How to avoid penalty from IRA, 401(k) withdrawals during 2009

In December 2008, President Bush signed The Worker, Retiree, and Employer Recovery Act of 2008 into law. The law waived the required minimum distributions for 2009 from IRAs and employer sponsored defined contribution requirement plans because of the large drop in the stock market and declining retirement values.

Generally, a required minimum distributions is an annual amount that must be withdrawn from an IRA or an employer sponsored plan beginning with the year the account owner reaches 70 ½.

The IRS said that in many cases, because the law was signed so late in the year, and many individuals and plan sponsors were confused about how to comply with the new rules, IRA owners and plan participants received distributions they were not required to take or did not want.

Retirees who made a withdrawal from an IRA, 401(k) or other qualifying retirement plan have until 11/30/09, or within 60 days of the distribution, whichever is later) to put the money back in the plan tax-free.

Notice 2009-82 assures plan administrators that Read the rest of this entry »