Congress has passed and sent to the President for signature H.R. 7327, the Worker, Retiree and Employer Recovery Act of 2008, a bill that places a one year moratorium on required minimum distributions from Individual Retirement Accounts and defined contribution plans for 2009. Although the intent of the legislation is to give retirees an opportunity to recoup financial losses suffered in the last year, it may adversely affect some charitable IRA rollovers.
Editor's Note: Our initial reporting stated participants would be able to recontribute MRDs made in 2008 back into their plans. This was based on a press release from Senator Olympia J. Snowe's office (R-Maine) that PGDC Editors misconstrued as applying to the current bill.
Full Text:
Congress has passed and sent to the President for signature H.R. 7327, the Worker, Retiree and Employer Recovery Act of 2008, a bill that places a one year moratorium on required minimum distributions from individual retirement accounts and defined contribution plans for 2009.
Although the intent of the legislation is to give retirees an opportunity to recoup financial losses suffered in the last year, it may adversely affect charitable IRA rollovers.
Under the Pension Protection Act of 2006, individuals age 70½ or older are permitted transfers up to $100,000 per year directly from their Individual Retirement Accounts to charity without having to report such amounts as income. The Emergency Economic Stabilization Act of 2008 extended these provisions through the end of 2009.
In addition, individuals who reach age 70½ and are required to make minimum required distributions can direct the entire amount (subject to a $100,000 limit) to charity in satisfaction of their minimum required distribution.
Since some donors elect to contribute only their MRDs to charity in lieu of adding them on top of their other taxable income, the new legislation will eliminate this important incentive through the end of 2009 at which time the current charitable IRA rollover itself will also expire. Others who give from their IRAs regardless of the new MRD rule will be unaffected.
Comments
Not for 2008
A thought and a question
Are the dollars required to be withdrawn in 2008 subject to federal income tax for 2008?
Not the law yet
return of 2008 minimum required distributions
Recontribution of 2008 withdrawals
Interesting site content
Recontributions of 2008 Amounts
Senator Snowe not referring to 7327
Furthermore, Senator Snowe cited legislation she introduced on Monday that will go further to help retirees by delaying the mandatory withdrawal of savings through 2010. Such a suspension will potentially give retirement accounts, such as IRAs and 401(k)s, an opportunity to recoup financial losses suffered in the last year. Furthermore, the legislation would allow retirees to recontribute to their retirement accounts the amount they were required to withdraw in 2008.
Relief for 2008 or 2009?
Recontribution of 2008 RMD?
2008 RMDs
HR 7327 only applicable for next year's RMD (2009)
"Pension Act waives required minimum distributions for calendar year 2009
The stock market's decline has been cruel to all investors, but doubly so for the millions of people who are required to receive required minimum distributions (RMDs) from qualified retirement plans and IRAs that are invested heavily in stocks or mutual funds. Because of the way in which RMDs are calculated (i.e., based on the previous year's closing value), the law has forced these individuals to receive a disproportionately large portion of their remaining account balance. And they have been forced to sell stock or mutual fund shares at exceptionally depressed values. This double hit affects not only retirees but also beneficiaries of qualified plan accounts and IRAs who must take minimum distributions from the accounts they inherited. The Pension Act (H.R. 7327, the “Worker, Retiree and Employer Recovery Act,” passed by Congress and ready for the President's expected signature) helps out, but for next year only. More specifically, for calendar year 2009 only, plan account participants and IRA owners don't have to make otherwise required lifetime RMDs, Likewise, their beneficiaries also don't have to make minimum distributions.
RIA observation: Unfortunately, the Pension Act doesn't help taxpayers with 2008 RMDs. Additionally, it doesn't change the way in which an RMD is calculated, namely based on the retirement account's previous year's closing value. "
Wish that Congress would waive for this year because they didn't think through this very well--this is the year that the waiver should occur, but alas, Congress didn't write the legislation to include 2008 which requires the RMD based on the 2007 values when the values were higher!
Claudia
RMD 2008 - 2009
Question - if the 2008 distribution is not made in 2008, is that amount deferred by the new legislation, along with the 2009 RMD? Or, must the 2008 RMD be taken by 4-1-09 without regard to the new legislation?
RMD Holiday
RMD Holiday and Rule 72T