Congressman Lamar Smith, Twenty First Congressional
District of Texas
(WASHINGTON) - Congressman Lamar Smith and a bipartisan group of House members this week wrote President Bush to ask that he direct the Treasury to suspend required minimum distribution rules for IRAs, 401(k)s, and 403(b)s for the 2008 tax year, and allow recontributions by those who have already made mandatory withdrawals this year.
According to Smith, the measure will help provide some relief to retirees whose savings have taken a hit due to the economic crisis and volatile markets.
These rules were suspended for the 2009 tax year as part of HR 7327, the Worker, Retiree, and Employer Recovery Act, which passed the House and Senate last week. But, the Treasury has the ability to change the requirements for the current tax year.
The full text of the letter to President Bush follows:
Dear Mr. President,
It is our understanding that you are on schedule to sign H.R. 7327, the Worker, Retiree, and Employer Recovery Act of 2008, in the next few days. This legislation contains an important provision temporarily waiving the required minimum distribution rules for IRAs, 401(k)s, and 403(b)s for the 2009 tax year.
We respectfully request that you use your executive authority to direct the Secretary of the Treasury to use the flexibility provided by statute to immediately waive the same rules for the 2008 tax year. Furthermore, we ask that you use the same authority to allow retirees who have already withdrawn in 2008 to make recontributions to their accounts. By doing this, you will allow retirees to protect some of their savings during these rough economic times.
While the Internal Revenue Code requires retired individuals to begin taking withdrawals the later of the year after they retire or the year after they turn 70 ½, it is our understanding that Treasury regulations set the specific intervals and penalties, and therefore the distribution requirements could be adjusted for 2008 without Congressional action.