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Saturday, January 09, 2010


IRA participants and defined contribution plan participants over age 70 1/2 have annual required minimum distribution requirements (RMDs) that require a minimum distribution each year. In 2009, economic relief legislation allowed taxpayers to skip the 2009 distribution.

This was only a one year exception, so participants must restart their RMDs in 2010. Some taxpayers are wondering whether the 2009 legislation affects their 2010 obligations.

Generally, the answer is no  - other than the incidental effect that there are more assets in such IRAs if the 2009 distribution was skipped than there would have been if distributions were made, which will result in slightly higher distributions by reason of the larger size of the IRA. However, there are a few rules that are still affected.

A. Where the participant died before his required beginning date, beneficiaries subject to the five year distribution rule must distribute out the entire account no later than December 31 of the calendar year containing the fifth anniversary of the owner's death. Such beneficiaries who waived the 2009 distribution have an extra year to complete the distributions.

B. A retirement account may allow the owner or beneficiary to choose between a 5-year or lifetime payout, and may specify one or the other payout method if the choice isn't timely made. The deadline for making the 5-year or lifetime payout election is extended to Dec. 31, 2010, if the deadline would have occurred in 2009.


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