• The Worker, Retiree and Employer Recovery Act of 2008 Gives Relief from Required Minimum Distributions
  • March 20, 2009 | Author: Debbie Reiss Hardesty
  • Law Firm: Frost Brown Todd LLC - Office
  • Required Minimum Distributions from Defined Contribution Plans Waived for 2009. The Worker, Retiree and Employer Recovery Act of 2008 (the "Recovery Act") was signed into law by President Bush on December 23, 2008. The Recovery Act makes technical corrections to the Pension Protection Act of 2006, but it also provides some relief from required minimum distribution rules for 2009. Under the required minimum distribution ("RMD") rules, participants in defined contribution qualified plans and individual retirement accounts and annuities ("IRAs") are generally required to begin taking distributions of their accounts no later than April 1st of the year after they reach age 70 ½. For 2009, required minimum distributions are not required from qualified retirement plans including 401(k) plans, 403(b) plans, 457(b) plans that are maintained by a state or a political subdivision, agency or instrumentality of a state, and IRAs. The waiver of 2009 RMDs is meant to help employees avoid the potentially harsh consequences involved in forcing a sale of assets that have lost a large amount of value in the current economic downturn in order to make a RMD.

    Plan Amendment Required. A plan amendment to reflect the 2009 RMD waiver will be required, but a plan or IRA does not have to be amended until the 2011 plan year to reflect the 2009 RMD relief set out in the Recovery Act. However, if an employer wants to allow a distribution in 2009 that would have been a RMD except for the waiver, and if the distribution is in a form not otherwise permitted under the plan’s terms, an amendment may be required by the end of 2009 to allow for such a partial distribution or installment distribution.

    Relief for 2009 Only. The Recovery Act does not grant any relief from RMDs which were required in 2008. Individuals who reached the age of 70 ½ in 2008, and who have until April 2009 to take their first RMD, will still have to take their 2008 RMD before April 1, 2009. Under current legislation, plans and IRAs will be required to comply with the RMD rules again in 2010.