John Scott, council director, retirement policy at ABC told PLANSPONSOR.com that participants in states affected by EGTRRA should be alarmed. If legislation is not passed to include the act in the states without legislation, retirement plan participants will pay taxes on the extra contributions they are allowed to make to their retirement plans through EGTRRA.
Dropping the Ball
EGTRRA includes a provision known as the “saver’s credit,” an non-refundable income tax credit for lower-income individuals with gross incomes of less than $50,000 who contribute to an employer-sponsored retirement plan or IRA for taxable years beginning after December 31, 2001, and before January 1, 2007.
Four states do not currently have any legislation pending on EGTRRA. They are: Maine, Massachusetts, North Carolina and Wisconsin. While Wisconsin’s governor, Scott McCallum, has shown support for EGTRRA, none of the state’s representatives have pumped out legislation on it. Meanwhile, North Carolina’s legislature does not meet until May 23 so any legislation on EGTRRA seems far off.
Still, Scott said California is moving along swiftly with its own endeavors to pass legislation incorporating EGTRRA into pension law. He believes that California’s success will act as the catalyst for other states to pass their own EGTRRA legislation.
Following is an overview as provided by ABC of the current status in the affected states:
Arizona – Arizona’s EGTRRA conformity bill, S.B. 1071, was approved by the Senate Finance Committee and now moves onto consideration by the full state Senate. If approved, the Arizona House of Representatives would then take up the legislation.
Arkansas – The Arkansas state legislature does not convene until 2003.
California – The California Senate approved state Senator Jack Scott’s proposed conformity legislation, S. 657, which provides for full conformity with the IRA and pension provisions of EGTRRA. S. 657 now heads to the Assembly. The legislation was amended to raise revenue to pay for conformity by denying business deductions for employee compensation in excess of $1 million and for club dues. The amended bill also provides for other changes in corporate tax treatment. In addition, two bills have been introduced in the state Assembly, AB 1743 (Campbell) and AB 1744 (Corbett), that provide for conformity with the retirement provisions of EGTRRA. Separately, Governor Davis stated in his budget message that he supported conformity with EGTRRA’s retirement provisions.
Georgia – House Bill 1026, which was introduced on January 15, would update the Georgia Public Revenue Code to reference the Internal Revenue Code as enacted or in existence as of January 1, 2002. H.B. 1026 was approved in committee in the state House of Representatives on February 7 and moves onto consideration by the full House.
Hawaii – On January 23, Senate Bill 2824, which would conform the Hawaiian income tax code to the Internal Revenue Code in existence as of December 31, 2001, was introduced. The bill was approved unanimously by the state Senate Committee on Ways & Means on February 11 and is being considered on the floor of the state Senate. The House Finance Committee approved a separate conforming bill, HB 2566, on February 7.
Idaho – House B