2009 Moratorium On Distributions From Retirement Accounts

Congress approved legislation that includes a one-year suspension of the required minimum distributions for 2009 for taxpayers who are 70 1/2 and older!

Requirements for 2008 remain unchanged.

While there has been some speculation about regulatory relief for 2008, Congressional tax staff feel that the 2009 RMD waiver provides fair and adequate taxpayer relief. Clearly Congress is attempting to help by not forcing withdrawals from accounts that have declined in these markets. As long as you are over 70 1/2 the new rules apply regardless of how your money is invested (stocks, bonds, CD’s etc.). The bottom line: If you do not need the money there is no forced withdrawal (RMD) in 2009. If you need the income you can still make withdrawals. This relief is for only one year – 2009.

Explanation of RMD Provision by Joint Committee on Taxation
Under the provision, no minimum distribution is required for calendar year 2009 from individual retirement plans and employer-provided qualified retirement plans that are defined contribution plans like a 401k (within the meaning of section 414(i)). Thus any annual minimum distribution for 2009 from these plans is not required to be made. The next required minimum distribution would be for calendar year 2010.

In the case of an individual whose required beginning date is April 1, 2010 (e.g., the individual attained age 70 1/2 in 2009), the first year for which a minimum distribution is required under current law is 2009. Under the provision, no distribution is required for 2009 and, thus, no distribution will be required to be made by April 1, 2010.

Effective Date
The provision is effective for calendar years beginning after December 31, 2008. However, the provision does not apply to any required minimum distribution for 2008 that is permitted to be made in 2009 by reason of an individual’s required beginning date being April 1, 2009. IRA rules are among the most complex laws on the books and there are several other rules that are part of this legislation that I have intentionally left out due to their narrow application. I am more that happy to discuss these temporary changes and how they affect your personal situation so do not hesitate to call.