Blog

On December 23, 2008, President Bush signed into law the Worker, Retiree, and Employer Recovery Act of 2008 (the "Act"). The Act provides relief to plan participants and pension plan sponsors impacted by the current economic crisis by suspending the requirement to receive minimum distributions for 2009.  It also provides limited relief from the defined benefit plan funding rules enacted by the Pension Protection Act of 2006 for both single-employer defined benefit pension plans and multi-employer plans.

Some of the significant aspects of the relief are as follows:

• No minimum distribution is required for calendar year 2009 from employer-provided qualified retirement plans and IRAs.  The suspension is for one year.  The 2010 minimum distribution is still required.
• The relief applies only to the minimum distributions for 2009.  A participant whose first distribution year is 2008 (i.e., he attains age 70 and 1/2 in 2008) and who would normally receive his first minimum distribution for 2008 by April 1, 2009, must still receive that initial minimum distribution.  A participant whose first distribution year is 2009 (i.e., he attains age 70 and 1/2 in 2009) and who would normally receive his first minimum distribution for 2009 by April 1, 2010, is not required to receive that distribution.  However, no relief is provided for the required minimum distribution for 2010 and that distribution must still be made no later than December 21, 2010...

With an RMD not required to be taken in 2009, what will be the impact of the new law in those states which treat an IRA account as a noncountable resource for Medicaid purposes if monthly RMD distributions are taken?  If the new law is followed, will the IRA account suddenly be recharacterized as a countable resource?  Is the better course of action to continue with the monthly RMD distributions?

To review a comprehensive article published by Pillsbury Winthrop Shaw Pittman LLP on the Worker, Retiree, and Employer Recovery Act of 2008, please click here.