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The Pension Protection Act of 2006 has changed the rules for distributions from IRAs and retirement plans. Prior to the passage of PPA-2006, a non-spouse beneficiary could not rollover benefits into an IRA, whether from a retirement plan or an IRA. But that has all changed.


For distributions after December 31, 2006, you may rollover the benefits of an IRA and retirement plan to an IRA, even if for a non-spousal beneficiary. This IRA will be treated as an inherited IRA by the non-spouse beneficiary, and this change gives beneficiaries more time to receive the benefits from this rollover. And because of this change, benefits will no longer be immediately taxable.


Another change from PPA-2006 is the ability to make a direct rollover into a Roth IRA from a retirement plan. A rollover is permitted for distributions after December 31, 2007. However, there are restrictions on your ability to do this because of limitations on the amount of Adjusted Gross Income. The early distribution penalty of 10 percent does not apply to this transaction. In 2010, the AGI limitation on the Roth rollovers will disappear.


These are just two aspects of the ever-changing world of retirement plan and IRA distributions. It's important to talk to your Rea professional to make sure you are correctly handling and planning your distributions at retirement.


-By Robert G. Ferguson, CPA (Marietta office)


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