Waiver of a Required Minimum Distribution (RMD) in 2009
Do you know someone who received a required minimum distribution (RMD) in 2009 and they do not need the money?
Here is the situation: In 2009, the Worker, Retiree and Employer Recovery Act of 2008 (WRERA) included a waiver of RMDs in 2009. Rather than take money out of their retirement plan or IRA when their account balances may have declined significantly in the preceding year, participants and IRA owners could let their savings grow. They could avoid realizing a loss by taking money out after their account balance may have declined in value. Additionally, they could avoid having to pay income tax on their distribution.
Unfortunately, many plan sponsors were unsure if the waiver of RMDs was optional or whether retirement plan participants had to be given a choice to waive or receive the distribution. So, many participants went ahead and took the scheduled distribution anyway.
Now that they received the money, what can they do?
The IRS issued Notice 2009-82 pertaining to 401k, 403b or other defined contribution plans as well as an Individual Retirement Account (IRA) extending the deadline which allows plan participants and IRA owners to rollover distributions already received. The deadline for participants and/or beneficiaries is the later of November 30, 2009 or 60 days after the distribution was made.
Subject to certain limitations, plan participants, IRA owners and beneficiaries can rollover distributions received in 2009 and avoid the tax payments on this distribution.
If you know someone in this situation, please tell them we
would be willing to help them evaluate their options regarding the
waiver of a required minimum distribution in 2009.
Return
from Required Minimum Distribution to Client Update
