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May 27, 2005 at 08:00 PM
The Internal Revenue Service wants to update the rules that govern efforts by activated members of the Guard and Reserve to contribute to their civilian employers’ 401(k) plans.[@@]
The IRS has included the proposed changes in a package of updates to Section 415 of the Internal Revenue Code. The section deals with limits on contributions to and benefits from retirement plans that qualify for special tax breaks.
One section, for example, would make it clear that ordinary defined contribution plan contribution limits apply to retirement medical accounts as well as to other types of individual retirement plan accounts.
Other sections address issues such as the application of the defined benefit limit when an employee receives multiple benefit streams beginning at different ages and the treatment of compensation paid after an individual leaves a job.
But the IRS and its parent, the U.S. Treasury Department, are emphasizing a section that would give members of the Guard and Reserve the ability to continue to contribute to their employers’ retirement plans while on active duty.
“We believe it is important that members of the National Guard and Reserve not lose the opportunity to save for retirement while they are serving their country,” says Eric Solomon, Treasury’s acting deputy assistant for tax policy.
