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Plans covered under the new regulations include: qualified plans under Sections 401, 403, 408 and 4974 of the Internal Revenue Code of 1986, IRAs, deferred compensation plans under Section 457, and Section 403(b) annuity contracts, custodial accounts and retirement income accounts.
Determining
Your Age for the Uniform Withdrawal Factor
Table
The official language in the IRS publication [REG-130477-00; REG-130481-00] is as follows:
Section 1.401(a)(9)-5, "...the employee's age as of the employee's birthday in the relevant distribution calendar year.
What this means is:
Your age, for the purposes of the "Uniform Withdrawal Factor Table", is your age as of December 31, 2008.
The source material for our table can be found in:
IRS Publication 590 Appendix E, "Table for Determining Applicable Divisor for MDIB", which is based on Table VI of Internal Revenue Service Regulation Section 1.72-9 by applying the minimum distribution requirement rules under Regulation 1.401(a)(9)-1.
Calculator
Limitations
The
calculator and "Uniform
Withdrawal Factor" table assume the interchangeability of IRAs
and qualified plans.
The
calculator does not provide an accurate number for cases where:
Nor
does it apply for:
-
inherited
IRA distribution calculations,
-
"grandfathered",
or pre-1987, 403(b) money,
or
-
individuals
who have deferred taking minimum distributions because they
are still working.
Required
Beginning Dates
The IRS rules state that the required beginning date for distributions is "April 1 of the calendar year following the year in which the employee attains the age 70½ ." Depending on which half of the year the participant's birthday falls in, that six-month marker determines when the participant must begin taking distributions.
Although taking a distribution immediately upon turning 70 ½ is not required-the participant has the option of waiting until his/her required beginning date and taking two distributions during that year (one prior to April 1 and one before December 31)-for tax purposes, most advisors recommend that the participant take his/her first distribution before December 31 of the year he/she turns age 70 ½.
Timing
the Distribution
Participants born between January 1, 1937 and June 30, 1937 will have to take one distribution in 2007 and one in 2008, or two distributions in 2008 if he/she failed to take a distribution in 2007. If the participant failed to take a distribution in 2007, the first distribution in the year 2008 would have to be taken on or before April 1, 2008 (in effect for what should have taken in the year 2007) and the second distribution will have to be taken by December 31, 2008.
A participant born between July 1, 1937 and June 30, 1938 will reach 70 ½ during 2008. Technically, he/she could delay taking the first required minimum distribution until April 1, 2009. The rule was and remains that the required beginning date for taking minimum required distributions is April 1 of the year following the year the participant turns 70 ½. However, if a participant was born between July 1, 1937 and June 30, 1938 and waits until 2009 for his/her first distribution, then he/she must take two distributions in 2009. The first distribution would be due on or before April 1, 2009, and the second distribution would be due by December 31, 2009. For tax purposes, most advisors would recommend taking the first distribution in 2008. Annual minimum distributions would continue for the rest of the participant's life.
For participants born July 1, 1938 or afterwards, there is no minimum required distribution for 2008. And, unless the participant needs the money or is pursuing certain complex income tax or estate plan strategies, he/she is better off leaving the money in the IRA and taking the first minimum required distribution when required in 2009 or later. To avoid bumping income levels up to the next tax bracket, many participants born between July 1, 1938 and December 31, 1938 should take one distribution in 2009 and one in 2010.
Reference
Material
Internal
Revenue Service [REG-130477-00; REG-130481-00]
The
Code sections which were amended were 26 USC 401(a)(9), 403(b)(10),
408(a)(6), 408(b)(3)
and 4974. |
