAs and Roth IRAs
13. Gives taxpayers the option of "split refunds" that can go into Roth IRAs
14. Allows disability income to count toward earned income for IRA purposes
15. Tax Court judges can contribute to the TSP
16. Shortens vesting schedule for non-elective employer contributions to no more than 6 years
17. 5500-EZ asset requirement to file raised to $250,000 (one-employee pension plans), and mandates a 5500-A (as it were) for <25 participant pension plans
18. Up to $100,000 can be taken as a tax-free distribution from an IRA to make a charitable contribution