Pension Protection Act of 2006
Did you hear?
Last week President George Bush signed into law the Pension Protection Act of 2006. Generally written for pension reform, the act does include several provisions that will affect all non-profit organizations and charitable giving, allowing individuals 70 1/2 or older to take tax-free withdrawals from their IRA's as long as the donation goes straight to the charity. The provision is effective for only 2006 and 2007 (and could be renewed).
In addition, the act also includes provisions that require more record-keeping requirements, new standards for donations of used clothing and household goods, as well as one provision specifically for "Taxidermal Donations" (I am not kidding).
Here's a link to the actual law as written. I'm not sure, but I do think it makes me a little concerned how much effort goes into writing laws in our country:
Pension Protection Act of 2006
The following is an explanation of the law, and is itself 386 pages long:
Explanation of Pension Protection Act of 2006
Key provisions of the law (and their PDF page numbers in the explanation above):
The Tax-Free IRA Charitable Gifts section is significantly important because it should increase giving in that sector. In addition to not being taxable, any withdrawal used for donation purposes does NOT increase the income of the donor. This provision allows a donor age 70 1/2 or higher the ability to donate from their IRA without a) itemizing, and b) affecting their income (which could trigger unintended tax/penalty consequences).
Finally, the recordkeeping requirements will impact all non-profit organizations. If donors itemize their donations (and most donors do), they must now include documentation for ANY donation amount, and either a receipt from the charity or a bank record will be acceptable. A written log showing that a donor has made the donation (such as cash donations or weekly giving) is no longer acceptable.
In the end, I do think the act will encourage giving at a higher level, especially amongst donors that meet the criteria. A direct mailing/communication to these donors would be advised, as you can explain the benefits of giving in this fashion that benefits both you and the donor.
Finally, the new record-keeping requirements should strengthen your acknowledgment processing. If you aren't acknowledging all of your donors, now is a great reason to start.
Oh, and by the way, maybe you'll get some new taxidermy to put in your office! :)
Last week President George Bush signed into law the Pension Protection Act of 2006. Generally written for pension reform, the act does include several provisions that will affect all non-profit organizations and charitable giving, allowing individuals 70 1/2 or older to take tax-free withdrawals from their IRA's as long as the donation goes straight to the charity. The provision is effective for only 2006 and 2007 (and could be renewed).
In addition, the act also includes provisions that require more record-keeping requirements, new standards for donations of used clothing and household goods, as well as one provision specifically for "Taxidermal Donations" (I am not kidding).
Here's a link to the actual law as written. I'm not sure, but I do think it makes me a little concerned how much effort goes into writing laws in our country:
Pension Protection Act of 2006
The following is an explanation of the law, and is itself 386 pages long:
Explanation of Pension Protection Act of 2006
Key provisions of the law (and their PDF page numbers in the explanation above):
- Tax-Free IRA Charitable Gifts (Page 273)
- Increased Charitable Deductions of Food Inventory (Page 279)
- Limiting Charitable Deductions of Clothing and Household items (Page 312)
- Recordkeeping Requirements for ALL Donations (Page 315)
- Reform Rules for Gifts of Taxidermy (why?) (Page 306)
The Tax-Free IRA Charitable Gifts section is significantly important because it should increase giving in that sector. In addition to not being taxable, any withdrawal used for donation purposes does NOT increase the income of the donor. This provision allows a donor age 70 1/2 or higher the ability to donate from their IRA without a) itemizing, and b) affecting their income (which could trigger unintended tax/penalty consequences).
Finally, the recordkeeping requirements will impact all non-profit organizations. If donors itemize their donations (and most donors do), they must now include documentation for ANY donation amount, and either a receipt from the charity or a bank record will be acceptable. A written log showing that a donor has made the donation (such as cash donations or weekly giving) is no longer acceptable.
In the end, I do think the act will encourage giving at a higher level, especially amongst donors that meet the criteria. A direct mailing/communication to these donors would be advised, as you can explain the benefits of giving in this fashion that benefits both you and the donor.
Finally, the new record-keeping requirements should strengthen your acknowledgment processing. If you aren't acknowledging all of your donors, now is a great reason to start.
Oh, and by the way, maybe you'll get some new taxidermy to put in your office! :)
posted by Jon Biedermann at
11:21 AM
1 Comments:
Those are some good points, however lump sum 401(k) distributions will face the biggest drawbacks thanks to the Pension Protection Act of 2006 signed by Mr. Bush. How does the Pension Protection Act of 2006 Affect Lump Sum Distributions?
The Pension Protection Act of 2006 affects lump-sum 401k distributions in 2 ways:
i) It alters the way corporations calculate the amount of pension benefit for their employees.
ii) It caps out the amount of lump sum distribution you can take out
Source: http://www.research401krollover.com
Can you give me an example of how the pension benefit is calculated?
Upon retirement, your employer will use your pension benefit or annuity payments to calculate the present value of your lump sum distribution. The calculation will factor in your life expectancy rates and future return on investments. Here's an example:
Monthly Payments Upon Retirement: $2500 per month
Life Expectancy: 25 years
Interest Rate: 6%
Present Value of Lump Sum Distribution: = $383,501
Therefore, if you are eligible to receive $2500 per month for the next 25 years at an interest rate of 6%, using Financial Analyst BAII Plus calculator, the present value of your lump sum distribution is $383,501.
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