An Associated Press news report quoted Bush spokesman Tony Fratto as saying that the White House had concerns with the Worker, Retiree and Employer Recovery Act (H.R. 7327), including that it might cause workers to actually lose benefits in the long term. However, Fratto told reporters, officials decided the bill’s benefits outweighed its potential drawbacks given “this current economic environment” and Bush included it in a handful of bills (see here) approved Tuesday.
The measure suspends for 2009 the requirement that individuals 70 1/2 and older must withdraw a minimum amount from their 401(k) plans or IRAs and that those who do not are subject to a 50% penalty on the amount that should have been withdrawn.
A growing chorus of lawmakers and retirement industry trade groups complained that the economic downturn was putting older Americans in the position of having to sell assets into a down market. That had the potential to seriously diminish the retirement nest egg for many who would have been affected by the long-standing RMD rules.
In addition to the RMD provisions, (see “House Passes Pension, RMD Relief“), the bill eases defined benefit plan funding requirements, allowing them more time to meet those requirements (see “RMD Bill Includes PPA Technical Corrections“). The bill also offers relief to multi-employer plans.
Retirement industry trade groups argued that more companies may have to freeze pension plans, lay off workers, or even go bankrupt without the bill’s relief.
Congress approved the bill this month in one of its final acts of the year.
While the bill signed into law Tuesday offers 2009 RMD relief, the U.S. Treasury Department resisted calls to implement necessary rules to offer similar help for 2008 (see “RMDs Still Required in 2008“).