Can my clients waive their required minimum distributions for tax-year 2009?
New legislation now allows individuals who are subject to required minimum distribution (RMD) rules to waive RMDs from their retirement plan or Individual Retirement Accounts (IRAs) for 2009 without incurring an IRS penalty.
The law is intended to provide relief to people concerned about the potential impact of ongoing financial market volatility on their retirement accounts. The relief treats equally individuals who usually take the required distribution amount monthly and those who take a lump sum amount at the end of the year.
If clients expect to receive a required minimum distribution for 2009 that they would like to suspend, they will need to contact Symetra at 1-800-796-3872 to request a voluntary suspension.
Are suspensions available for beneficiaries, or are they limited to the original contract owner?
Contract holders or their beneficiaries who are required to receive a required minimum distribution for 2009 may voluntarily request that the distribution be suspended.
What if clients receive a minimum distribution for 2009 that they did not want to receive?
Individuals may return any minimum distributions received for 2009, provided they do so within 60 days of when the distribution was received.
If clients suspend their RMD, will they still be allowed to make withdrawals?
Yes. Suspending the RMD does not block access to their funds or preclude clients from making withdrawals which are ordinarily allowed in their retirement account.
What should clients do if they do NOT want to suspend distributions?
They do not need to take any action. Clients who receive minimum distributions will continue to receive them unless they notify Symetra that they would like the payment to be suspended.
If clients suspend minimum distributions for 2009, will they face any additional taxation or penalty when they take the distribution for subsequent years?
No. The Act includes a temporary waiver of the IRC section 401(a)(9)’s required minimum distribution rules for 2009. It is not considered a deferral.
Can clients wait until the end of tax-year 2009 to decide whether to suspend an RMD?
It depends on when their minimum distribution normally is sent. The law gives individuals 60 days from the date they receive a minimum distribution to return the check, re-contribute the distribution, or roll it over to a qualified retirement account without penalty.
Will the 2010 RMDs be calculated differently if clients suspend their 2009 RMD?
No. The 2010 RMDs will be calculated using the balance as of December 31, 2009.
Can clients who turned age 70½ in 2008 and deferred their RMD until April 1, 2009, suspend the 2008 RMD for the rest of 2009?
No. Clients who turned age 70½ during 2008 have until April 1, 2009 to take their 2008 RMD. This new law does not affect or change that requirement. They must still satisfy their RMD requirement for 2008.
