A new law, the Heroes Earned Retirement Opportunities (H.E.R.O.) Act, permits military personnel earning hazard pay to make contributions to an individual retirement account (IRA). The legislation was signed by President Bush on Memorial Day.
Under the Internal Revenue Code of 1986, the combat "hazard pay" received by members of the Armed Forces is not considered taxable income. While this is beneficial to military personnel, the provision also penalizes them when it comes to the level of contributions they can make to their IRAs, according to Rep. Virginia Foxx (R-NC), who introduced the bill.
The H.E.R.O. Act amends the tax code "to allow members of the armed forces serving in a combat zone to make contributions to their individual retirement plans even if the compensation on which such contribution is based is excluded from gross income ?"