Tax-qualified retirement plans and traditional (non-Roth) IRAs are subject to required minimum distribution (RMD) rules. Generally, RMDs must begin by the required beginning date (RBD), which usually is April 1 of the calendar year following the calendar year in which the individual reaches age 70½ (or retires, if later). Under the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA), no RMD was required for calendar year 2009 from IRAs or tax-qualified defined contribution plans. Plans that suspended RMDs in 2009 must now re-start them. Here’s how to go about doing that:
- Taxpayers who attained age 70½ before 2009. The RMD for 2010 for these taxpayers is based on retirement plan account values as of December 31, 2009. The skipped year of RMDs does not affect the method of calculating RMDs for 2010.
- Taxpayers who attained age 70½ in 2009. A taxpayer’s RBD is determined without regard to the 2009 temporary waiver rule for RMDs, for purposes of applying the RMD rules after 2009. For example: Baker attained age 70½ in 2009, and thus his RBD is April 1, 2010. Under pre-WRERA law, the first year for which he would have had to take an RMD from the plan was 2009. Under WRERA, no RMD was required for 2009, and, thus, no distribution for 2009 need be made by April 1, 2010. However, because WRERA did not change the RBD for purposes of determining the RMD for calendar years after 2009, the RMD for 2010 must be made no later than the last day of calendar year 2010.
- Taxpayers who attain age 70½ in 2010. The one-year RMD waiver had no effect on these plan participants. Their RMD for the first distribution calendar year (2010) may be postponed until April 1, 2011. The second required distribution (for 2011) must be made on or before December 31, 2011.
Companies that suspended RMDs in 2009 also might need to reflect that suspension in their plan documents, if they have not done so already. IRS Notice 2009-82, 2009-41 I.R.B. 491, provides model amendments that can be used for that purpose, which must be adopted by the end of the first plan year beginning on or after January 1, 2011 (January 1, 2012 for governmental plans).