A group of 61 members of Congress has written to President Bush asking him to suspend rules that require senior citizens to withdraw money from their severely depleted retirement accounts by the end of the year.
Earlier this month, Congress passed a bill that eliminated the requirement for minimum distributions from IRAs, 401(k) and 403(b) accounts for 2009, but left it up to the Treasury Department to decide what to do about 2008 (see Congress Kills Minimum Distributions for 2009). President Bush signed the bill on Tuesday.
However, Treasury assistant secretary for legislative affairs Kevin Fromer wrote to Congress saying the Treasury had decided not to suspend the minimum withdrawals for 2008, claiming such a change would be "complicated and confusing for individuals and plan sponsors" (see Minimum IRA Distributions Still Required for 2008). Under the rules, retirees over the age of 70-1/2 are required to take a minimum distribution by Dec. 31 every year or pay half of the minimum distribution in the form of an excise tax plus the income tax on the distribution.
Rep. Spencer Bachus, R-Ala., and Rodney Frelinghuysen, R-N.J., along with 59 other lawmakers, wrote to Bush asking him to urge Treasury Secretary Henry Paulson to nonetheless waive the rule.
"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," they wrote on Dec. 19. "Furthermore, we ask that you use the same authority to allow retirees who have already withdrawn in 2008 to make recontributions to their accounts.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."
The lawmakers believe that the distribution requirements should be suspended for this year as well as next. "Federal tax regulations should not force seniors to take money from their retirement accounts at a time when the value of their investments has plummeted," said Bachus (pictured) in a statement.
Bachus and Frelinghuysen co-sponsored a bill in November, the Temporary IRA Distribution Act, that would have waived the minimum distribution requirement for both 2008 and 2009. The provision affecting minimum distributions for 2009 only was included in the bill that passed this month, the Worker, Retiree and Employer Recovery Act of 2008. That bill also allows corporations to delay fully funding their pension plans. The American Institute of CPAs and 350 other organizations wrote to leaders of the House Ways and Means Committee in November asking for relief from the requirement for businesses.
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