The Treasury Department and the Internal Revenue Service issued a notice providing extensive guidance on several Pension Protection Act rules relating to distributions from tax-qualified retirement plans. The guidance addresses many questions on the law’s provisions, including:

  • Interest rate assumptions for lump sum distributions;
  • Hardship distributions from a 401(k) and similar plans;
  • Early distributions from qualified plans to terminated public safety employees;
  • Rollovers from qualified plans to IRAs for non-spouse beneficiaries;
  • Distributions to pay for health insurance for retired public safety officers;
  • Earlier vesting of certain employer contributions; and,
  • New rules for the notice and consent period for distributions.

The notice also clarifies several issues concerning the provision permitting IRA owners age 70-1/2 or older to directly transfer tax-free, up to $100,000 per year to an eligible charity. For example, a check from an IRA made payable to an eligible charity but delivered by the IRA holder still qualifies for tax-free treatment. IRAs held on behalf of beneficiaries, as well as IRAs held by the original owners, are eligible to use this provision.Additionally, the $100,000 annual limit applies separately for each spouse of a married couple. If both spouses have IRAs and are at least age 70-1/2 or older, the couple can transfer a combined total of $200,000.
Separately, the IRS Office of Chief Counsel is reviving its professor-in-residence program. Dormant since the late 1980s, the program provides some of the nation’s top legal academicians the opportunity to contribute to the development of legal tax policy and administration.

IRS Chief Counsel Donald L. Korb has selected Calvin H. Johnson, the Andrews & Kurth Centennial Professor of Law at the University of Texas Law School, to hold the position for the 2007 year. Johnson who has taught at the University of Texas Law School for more than 25 years and has previously served in a number of advisory roles, including adviser to the Joint Committee on Taxation, guest scholar at The Brookings Institution and member of the IRS Commissioner’s Advisory Group.

He’ll begin his tenure with the IRS Office of Chief Counsel this month.

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