Entrust Learning Center > IRA Insights > July IRA Insights - Interesting Insights - Tax Relief for Military

July IRA Insights - Interesting Insights - Tax Relief for Military

On June 17, 2008, President Bush, signed H.R. 6081, the Heroes Earnings Assistance and Relief Tax (HEART) Act of 2008. The bill was passed by the

On June 17, 2008, President Bush, signed H.R. 6081, the Heroes Earnings Assistance and Relief Tax (HEART) Act of 2008. The bill was passed by the House of Representatives and Senate in late May. As reported previously in Latest News, H.R. 6081 contains many items of tax relief for military personnel, and specifically offers tax-related benefits related to employer-sponsored retirement plans, IRAs, and Coverdell education savings accounts (ESAs). Provisions of particular note for Entrust clients and associates include the following:

• The temporary provision of the Pension Protection Act of 2006 ( PPA) allowing qualifying reservists to take penalty-free retirement plan and IRA withdrawals, and later re-contribute these amounts to IRAs, is made permanent. Under PPA, only reservists who were called to active duty before December 31, 2007, were eligible.
• A recipient of a military death benefit gratuity, paid to a beneficiary as a result of a service member's death (and potentially as large as $100,000), may contribute such an amount without taxation to a Roth IRA or an ESA.
• Employer-provided differential pay-the difference between pre-service civilian pay and the military pay of employees who go on active duty-will be treated as wages for retirement plan purposes. H.R. 6081 does not require employers to contribute differential pay; this is optional.
• The Uniformed Services Employment and Reemployment Rights Act (USERRA) is modified to treat former employees killed or disabled while on active duty as if they had returned to employment for purposes of employee benefits. Generally, USERRA does not apply in situations where service personnel do not return to their prior civilian employment. By treating a service member as having returned to employment, certain benefits for employees or their beneficiaries may now be available, even though death or disability happened while on active duty, and return to employment did not occur. Retirement plan vesting or contributions, insurance payments, etc., are among the benefits that may now be available.