Lost Retirement Savings Can be Rolled into Roth Individual Retirement Accounts

After Delta Air Lines emerged from bankruptcy in May 2007, thousands of employees previously had to forfeit benefits and wages they were due.  As compensation, those employees received lump sum payments for the wages and benefits they had lost.  But because these sums were subject to taxation upon receipt, the advantage of this assistance was mitigated by the additional burden on workers to comply with tax laws as well as the deduction of income.  

    As a response to this problem, Rep. Lewis, a senior member of the Ways and Means Committee, introduced the Lost Retirement Savings Act to preserve the benefits offered to these employees.  The original bill allows lump sum payments to be rolled into a traditional IRA without taxation and into a Roth IRA with tax deferment. The bill which passed the House today, the Pension Protection Technical Correction Act of 2008, includes provisions of the Lewis bill, including the ability of employees to roll lump sum payments into a Roth IRA with tax deferment. 

    “These employees have been through so much,” said Rep. John Lewis. “A lot has been asked of thousands of pilots and other airline employees in Atlanta and around the country.  Today, we are one step closer to providing them some much needed relief.  Times are hard.  They’re getting harder.  People are tapping into their savings just to get by.  We need to protect people’s savings and help them prepare for retirement in any way we can.  The bipartisan support for this effort makes a statement, and I am proud to have led the effort.”

    The Pension Protection Technical Correction Act of 2008 clarifies numerous sections in the Pension Protection Act of 2006 (PPA) to ensure that the statute is implemented and interpreted as Congress intended.  Millions of workers, along with their employers and service providers, will benefit from these improvements to employer-sponsored defined benefit and defined contribution retirement plans.  The legislation now awaits action by the full Senate.

 

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