In the most sweeping change to pension
law since the Employee Retirement Income Security Act of
1974, Congress passed and President George W. Bush signed the Pension
Protection Act of 2006 in August. Key provisions include the following:
Increased funding requirements for single- and
multi-employer defined benefit plans. The rules go into effect
January 1, 2008, and plans must be 100% funded within seven years.
However, employers who sponsor “at risk” plans must make accelerated
contributions; commercial airlines have 10 years to meet the requirements.
Stronger support for hybrid “cash balance” plans.
The law provides companies with protection against age
discrimination lawsuits when they convert from straight defined
benefit plans to hybrids that combine elements of defined benefit and
defined contribution plans.
Incentives to save for retirement. Employers now
can automatically enroll employees in 401(k) plans, although the
employees retain the right to opt out. Taxpayers can have the IRS
direct-deposit their refunds into an IRA. Temporary incentives created
under the Economic Growth and Tax Relief Reconciliation Act of 2001
are now permanent.
Tighter rules for charitable donations. For a
taxpayer to claim a deduction, items such as used clothing and
household goods donated to charity must be in “good condition.” For
cash, checks or other monetary gifts, the donor must produce a bank
record or receipt showing the charity name and the amount and date of
the contribution.
A summary of the key provisions of the act can be found on the AICPA Employee Benefit Plan Audit Quality Center Web site at www.aicpa.org/EBPAQC .
President Bush also signed legislation
exempting the income of nonresident retired firm partners
from state taxation. The law, which the AICPA supported, is
retroactive to 1996, when earlier legislation granted exempt status to
nonresident retired firm employees. “The new law promotes equity by
ensuring that states’ tax rules are uniform for both firms’ retired
employees and partners,” said AICPA Vice-President of Taxation Thomas
P. Ochsenschlager.
The International Accounting Education Standards
Board, an independent body within the International
Federation of Accountants (IFAC), issued an exposure draft of
International Education Practice Statement 2.1, Information
Technology for Professional Accountants (
www.ifac.org/Guidance/EXD-Details.php?EDID=0056 ). Intended to
help IFAC member bodies prepare accountants to use information
technology effectively, the guidance describes the knowledge and
skills they need. Comments on the proposal are due November 15, 2006.
The Governmental Accounting Standards Board
proposed a Concepts Statement, Elements of Financial
Statements, that would define the seven elements of historically based
financial statements of state and local governments (
www.gasb.org/exp/ed_elements_financial_statements.pdf ). For
statements of financial position, these elements include assets,
liabilities, deferred outflows of resources, deferred inflows of
resources and net assets; for resource flows statements, they include
outflows of resources and inflows of resources. Comments are due
November 17, 2006.
The AICPA submitted comments to the
Public Company Accounting Oversight Board (PCAOB) on its Proposed
Rules on Periodic Reporting by Registered Public Accounting Firms
(
www.pcaobus.org/rules/ ) and Proposed Rules on Succeeding to
the Registration Status of a Predecessor Firm (
www.pcaobus.org/rules/ ). The AICPA generally agreed with the
proposals; it recognized the PCAOB’s need for annual updates of firms’
registration statements to help plan firm inspections and supported
the proposal that firms should promptly notify the board of
significant, nonroutine events affecting them. But the AICPA said
certain rules would impose a greater compliance burden on firms than
the board may have intended, and it requested more flexibility in some
reporting requirements. For more information on the PCAOB proposals
and related resources, visit the AICPA Center for Public Company Audit
Firms at www.aicpa.org/CPCAF .
An AICPA Tax Section task force submitted
comments to the Treasury Department on its 2005–2006 Priority
Guidance Plan, which proposed the issuance of guidance on
whether negative additional section 263A costs are taken into
account under regulations section 1.263A-1(d)(4). In its comments, the
task force said that the regulation already authorizes such
costs, and that if the government does not agree, current regulations
should be changed to explicitly allow these costs (
http://tax.aicpa.org/resources/tax+accounting/ ). The task force
also said recently issued Technical Advice Memorandum 200607021 (
www.irs.gov/pub/irs-wd/0607021.pdf ) creates significant
administrative burdens by requiring taxpayers to maintain separate
inventory allocation methodologies for financial accounting for
section 471 costs and section 263A costs.
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Catherine Allen, Kenneth D. Askelson, James Bean, John C. Boma, Steven J. Brown, Jolene C. Brucks, Thomas F. Burrage, Linda Burt, J. Gregory Bushong, R. Patrick Cargill, Benson J. Chapman, Rosemarie T. Dunn, Thomas Emmerling, Elizabeth Fender, Robert J. Freeman, Kim Gibson, Alan Glazer, Randi K. Grant, Patrick T. Hanratty, DeAnn Hill, James E. Hunton, Sandra Johnigan, Susan S. Jones, G. William Kennedy, Frank J. Kopczynski, Jeffrey B. Kraut, Dennis B. Kremer, Alan Levin, John Lewison, Joseph P. Liotta, Mano Mahadeva, Jane M. Mancino, Benjamin F. Mathews, David McIntee, Anita Meola, Debra Mitchell, Roger H. Molvar, Brenda Morris, Craig Murray, Glenn Newman, Lyne P. Noella, Edward T. Odmark, Mary P. Ricciardello, Mark L. Richardson, Marshall B. Romney, Steven E. Sacks, Peggy Scott, Carolyn Sechler, Gary Shamis, Ivan J. Sotomayor, Alan Steiger, Paul C. Sullivan, Barry S. Sziklay, Gary R. Trugman, Robert Willens, Mark A. Yahoudy, Alan S. Zipp | ||
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