HB 449 - ROTH IRA EXEMPTION Number 0408 CHAIR JAMES announced the committee would hear HB 449, "An Act relating to certain individual retirement accounts," sponsored by Representative Therriault. Number 0418 JOSEPH BALASH, Legislative Secretary to Representative Gene Therriault, Alaska State Legislature, came before the committee. He read the following statement into the record: "Under the Alaska Exemptions Act, retirement plans are protected from creditor claims. However, it does so by listing each type of retirement plan by reference to the Internal Revenue Code section governing that plan. "The 1997 Taxpayer Relief Act passed by Congress created the Roth IRA under Internal Revenue Code Section 408A. This section will allow taxpayers to make nondeductible contributions to a Roth IRA and then later take all distributions from the account tax-free subject to certain specified conditions. These qualified distributions must be included in gross income, but for 1998 only, the tax will be spread over four years rather than the customary one. "This is a great opportunity to convert all future IRA account earnings into tax-free income and spread the current tax bite over four years. However, those Alaskans who take advantage of this are removing their assets from the list of those protected under state law under the Alaska Exemptions Act. "This option is available only during 1998. Beginning in 1999, contributions from regular IRA accounts that are rolled into Roth IRAs will be fully taxed in the year of the rollover. In order for Alaskans to maintain their protection while taking advantage of this opportunity, legislation must be passed this session." Number 0445 REPRESENTATIVE BERKOWITZ asked if there has been any opposition to the bill. MR. BALASH indicated that he isn't aware of any opposition. Number 0448 REPRESENTATIVE HODGINS made a motion to move HB 449 out of committee with individual recommendations and with the attached zero fiscal notes. CHAIR JAMES indicated there was someone wishing to give testimony. Number 0458 THOMAS YERBICH, Attorney, testified via teleconference from Anchorage, in support of HB 449. He noted he represents debtors in bankruptcy. He stated he has a serious concern that if the bill is not enacted this year, he believes a number of people will not realize that they are giving up an important protection that currently exists under state law. Number 0465 REPRESENTATIVE HODGINS noted the committee was just given a proposed amendment. He then moved to adopt the amendment. CHAIR JAMES said Representative Hodgins can't move the amendment because there is a prior motion to move the bill. She asked Representative Hodgins to withdraw his previous motion. REPRESENTATIVE HODGINS withdrew his motion to move the bill. CHAIR JAMES asked if there is an objection to withdrawing the motion to move the bill from committee. Number 0475 REPRESENTATIVE BERKOWITZ objected for the purpose of discussion. He asked, "Is the effective date so we can come in under the wire with the upcoming tax season?" Number 0476 MR. BALASH responded that may be a possibility. He stated, "It was an oversight, on our part, in trying to get the legislation into the Clerk's office before the deadline for personal legislation. It's something we've intended to have included. As far as how it affects this current deadline, in all reality I don't know that that was our intention, but it may favor those who would be affected by this." REPRESENTATIVE BERKOWITZ withdrew his objection. CHAIR JAMES said there is no objection to removing the motion on the floor which was to move the bill. Number 0485 REPRESENTATIVE HODGINS moved that Amendment A-1, be adopted. Amendment A.1 was written as follows: Page 1, line 1, following "accounts": Insert "; and providing for an effective date" Page 1, following line 9: Insert a new bill section to read: "*Sec. 3. This Act takes effect immediately under AS 01.10.070(c)." CHAIR JAMES asked if there is an objection to the adoption of Amendment 1. There being none, Amendment 1 was adopted. Number 0419 REPRESENTATIVE HODGINS made a motion to move HB 449, as amended, out of committee with individual recommendations and with the attached fiscal notes. There being no objection CSHB 449(STA) moved out of the House State Affairs Standing Committee.