Treasury Refuses Required Minimum Distribution Relief for 2008

In a letter dated December 19,  2008, a group of representatives led by Spencer Baucus (R-Alabama) sent a letter to the President demanding that he order the Treasury Department to provide relief from required minimum distribution (“RMD”) requirements under Section 401(a)(9) of the Tax Code for the 2008 calendar year.  The theory underlying the request is that individuals should not be forced to take a distribution from their retirement accounts when the value of that account has plummeted.  However, Treasury believes lifting the RMD requirements for 2008 would cause uneccessary confusion and complications, and has therefore refused to soften the rules pertaining to RMDs for 2008.

The recently passed Worker, Retiree and Employer Recovery Act of 2008 contains a provision that waives the RMD requirements for certain qualified, 403(b) or 457 plans for the 2009 calendar year, but specifically does not waive the requirements for 2008. Treasury has simply reiterated that provision. In other words, individuals who reach age 70 1/2 during 2009 will not be required to take distributions from their retirement accounts, but individuals who do so in 2008 are still subject to the requirement.

Bush Signs Pension Bill

Companies sponsoring underfunded pension plans got an early Christmas present today as the President signed H.R. 7327, the Worker, Retiree, and Employer Recovery Act of 2008 (“Act”), which delays required minimum distributions from certain retirement accounts for one year, makes changes to funding requirements for certain pension plans, and makes other miscellaneous changes to tax and pension laws. We reported earlier that the administration was initially opposed to such legislation, but it has apparently realized the necessity of such an extension for many, if not most, defined benefit sponsors.