In December, both houses of Congress unanimously passed the Worker, Retiree, and Employer Recovery Act (H.R. 7327). Then, the bill went to the President for his signature, and it is anticipated that the President will sign the bill. The intent of the new law is to allow individuals time to recoup financial losses in their retirement accounts.

One of the provisions of this Act is that for 2009, the required minimum distribution (RMD) requirements do not apply to any qualified defined contribution plan under 401(a), any defined contribution qualified annuity plan under code sections 403(a) or 403(b), any eligible defined contribution plan of a government employer under code section 457(b), any traditional or Roth IRA under code sections 408 or 408A. As a result, plan participants will not be required by law to take minimum distributions for the year 2009. If a participant has not begun taking his minimum distributions, and he or she passes away, and the remaining balance has to be distributed within five years, 2009 will be excluded from the five-year period.

The rules for determining the required beginning date for purposes of establishing when an individual must begin taking minimum distributions in the years after 2009 are determined without regard to the 2009 suspension.

Example: Sam reaches the age of 70½ or retires (if retirement is the pertinent date for his required beginning date in 2009). He would have had to take his first required minimum distribution by April 1, 2010. Under the new legislation, he is not required to take a distribution until December 31, 2010. This first distribution is the 2010 required minimum distribution.

Example: Ann is 74. She would have had to take $15,000 from her 401(k) in 2009 as a required minimum distribution had this new legislation not been passed. She would like to roll over $20,000 from her 401(k) to a traditional IRA in 2009. This is the only distribution she will take in 2009. She may not roll over the first $15,000. She may, however, roll over $5,000 of the $20,000 distribution to her IRA.

If you are subject to the required minimum distribution rules, and you have funds in IRAs and other retirement plans, such as 401(k)s or 403(b)s, 2009 may be a good year to consider a Roth IRA conversion, as your taxable income may be lower than normal because of the suspension of the required minimum distribution (RMD) requirements.

Please consult with your financial advisor at Wealth Enhancement Group to discuss your specific situation and any questions or concerns you may have.