President Bush signs the Worker, Retiree and Employer Recovery Act of 2008. (H.R. 7327)
The relief from the minimum distribution requirements, as outlined in the article below, is welcome news to older folks who don’t need to take the minimum distribution in order to get by. This new requirement is especially timely for those participants who would like the chance to let their retirement plans recover somewhat from the recent market decline before they make further withdrawals.
LeClair L. Flaherty, Esq.
Direct Dial: (248) 893-1402
lflaherty@wrightpenning.com
The original source of this information is from http://www.omf.org/omf/us:
Pension Bill Waives 2009 IRA RMDs
On December 23, 2008, President Bush signed the Worker, Retiree and Employer Recovery Act of 2008. (H.R. 7327). This bill includes a key provision that will waive IRA, 401(k), 403(b) and some other types of required minimum distributions (RMDs) for 2009.
Under the IRS rules, individuals over age 70½ are required to take required distributions each year from their IRAs. For most IRA owners, the distributions are paid out under the following Uniform Table. Payouts equal the balance the previous December 31 multiplied by a factor based upon age. More senior persons must take a larger withdrawal.
Age IRA Approximate Payout
71 3.8%
75 4.4%
80 5.3%
85 6.8%
90 8.8%
95 11.6%
Because the value on December 31 of 2007 was used for RMDs in 2008 and the stock markets declined in late 2008, a number of IRA owners had to take larger distributions than would be expected in normal years. In order to enable individuals to rebuild their IRAs and other qualified plans, Congress has created an “RMD holiday” for 2009. During 2009, individuals may choose to not withdraw any amount even if they are over age 70½. Of course, IRA owners over age 59½ may still voluntarily withdraw without penalty and pay income tax on amounts from an IRA.
Several members of Congress also asked the IRS to make changes for year 2008. Because many individuals had already taken withdrawals in 2008, the IRS declined to make any changes for year 2008. The “RMD holiday” applies only to year 2009.
GiftLaw Weekly Editor’s Note: This provision will be helpful to many persons who are attempting to rebuild their IRA. Hopefully, the markets will also recover in 2009 and IRAs will begin to grow again. While the requirement to take a distribution in 2009 does not exist, it still will be possible for charitably-minded persons to make direct transfers from IRAs to qualified charities in 2009.