For Boomers that have reached the IRS magic age of 70 1/2, there is good news for their required minimum distributions. 2009 required minimum distributions from retirement plans are eligible for rollover. There is good news for retirees and beneficiaries of certain employer sponsored retirement plans and IRAs. Changes to the worker retiree and employer recovery act of 2008, effective from the 2009 required minimum distribution qualifying individuals, they suspend their 2009 RMDs or choose to roll them over an IRA or other eligible retirement plans.
Who is effected?
Defined contribution (401(k) plan) participants require to take a minimum distribution for 2009 403(b) and governmental 457 plan required to take required distribution for ’09. Owners of traditional employee pension and SIMPLE IRAs who turn 70.5 or older in 2009. Beneficiaries of defined contribution 403(b) and governmental 457 plan participants and IRA owners.
What do you need to know?
Any 2009 lifetime distribution that is determined by dividing an account balance by distribution period may be suspended including RMDs to a retirement plan participants and IRA owners and after death distributions for beneficiaries. The amount that would have been the 2009 RMD is eligible for rollover to an IRA or other eligible plans. Employers may but are not required to offer a direct rollover option for the 2009 RMD from the plan. If taken, a retiree must complete a rollover of a 2009 RMD within 60 days of receipt of the amount in order to avoid taxation. If the amount would’ve been a 2009 RMD as distributed from the employer’s plan the usual 20% mandatory federal withholding does not apply.
Please note, IRA owners and plan participants who turn 70.5 in 2008 but elected to delay taking their 2008 RMD until April 1st, 2009 cannot suspend nor roll over their 2008 RMD. Suspension rollover option applies only to RMDs for 2009.