Pension Digest Alert
Congress has passed the Heroes Earnings Assistance and Relief Tax Act
June 17, 2008

Here is a short summary:

1. Contributions of military death gratuities will qualify to be contributed via a special rollover to Roth IRAs and Coverdell ESAs. This provision is effective retroactively.
   
2. The 10% additional tax exception under Code Section 72 is made permanent. Certain individuals ordered or called to active duty on or after December 31, 2007 may now qualify for not having to pay the 10% tax.
   
3. Employers will be encouraged to make different wage payments to employees who are active duty members of the uniformed services. Such payments will qualify as wages for IRA contribution purposes and also as compensation for pension plan purposes.
   
4. The bill also has provisions to raise additional tax revenues. The tax rules governing expatriation are changed radically. The new rule is - all property of an expatriate shall be treated as sold on the day before the expatriation date for its fair market value. There are some exceptions to the general rule.
   
   The general rule does not apply to any item of deferred compensation, specified tax deferral accounts such as traditional IRAs, Roth IRAs, CESAs, HSAs, Archer MSAs or any interest in a non-grantor trust. A special rule applies - the expatriate with a traditional IRA or other specified tax deferred account is treated as receiving a distribution of his or her entire interest on the day before the expatriation date. The 10% early distribution tax provided by various Code Sections do not apply. Appropriate adjustments shall be made to subsequent distributions. A person's expatriation date is the date he or she relinquishes U.S. Citizenship, or in the case of a long-term resident of the U.S., the date on which the person ceases to be a lawful permanent resident of the United States.