September 25, 2009

In late 2008, President Bush signed into law the Worker, Retiree, and Employer Recovery Act of 2008. The Act makes technical corrections to the Pension Protection Act of 2006 (PPA), and includes (among other things) a relief measure waiving the requirement that taxpayers age 70 and ½ and older must take a required minimum distribution in 2009.

The provision applies to IRAs and many (but not all) pension plans. Individuals withdrawing under the five-year method may also take advantage of the provision (i.e., the distribution can be waived for 2009 which effectively allows the distributions to be taken over six years rather than five). Also, for withdrawals made in 2009 (that are not an RMD for 2008), the withdrawn amounts can be rolled over into other eligible retirement plans with any untaxed portion of the withdrawal that is not rolled-over reported into gross income.

Now, IRS has provided relief for people who have already received a 2009 required minimum distribution IRS says that individuals generally have until the later of Nov. 30, 2009, or 60 days after the date the distribution was received, to rollover the distribution. That means that taxpayers that have already received their 2009 distribution can roll it back into the plan tax-free.

IRS also provided guidance for retirement plan sponsors. In the Notice that IRS issued, they provided two sample plan amendments that plan sponsors may adopt or use to amend their plans to either stop or continue 2009 required minimum distributions. Both sample amendments provide that participants and beneficiaries can choose to receive or not to receive 2009 required minimum distributions. Also, both sample amendments allow the employer to offer direct rollover options of certain 2009 required minimum distributions. Notice 2009-82 (Sept. 24, 2009).