On Aug. 17, 2006, President Bush signed into law the Pension Protection Act of 2006. The act provides a tax benefit to reservists, strengthens pension funds, and provides important tax law changes.
The act creates an exception for reservists called to active-duty service — for more than 180 days or an indefinite period between Sept. 11, 2001 and Dec. 31, 2007 — to make early withdrawals (prior to age 59 ½) from certain retirement plans without triggering the 10-percent penalty tax imposed on such withdrawals under IRS Code Sec. 72(t). The withdrawal exception specifically applies to Individual Retirement Accounts (regular and Roth), 401(k) plans, and 403(b) tax-sheltered annuities. It is important to recognize that the withdrawals will constitute taxable income to the account owner.
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