IRS Guidance on Required Minimum Distributions for 2009
In late 2008, Congress passed the Worker, Retiree and Employer Recovery Act ("WRERA"). It included a waiver of required minimum distributions (RMDs) for retirement plans for calendar year 2009. In some situations, RMDs were made anyway, either because plan administrator were not prepared to make changes or they were concerned about sticking closely to plan language. Fortunately, the IRS has issued come guidance on how to handle the situation. Notice 2009-82 provides relief for people who have already received a 2009 RMD this year. Individuals now generally have until the later of Nov. 30, 2009, or 60 days after the date the distribution was received, to roll over the distribution.
Remember, generally, a required minimum distribution is the smallest annual amount that must be withdrawn from an IRA or an employer’s plan beginning with the year the account owner reaches age 70½. The 2008 law waives required minimum distributions for 2009 for IRAs and defined contribution plans (such as 401(k)s) and allows certain amounts distributed as 2009 RMDs to be rolled over into an IRA or another retirement plan.
The notice also provides guidance for retirement plan sponsors. It contains two sample plan amendments that plan sponsors may adopt or use to amend their plans to either stop or continue 2009 required minimum distributions. Both sample amendments provide that participants and beneficiaries can choose to receive or not to receive 2009 required minimum distributions. Also, both sample amendments allow the employer to offer direct rollover options of certain 2009 required minimum distributions. Plan sponsors may need to tailor the sample amendment to their plan’s particular terms and administration procedures and must adopt the amendment no later than the last day of the first plan year beginning on or after Jan. 1, 2011 (Jan. 1, 2012 for governmental plans).
Notwithstanding the amendment, employers must decide what to do about RMDs before November 30, 2009. Employers must decide whether to (1) suspend all RMDs for 2009 unless the participant affirmatively requests the distributions, (2) distribute all RMDs unless the participant affirmatively requests a waiver, or (3) continue RMDs for 2009 in accordance with the existing plan provisions without any participant choice. Plan must be operated in accordance with the administrative procedures after November 30, 2009
So the action plan would be as follows:
- Decide your administrative option
- Select the Appropriate Amendment (if you are making a change)
- Notify the Participants
Note that there is no inidication that RMD waivers will be permitted for 2010.
If you have questions about RMDs and your retirement plan, please contact a Fox Rothschild attorney for assistance.
