IRS Provides Guidance on HEART Act
January 20, 2010 (PLANSPONSOR.com) – The Internal Revenue Service has provided
guidance in the form of questions and answers with respect to certain
provisions of the Heroes Earnings Assistance and Relief Tax (HEART) Act of
2008.
IRS Notice 2010-15 addresses HEART Act section 104 (relating to survivor and disability payments
with respect to qualified military service), section 105 (relating to treatment
of differential military pay as wages), section 107 (relating to distributions
from retirement plans to individuals called to active duty), section 109
(relating to contributions of military death gratuities to Roth IRAs and
Coverdell education savings accounts), and section 111 (relating to an employer
credit for differential wage payments to employees who are active duty members
of the uniformed services).
The HEART Act was passed in June 2008 (see Rules/Regs:Heroic Measures), and provisions in the law include:
- Employers who provide differential pay to employees
called up for active military service now must recognize that compensation in
calculating employees' pension benefits.
- For individuals ordered to active military duty for at
least six months on or after December 31, 2007, those reservists' requests for
defined contribution plan distributions will not require the typical 10% early
withdrawal penalty applied if the taxpayer is younger than 59 1/2.
- A survivor of a deceased service member is allowed a
tax-free rollover of any military death gratuity and any group life insurance
payment to the survivor's Roth individual retirement account (Roth IRA) or to
an education savings account.
- As part of a plan's qualifications under the Internal
Revenue Service (IRS) code, it must provide survivors of a participant who
dies while on active military service any additional benefits (other than
benefit accruals relating to the period of military service) that would be
provided under the plan had the participant gone back to work and then died
while an active employee. For purposes of the new law, the person would be
considered a "deemed rehired employee."
The IRS is also
requesting comments regarding any additional issues relating to the sections of
the HEART Act that are addressed in the notice.
Rebecca Moore
editors@plansponsor.com