WASHINGTON, DC -- President Bush signed bipartisan legislation today to temporarily suspend a tax penalty for seniors who do not take a minimum withdrawal from their depleted retirement accounts in 2009, such as 401(k)s.
The Worker, Retiree and Employer Recovery Act (H.R. 7327), introduced by U.S. Reps. George Miller (D-CA), Charles B. Rangel (D-NY), Howard P. “Buck” McKeon (R-CA), and Jim McCrery (R-LA), suspends an Internal Revenue Service requirement for one year that account holders of 401(k)-style plans must withdraw a minimum amount of money every year after they reach 70 ½ years old. This suspension would be available to everyone regardless of their retirement account balances.
The Worker, Retiree and Employer Recovery Act (H.R. 7327), introduced by U.S. Reps. George Miller (D-CA), Charles B. Rangel (D-NY), Howard P. “Buck” McKeon (R-CA), and Jim McCrery (R-LA), suspends an Internal Revenue Service requirement for one year that account holders of 401(k)-style plans must withdraw a minimum amount of money every year after they reach 70 ½ years old. This suspension would be available to everyone regardless of their retirement account balances.
“Americans have seen trillions of dollars evaporate from their
retirement accounts over the last few months as a result of our
economic crisis,” said Rep. George Miller (D-CA), the chairman of the
House Education and Labor Committee. “Congress worked swiftly, and in a
bipartisan way, in order to provide important relief to seniors who may
face a steep tax if they do not make a withdrawal from their depleted
retirement accounts.”
Miller and Rep. Rob Andrews (D-NJ) called on U.S. Treasury Secretary Henry Paulson in October to suspend a tax penalty for seniors who do not take a minimum withdrawal from their depleted retirement accounts, such as 401(k)s. Last week, the agency declined to act to provide relief for the 2008 tax year. To read the letter to Sec. Paulson, click here.
“Countless jobs and retirement benefits will remain intact thanks to the enactment of the Worker, Retiree, and Employer Recovery Act today,” said Andrews, the chairman of the Health, Employment, Labor and Pensions Subcommittee. “As a longtime proponent of suspending the required minimum distribution for retirees aged 70 ½ and over with 401(k) and other defined contribution accounts and as the author of the transition rule which provides single employers an affordable transition towards fully funding their pension plans, I would like to thank Chairman Miller for his tremendous leadership in enacting HR 7327.”
Current regulations require account holders of 401(k)-type account to withdraw a minimum amount of money every year after they reach 70 ½ years old. If seniors do not take out a minimum amount based on an Internal Revenue Service formula, they are subject to a 50 percent penalty. For instance, if an individual fails to withdraw $4,000, they would be assessed a $2,000 tax the next year.
H.R. 7327 also eases funding requirements for companies and other pension plans forced to make additional contributions as a result of the economic downturn and makes technical corrections to the Pension Protection Act of 2006.
Miller and Rep. Rob Andrews (D-NJ) called on U.S. Treasury Secretary Henry Paulson in October to suspend a tax penalty for seniors who do not take a minimum withdrawal from their depleted retirement accounts, such as 401(k)s. Last week, the agency declined to act to provide relief for the 2008 tax year. To read the letter to Sec. Paulson, click here.
“Countless jobs and retirement benefits will remain intact thanks to the enactment of the Worker, Retiree, and Employer Recovery Act today,” said Andrews, the chairman of the Health, Employment, Labor and Pensions Subcommittee. “As a longtime proponent of suspending the required minimum distribution for retirees aged 70 ½ and over with 401(k) and other defined contribution accounts and as the author of the transition rule which provides single employers an affordable transition towards fully funding their pension plans, I would like to thank Chairman Miller for his tremendous leadership in enacting HR 7327.”
Current regulations require account holders of 401(k)-type account to withdraw a minimum amount of money every year after they reach 70 ½ years old. If seniors do not take out a minimum amount based on an Internal Revenue Service formula, they are subject to a 50 percent penalty. For instance, if an individual fails to withdraw $4,000, they would be assessed a $2,000 tax the next year.
H.R. 7327 also eases funding requirements for companies and other pension plans forced to make additional contributions as a result of the economic downturn and makes technical corrections to the Pension Protection Act of 2006.
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