calling mgb, what about reverting to old law??

[Guest Keith N]

Has anyone heard anything regarding this concept of reverting to the old law? I'm specifically interested in 415 limits. Does this mean that if you have a person who's NRA is more than 10 years away, I can't fund for the new limit?

I would think we would need guidance fairly soon.

[FAPInJax]

You can definitely use the new limits for funding a participant over 10 years away.

The problem that may arise is that in 10 years the law says that everything reverts back to its prelaw status. For 415, that would mean that there is a 415 benefit that has been increased for 10 years establishing the new limit IF the law is not made permanent.

[MGB]

For those that don't understand the issue:

There is a rule in the Senate that any tax law that decreases revenues in the future (i.e., has the potential to increase budget deficits - which is what we had when this rule was put in place), must have a "super majority" to pass. A super majority is 60 votes.

It was perceived that Bush's plan would never have gotten the 60 votes in the 50-50 Senate. So, the Republican leadership went to the Senate Parlimentarian a couple of months ago and requested a ruling as to whether they could put Bush's tax cut proposals into a buget reconciliation bill (which only needs a simple majority to pass). Another feature of a reconciliation bill is that it may not be fillibustered - it can have a limited 40 hours of debate before a final vote.

In a move that really ticked off the Democrats, he ruled this could be a reconciliation bill. However, it must be limited to the 10-year window that is used for scoring a reconciliation bill.

What this means is that all provisions revert to current law in 2011. (I.e., all those tax rate reductions, repeal of estate tax, pension provisions, etc., revert to the law you have on your desk today.) In order for this to remain law, an actual tax law (with 60 votes) will need to be passed between now and 2011 in order to make these provisions permanent. My personal opinion is that the only way this will happen is if a lot of the tax reductions are repealed at the same time in order to get the 60 votes (Daschle has already indicated they will immediately move to begin this process).

The last section of the bill is:

"Section 901. Sunset of Provisions of Act

(a) In General. All provisions of, and amendments made by, this Act shall not apply -

(1) to taxable, plan, or limitation years beginning after December 31, 2010, or

(2) in the case of title V, to estates of decedents dying , gifts made, or generation skipping transfers, after December 31, 2010.

(B) Application of Certain Laws. The Code and ERISA shall be applied and administered to years, estates, gifts, and transfers described in subsection (a) as if the provisions and amendments described in subsection (a) had never been enacted."

It is this last subsection (B) that most people haven't read. I would argue that this implies that DB valuations between now and 2011 can ignore the sunset provision and project out the higher DB limits ad infinitum. Of course, the IRS (particularly Jim Holland) could come up with a different interpretation.