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CCH® PENSION AND BENEFITS — 01/22/09

IRS provides guidance to financial institutions on reporting rules applicable to RMDs for 2009

The IRS has issued guidance to financial institutions on the reporting rules applicable to required minimum distributions (RMDs) for 2009, reflecting the Worker, Retiree, and Employer Recovery Act of 2008 (P.L. 110-458).

The Act waives any RMDs for 2009 for individual account plans, such as 401(k) plans and 403(b) plans, and for IRAs. This means that most participants and beneficiaries otherwise required to take minimum distributions from these types of plans are not required to withdraw any amount in 2009. If they do make a withdrawal in 2009 (that is not an RMD for 2008) they may be able to make a rollover of the withdrawn amount into an eligible retirement plan. The Act does not waive 2008 RMDs. If a beneficiary is receiving distributions over a 5-year period, he or she can now waive the distribution for 2009, effectively taking distributions over a 6-year period.

The IRS advises issuers of the 2008 Form 5498 not to put a check in box 11, which indicates whether the taxpayer must take an RMD. However, if a financial institution issues a Form 5498 with box 11 checked, the IRS will not consider the form incorrectly issued as long as the IRA owner is notified by the financial institution no later than March 31, 2009 that no RMD is required for 2009. In addition, the RMD information required under Notice 2002-27 need not be sent to IRA owners for 2009. Finally, the IRS encourages all financial institutions to inform IRA owners who delayed taking their 2008 RMD until April 1, 2009, that they are still required to take that distribution.

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