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Law lets service members put hazard pay into IRA, shields it from taxes
JOURNAL WASHINGTON BUREAU
By Mary M. Shaffrey

President Bush used the Memorial Day holiday to honor Americans serving in war zones by signing into law a bill that allows them to put their salaries into their individual retirement accounts.

The Heroes Earned Retirement Opportunities Act was sponsored by Rep.Virginia Foxx, R-5th. The new law, also known as the HERO Act, takes effect immediately. It changes a previous law that did not allow military personnel earning hazard pay to make contributions to their IRAs.

"It's a tribute to those who are keeping us free. We couldn't do this without them," said Foxx, as she left the Oval Office signing ceremony before heading to Arlington National Cemetery with Bush.

Foxx first got the idea last year when a Clemmons man, Bob Hensley, contacted her. His son, Spec. Michael Hensley, 38, was serving his first tour of duty in Iraq. He wanted to put money in his IRA, but because hazard pay was not considered as taxable income, he was not allowed. Internal Revenue Service code allows only taxable income, such as wages and commissions, to be put into an IRA. The new law makes combat pay eligible for saving in an IRA, but service members will not have to pay taxes on it. Base pay remains taxable.

"If anyone has earned the opportunity to save for their retirement, it's our military heroes who risk their lives daily to protect our freedoms," Foxx said.

Bob Hensley said yesterday that he was surprised and pleased that the bill was signed.

"Usually Congress has to debate these things three or four years before they get something done," Hensley said.

Foxx introduced the bill last year. It passed the House 412-0 on May 9, and passed the Senate by unanimous consent a week later.

The signing ceremony was closed to print press. Foxx said that as the president signed the bill he reflected on his optimism for the future, and his belief that the Oval Office is a shrine to democracy.

"This bill is a wonderful example of how that democracy works because a citizen in this country can call his or her member of Congress and give them an idea and see it come to fruition," Foxx recalled Bush saying.

For Foxx, the signing was especially significant because it was the first major piece of legislation she has sponsored that has become law. According to her office, it was also the first bill sponsored by a freshman that has become law.

"I am very humbled," said Foxx, who was visibly in awe of the day's events.

The irony of the bill being signed on Memorial Day was not lost on Bob Hensley, who said that his son is expected to have a second tour of duty in Iraq later this year.

"It shows we are grateful to those who may have to give their lives for this country," he said.

Photo Caption: President Bush signs the Heroes Earned Retirement Opportunities (H.E.R.O.) Act on Monday in the White House. From left are, Sen. John Warner, R-Va., Senate Majority Leader Bill Frist of Tenn., and Rep. Virginia Foxx, R-N.C.

• Mary M. Shaffrey can be reached in Washington at 202-662-7672 or at mshaffrey@wsjournal.com