Washington, D.C. - Last month, Congressman John Sarbanes sent a letter to Treasury Secretary Paulson calling for a temporary waiver of the Required Minimum Distribution (RMD) so that retirees who are in a position to weather the current market volatility will avoid taking unnecessary losses in their retirement savings. Under current law, individuals who have reached age 70½ must take an annual required minimum amount from their retirement plan or IRA.  Failure to take the distribution would subject the individual to a 50 percent excise tax penalty of the amount that should have been withdrawn.

Because the Treasury failed to act on this matter in a timely way, the Congress decided to take up the issue. With Sarbanes' support, Congress recently approved the Worker, Retiree and Employer Recovery Act, which would allow seniors to avoid the RMD without penalty during 2009. This legislation now awaits the President’s signature.

“American workers have seen their retirement investments lose trillions of dollars of value as a result of the economic crisis.  By suspending this policy, seniors who are in a position to weather the current market volatility will avoid taking unnecessary losses,” said Sarbanes. “The RMD also effectively forces out willing investors at a time when we are trying to stabilize our economy and stem the dangerous and disorderly flight from our markets that has occurred over the last few months.”

Under the Worker, Retiree and Employer Recovery Act, all taxpayers, those who usually take the RMD amount monthly and those who take a lump sum amount at the end of the year, would have equal treatment. 

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