Bill Suspends Minimum Required Distributions; Implications for Charitable IRA Rollovers

Bill Suspends Minimum Required Distributions; Implications for Charitable IRA Rollovers

News story posted in Legislative on 17 December 2008| 16 comments
audience: National Publication | last updated: 18 May 2011
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Summary

Congress has passed and sent to the President for signature H.R. 7327, the Worker, Retiree and Employer Recovery Act of 2008, a bill that places a one year moratorium on required minimum distributions from Individual Retirement Accounts and defined contribution plans for 2009. Although the intent of the legislation is to give retirees an opportunity to recoup financial losses suffered in the last year, it may adversely affect some charitable IRA rollovers.

Editor's Note: Our initial reporting stated participants would be able to recontribute MRDs made in 2008 back into their plans. This was based on a press release from Senator Olympia J. Snowe's office (R-Maine) that PGDC Editors misconstrued as applying to the current bill.

Full Text:

Congress has passed and sent to the President for signature H.R. 7327, the Worker, Retiree and Employer Recovery Act of 2008, a bill that places a one year moratorium on required minimum distributions from individual retirement accounts and defined contribution plans for 2009.

Although the intent of the legislation is to give retirees an opportunity to recoup financial losses suffered in the last year, it may adversely affect charitable IRA rollovers.

Under the Pension Protection Act of 2006, individuals age 70½ or older are permitted transfers up to $100,000 per year directly from their Individual Retirement Accounts to charity without having to report such amounts as income. The Emergency Economic Stabilization Act of 2008 extended these provisions through the end of 2009.

In addition, individuals who reach age 70½ and are required to make minimum required distributions can direct the entire amount (subject to a $100,000 limit) to charity in satisfaction of their minimum required distribution.

Since some donors elect to contribute only their MRDs to charity in lieu of adding them on top of their other taxable income, the new legislation will eliminate this important incentive through the end of 2009 at which time the current charitable IRA rollover itself will also expire. Others who give from their IRAs regardless of the new MRD rule will be unaffected.

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