The Wisconsin Senate passed the IRA Reform Bill, Senate Bill 439, today by a vote of 33 to 0. The bill, which I authored, is a comprehensive reform package that will make state law consistent with the federal tax code, encourage people to invest in their retirement, and help members of the military.
Here’s how the bill works:
The IRA Reform Bill Removes Penalties
Current Wisconsin law does not allow for all individuals to convert from a traditional IRA to a Roth IRA without a stiff penalty. That’s why I decided to introduce the IRA Reform Bill to allow all individuals, regardless of their income level, to convert to a Roth IRA penalty free. I have heard from constituents, CPAs and financial planners who overwhelmingly support removing stumbling blocks to planning for retirement. This provision was enacted on the federal level in 2005 for tax years starting in 2010, and it is time for Wisconsin to do the same.
The IRA Reform Bill Allows You to Save More
The IRA Reform Bill will also make Wisconsin retirement contribution limits match federal law, ensuring Wisconsin residents can continue to contribute the maximum amount to retirement accounts. Keeping Wisconsin’s tax treatment of retirement accounts current with federal law will encourage Wisconsin workers to save for retirement. Encouraging people to invest in their future makes good financial sense not only for retirees, but the entire state.
The IRA Reform Bill Helps Members of the Military
The IRA Reform Bill also adopts federal changes made in the Heroes Earning Assistance and Relief Tax (HEART) Act of 2008. These changes would exempt Guard members and U.S. military reserves from certain IRA penalties, including withdrawal penalties, if they are called to active duty for more than 179 days. It also allows military death benefits to be added to a Roth IRA notwithstanding the annual contribution limits, allows reservists called to active duty to withdraw funds from their health flexible spending accounts without incurring penalties, and excludes from gross income any state or local bonus payment made to military families if their payment is related to their service in a combat zone.
The Future of IRA Reform
The IRA Reform Bill is now headed to the Assembly for concurrence. The bill is supported by the Wisconsin Institute of CPAs, the National Association of Insurance and Financial Advisors, the Wisconsin Bankers Association, and the State Bar of Wisconsin.