RMD Alert - Temporary Relief for 2009

On December 11, 2008, the House and Senate passed the Worker,
Retiree, and Employer Recovery Act. As of the writing of this,
President Bush had not yet signed the Act, but is expected to. The
Act states that no RMD is required for 2008. As you are aware, the
current global economic conditions have caused sharp declines in
many contract values. This Act is designed to provide relief to contract
owners who would otherwise be forced to take a distribution in
2009. The goal is to not force contract owners to take a distribution
when their contract is at a low point and instead allow those finds to
stay invested in the contract and participate in any economic recovery.

The RMD Rules, Briefly Stated:
• Individuals are required to take at least a minimum annual distribution
from their account after they reach their required beginning
date, which is April 1 after they reach 70 1/2.
• For beneficiaries of deceased individuals not already receiving
RMDs, the required beginning date is either following the 5th
anniversary of death (for a complete distribution) or following
the 1st anniversary of death (for a periodic distribution). Special
rules apply of the only designated beneficiary is the surviving
spouse.

The Situation That Congress Sought To Relieve:
• In the current economic environment, many contract values
have been diminished by the deep declines in the stock market.
• Congress was concerned that requiring individuals to take 2009
RMDs could have the unintended effect of forcing individual to
‘sell low.’ As a result, the RMD would diminish the likelihood of
the individual being able to participate in any economic recovery.

What The Act Changes:
• No RMD is required for 2009
• Any individual who attains age 70 1/2 in 2009 will not be required
to take a first RMD by April 1, 2010, but the distribution
for the 2010 calendar year must be taken by December 31,
2010.
• If the individual takes a partial withdrawal, the distribution is not
subject to the mandatory 20% withholding that is typically required
of RMDs.
• For beneficiaries under the 5-year rule, the 5-year deferral period
is extended by one year (example: if an individual died in
2007 the period would end in 2013 instead of 2012.)

***This information is provided as general guidance. It is not intended to be legal or tax advice. Any taxpayer should seek advice based on
the taxpayers particular circumstances from an independent tax advisor