New Law Affects Required Minimum Distributions for 2009

Changes to the Required Minimum Distribution

On December 23, 2008, the President signed the Worker, Retiree, and Employer Recovery Act of 2008 (the Act) into law. Section 201 of the Act waives any required minimum distribution (RMD) for 2009 from retirement plans that hold each participant's benefit in an individual account, such as 401(k) plans and 403(b) plans, and certain 457(b) plans. The Act also waives any RMD's for 2009 from an Individual Retirement Arrangement (IRA).

The Act does not waive any 2008 RMD's, even for individuals who were eligible and chose to delay taking their 2008 RMD until April 1, 2009. These individuals must still take their full 2008 RMD by April 1, 2009, or they might face a 50% excise tax on the amount not withdrawn. The 2009 RMD waiver under the Act does apply to individuals who may be eligible to postpone taking their 2009 RMD until April 1, 2010. However, the Act does not waive any RMD's for 2010. For additional information on rollovers and calculating the taxable portion of your withdrawal or distribution, click on the IRS Publication links on the left.

If a beneficiary is receiving distributions over a 5-year period, he or she can now waive the distribution for 2009, effectively taking distributions over a 6-year rather than a 5-year period.


The bottom line is that you, or your loved ones, have a few options when taking your RMD's for 2009:

1. Take your RMD, and pay taxes on the distribution.
2. Send your RMD to a charity of your choice, and not pay taxes on your distribution.
3. Not take your RMD.

If you would like to take advantage of this new law, please contact us ASAP. We can help guide you through the new law and the tax consequences for you and your family.

Have a great day!

Robert J. Moritz, CFS
Vice-President
Circle Financial Planning, Inc Center of Money Concepts