Letter to Pension Conferees
June 21, 2006
The Honorable Charles Grassley
Senate Committee on Finance
219 Dirksen Senate Office Building
Washington, DC 20510-6200
Dear Chairman Grassley:
The Credit Union National Association (CUNA) represents 87 million credit union members in all fifty states. CUNA has long advocated innovative, tax-advantaged retirement savings accounts as a means of encouraging credit union members to take an active role in planning for their financial needs in retirement. In your role as a conferee to the Pension Reform conference committee, I urge you to include in your report the retirement savings provisions in H.R. 2830, the Pension Protection Act of 2005.
Section 601 of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) increased annual contribution limits for IRAs and created "catch-up" provisions for those age 50 and older to contribute additional pre-tax dollars to their IRAs. As you know, these provisions will expire in 2010 absent an extension or made permanent by the Congress. H.R. 2830 would make these provisions permanent.
Section 618 of EGTRRA created an innovative savings account for lower-income individuals called the Retirement Savings Tax Credit, commonly referred to as the Saver's Credit. An individual who meets the eligibility requirements is able to claim a matching tax credit for the first $2,000 he or she deposits into an IRA. Due to expire at the end of this year, we urge you to include the provision in H.R. 2830 that makes the Saver's Credit permanent.
As you know, this year's House-passed tax reconciliation bill (H.R. 4297) included a provision to extend the Saver's Credit until the end of 2008. The Senate version (S. 2020) would have extended it to the end of 2009. However, it was not included in the conference report that ultimately became the Tax Increase Prevention and Reconciliation Act of 2005 (P.L. 109-222).
CUNA also encourages you to accept the House-passed provisions to assist our men and women in uniform to save for retirement and also have the flexibility to manage IRA distributions penalty- free to meet the unique challenges that face armed forces personnel.
Under current law, an IRA distribution is usually subject to a 10% penalty if it is made prior to death, disability or attainment of age 59½. H.R. 2830 would waive that penalty for reservists and guardsmen who are called to active duty for at least 180 days. Amounts withdrawn may be repaid to the IRA within two years of the distribution date.
I believe that these important savings provisions will increase the national savings rate and better prepare individuals for the financial needs they will face in retirement.
Daniel A. Mica
President & CEO