Congress Revises Required Minimum Distribution (RMD) Rules for 2009

Because of the economic crisis, Congress has passed what it evidently thinks is temporary retirement plan relief in through H.R. 7327, the "Worker, Retiree, and Employer Recovery Act of 2008."

This new law allows an account holder not to take what would otherwise be a Required Minimum Distribution (called "RMDs") in 2009. The technical explanation of the Act can be found here. Generally, account holders must take RMDs from a traditional IRA commencing at the age of 70 1/2.

The logic, I imagine, is to prevent the forced liquidation of assets at low stock market prices to meet the RMD requirements. But on the other hand, only Congress would consider the option of taking in less money "relief."

Setting aside my cynical self, the "technical explanation" does offer a good explanation of the RMD requirements and the regulations. Here is some of the explanation of the Act:

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 (within the meaning of section 414(i)). Thus any annual minimum distribution for 2009 from these plans required under current law, otherwise determined by dividing the account balance by a distribution period, is not required to be made. The next required minimum distribution would be for calendar year 2010. This relief applies to life-time distributions to employees and IRA owners and after-death distributions to beneficiaries.

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. However, the provision does not change the individual’s required beginning date for purposes of determining the required minimum distribution for calendar years after 2009. Thus, for an individual whose required beginning date is April 1, 2010, the required minimum distribution for 2010 will be required to be made no later than the last day of calendar year 2010. If the individual dies on or after April 1, 2010, the required minimum distribution for the individual’s beneficiary will be determined using the rule for death on or after the individual’s required beginning date.