Important Information for Those Over 70 ½ Years of Age Who Are Eligible to Take Required Minimum Distributions (RMDs) From Their IRA and/or Qualified Retirement Plan
The Worker Retiree and Employer Recovery Act (WRERA) signed into law by former President Bush on December 23, 2008 contains, among other stipulations, a provision for the suspension of Required Minimum Distributions (RMDs) for tax year 2009.
Some important provisions of this Act are:
•· RMDs are suspended for IRA owners and qualified retirement plan participants (401(k), 403(b), 457 plans, etc.)
•· RMDs are suspended for IRA and qualified retirement plan beneficiaries including Roth IRA beneficiaries.
•· The law change does not change your required beginning date. For example, if you turn 70-1/2 in 2009, your required beginning date is April 1, 2010, even though you are not required to take your first year RMD because of the law change.
•· This law change has no effect on 2008 RMDs. If 2008 is your first RMD year, you still must take your 2008 RMD by April 1, 2009.
•· This law has no effect on Qualified Charitable Distributions (QCDs) for 2009.
•· If you need your RMD or any part of it, you may take it without penalty. Of course, it will be added to your taxable income in the year of the distribution.
I strongly suggest if you are subject to RMDs for 2009 and wish to suspend your withdrawal or ensure you receive it that you proactively contact your IRA custodian or 401(k) plan administrator to inquire as to what action, if any, you must take.
Although this new law may sound somewhat straightforward, any change in the tax law, especially when it deals with retirement plan distributions, is complicated and filled with potential tax traps. As such, I am available to you, a family member, a friend, or coworker to offer guidance to avoid a financial mistake. Kindly contact me if I may be of assistance.
Very truly yours,
Leo K. Casper, CPA/PFS