Congress yesterday passed a law (and President Bush is expected to soon sign the law) which will give relief for Required Minimum Distributions (RMDs) in 2009. As Joe Kristan noted, this isn’t much relief.
RMDs are required for tax deferred retirement accounts such as 401(k)s and traditional IRAs. Once a participant turns age 70½ they are required to take an RMD from their retirement account. A participant can take more than the RMD, but must make a withdrawal of at least the RMD. Once an RMD is required it must be taken annually.
The problem is that during 2008 most individuals’ retirement accounts fell in value. However, the RMD is based on the amount in the account as of December 31st of the prior year. Thus, the RMDs for 2008 are based on account values that may no longer represent what’s really in the account.
Relief in 2009 doesn’t really help matters because the problem is in 2008. While the Department of the Treasury could issue a regulation allowing relief for this year it doesn’t appear that’s going to happen.