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Required Minimum Distribution Update 2009.

The Internal Revenue Service today provided guidance affecting required minimum distributions(RMD). The Worker, Retiree, and Employer Recovery Act of 2008 waives required minimum distributions for 2009 from certain retirement plans.

Generally, a required minimum distribution is the smallest annual amount that must be withdrawn from an IRA or an employer’s plan beginning with the year the account owner reaches age 70½, or when you inherit such an account. (The IRS lets you defer your first distribution to April 1 of the year following the year you turn 70½.). The 2008 law waives required minimum distributions for 2009 for IRAs and defined contribution plans (such as 401(k)s) and allows certain amounts distributed as 2009 required minimum distributions to be rolled over into an IRA or another retirement plan. If you're age 70½ or older at any point in 2009 or if you've inherited a retirement account, you're not required to take an RMD until December 31, 2010. The IRS recently extended the deadline to allow you until either November 30, 2009, or 60 days after the date you received your distribution, whichever is later, to roll it back to a retirement account. Only one distribution from an IRA in 2009 will be eligible for this rollover relief because of the one-rollover-per-year rule for IRAs.

The RMD suspension applies to traditional IRAs, 401(k)s, 403(b)s, and other defined contribution plans. It also applies to investors under age 70½ who own inherited IRAs or inherited retirement plan accounts that would otherwise be subject to RMDs.

If you've taken your 2009 RMD as a lump-sum distribution, you may roll the entire amount back into your IRA or other retirement plan. If you took your RMD from an employer-sponsored plan and the plan permits, you can roll your RMD back into the original plan. However, if you've been taking distributions in periodic installments from an IRA rather than a lump sum, you may roll back only one of those installments.

Note that if you inherited an IRA from someone other than your spouse, tax laws prohibit you from rolling over assets from that account, even in this situation. As always, any non-RMD withdrawal can be rolled back into your retirement plan only within 60 days of distribution.