Washington, D.C. - The U.S. House of Representatives approved legislation today that would temporarily suspend an excise tax which is assessed on seniors who fail to take a required minimum distribution (RMD) from their retirement accounts including IRAs, 401(k)s, and 403(b)s. The bill would waive the penalty on RMD for 2009, thereby allowing seniors to recoup some of the losses they have experienced as the stock market plummeted.
Under the Worker, Retiree and Employer Recovery Act (H.R. 7327), all taxpayers, those who usually take the required minimum distribution amount monthly and those who take a lump sum amount at the end of the year, would have equal treatment. Under current law, individuals who have reached age 70½ must take required an annual required minimum amount from their retirement plan or IRA. Failure to take the distribution would subject the individual to a 50-percent excise tax penalty of the amount that should have been withdrawn.
“This relief will help workers and seniors safeguard their retirement savings during the economic crisis." said Ways and Means Committee Chairman Charles B. Rangel (D-NY). “Every segment of our economy is experiencing financial pain and this bipartisan legislation will go a long way to help employers do the right thing for their workers even in these difficult economic times."
“Americans have seen trillions of dollars evaporate from their retirement accounts over the last few months as a result of our economic crisis," said U.S. Rep. George Miller (D-CA), the chairman of the House Education and Labor Committee. “I’m glad that Congress worked swiftly, and in a bipartisan way, to provide important relief to seniors who may face a steep tax if they do not make a withdrawal from their depleted retirement accounts."
“In the face of daunting economic challenges and an unanticipated strain on our nation’s retirement system, Congress has taken a measured and appropriate step to ease the financial burden on workers, retirees, and employer-sponsored pension plans," said U.S. Rep. Howard P. “Buck" McKeon (R-CA), the Education and Labor Committee’s senior Republican. “While we remain fully and unequivocally committed to the notion that businesses and unions must fully fund their pension obligations to their workers, the small step we’re taking today will provide much-needed relief to participants, plan sponsors, and beneficiaries in the short term, potentially staving off job cuts, benefit reductions, or financial burdens that would be far more harmful to workers and retirees in the long term."
“The minimum distribution rules are especially burdensome in the face of sharp financial market declines; suspending these rules for 2009 will provide some much-needed relief to senior citizens, and I hope the Senate is able to act quickly on this measure," said Rep. Jim McCrery (R-LA), the senior Republican on the Ways and Means Committee.
In addition, the bill would ease funding requirements for employer-sponsored pension plans that would be forced to make significantly increased contributions during these economic difficult times when they are very short on cash. The bill includes temporary funding relief for multi-employer plans that have been negatively impacted in this economic downturn. The bill would also make nominal technical corrections to the Pension Protection Act of 2006.
