Congress Waives Required Mininimum Distributions for 2009

Retired individuals won't need to take a required minimum distribution from their IRA, 401(k), 403(b), or 457 plans for the year 2009. This waiver is part of the Worker, Retiree, and Employer Recovery Act of 2008 (H.R. 7327).

Minimum distributions are required starting when the accountholder turns age 70 and a half, and the IRS imposes a 50% excise tax for not taking at least the minimum amount. Minimum distributions are calculated based on life expectancy tables published by the IRS.

This tax law change will have the effect of helping retirees preserve their capital in the face of the market downturn, "so that people do not have to pull money out at a time when many investments have lost value," (Pensions Get a Reprieve in Congress, New York Times). The change applies only to the 2009 year. Required minimum distributions for 2008 remains unchanged.

More information:

• Congress Passes Emergency Pension Tax Relief/Technical Corrections (CCH Tax Briefing, pdf, 5 pages)
• FAQs about Required Minimum Distributions (IRS.gov)