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Required Minimum Distributions in 2009: What You Need to Know
by the Schwab Center for Financial Research Updated October 6, 2009
Key points
Required minimum distributions (RMDs) are suspended for 2009. Mandatory withdrawals will resume in 2010.
On September 24, 2009, the IRS issued a notice that allows qualified RMDs to be rolled back into the account they were withdrawn from, or a new account.
Helpful for individuals who are affected by RMD rules.
In December 2008, the Worker, Retiree, and Employer Recovery Act of 2008 was signed into law, and provided a waiver of the 2009 RMDs—for 2009 only, you can skip your required minimum distribution. The requirement to take an RMD will resume in 2010.
On September 24, 2009, the IRS issued Notice 2009-82, which allows certain 2009 RMD amounts to be rolled back into an existing or new retirement account, as applicable, by November 30, 2009, or 60 days after the date the distribution was received, whichever is later. For IRA owners, the once-a-year rollover rule still applies.
This law affects everyone who has a RMD for the tax year 2009 and holds:
IRAs.
SEP and SIMPLE IRAs.
Defined contribution retirement plans, such as 401(k)s, profit-sharing and money purchase plans.
403(b) and 457 plans.
Beneficiaries of all of the above, as well as beneficiaries of Roth IRAs.
If you:
Please
Choose to take a distribution
Call us at 800-435-4000. For IRAs, you can also take the distribution online. Log into your account and go to the "Transfers & Payments" tab.
Choose not to take a distribution in 2009 and haven't already scheduled your RMD
No action is required on your part
Have already scheduled your
2009 RMD but wish to cancel it
Call us at 800-435-4000. For IRAs, you can cancel your RMD online by:
Logging in to your account
Click on the "Transfers & Payments" tab
Going to "Cash Transfers Status," finding your pending 2009 distribution and clicking "Delete."
Have already taken your RMD, but wish to roll it back.
I turn 70½ in 2009. Does this temporary waiver apply to me? Yes. For 2009 only, no distribution is required and, thus, no distribution will be required to be made by April 1, 2010.
I turn 70½ in 2009. Does this mean that my 2010 distribution is not due until April 1 of 2011?
No. Even though 2010 is your first RMD, the IRS considers it your second RMD. Your first distribution was considered waived. As such, you must make your 2010 distribution by December 31, 2010.
What should I do if I have a scheduled 2009 RMD from my account and I want to cancel it?
Clients can call Schwab at 800-435-4000 to cancel their RMD for 2009, or they can cancel it logging into their account and following the instructions above.
I already took my 2009 RMD from my account, but I didn't know about the relief until now. Can I reverse it or roll it to an IRA or another Plan?
Schwab will not be able to reverse an RMD already taken (make it look like the distribution had not occurred). However, if you already took your 2009 RMD, it can be rolled back by the later of November 30, 2009, or 60 days after the date the distribution was received. However, the once-a-year rollover rule still applies for IRA owners. Clients should contact Schwab for more information on how to roll back their RMD, or seek guidance from their tax advisors.
I took multiple distributions from my IRA in 2009. Can I roll them all back?
No. The once-a-year rollover rule still applies, so IRA owners can roll back only one distribution within a rolling 12-month period. For example, if you’ve taken several 2009 RMDs via recurring monthly distributions, only one monthly distribution is allowed to be rolled over.
If I convert my IRA to a Roth IRA, do I need to take a 2009 RMD?
No.
If I take a distribution and plan to roll it over to another IRA within 60 days, must I take a 2009 RMD prior to rolling it over?
No.
Does the 2009 waiver mean that I will need to make up the "skipped" distribution in a later year?
No. The government has provided a wavier meaning that you do not need to take a distribution for 2009. You are still required to take distributions in 2010.
As always, if you have questions or need help, please contact your Schwab consultant. If you're not yet a Schwab client but would like to learn more, a Schwab consultant can help. Call 800-435-4000 to get started.
Important Disclosures
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.
This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax advisor, CPA, financial planner or investment manager. Tax laws and authorities are subject to change, either prospectively or retroactively, and any subsequent change could have a material impact on your situation.
The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.
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