2009 Required Minimum Distribution Waiver
Rev. 05/27/10; E-mail Alert 2010-8

The "2009 distribution calendar year" waiver of the required minimum distribution (RMD) is over. As of 2010, required minimum distributions resume. However, for beneficiary's there may be some ripple affects from the 2009 RMD waiver.

Beneficiary deadlines extended by the 2009 RMD waiver

Life Expectancy Rule
For a participant who died in 2008, the deadline for beneficiary to start life expectancy payments would have been by the end of 2009. This deadline was extended to the end of 2010. This extension includes a non-spouse beneficiary direct rollover to an inherited IRA.

Note, however, that Q&A-4 of Notice 2009-82 did not waive the deadline for identifying the designated beneficiary and so for those who died in 2008, that remained September 30, 2009. Thus, for those beneficiaries that wished to disclaim being a beneficiary, they had to do so by September 30, 2009.

5-Year Rule
The 5-year rule is available only for an individual who dies before reaching his or her required beginning date. The 5-year rule is an optional provision in a qualified retirement plan. If it is available in the plan, it may be chosen by the beneficiary. In accordance §401(a)(9)(H)(ii)(II) that was added by the Worker, Retiree and Employer Recovery Act of 2008 (WRERA), the year 2009 is not to be counted as part of the five years. Thus, there is an extension of the 5 year rule to 6 years in certain cases.

Example
The 5-year rule calls for all funds to be distributed by the end of the 5th year after the year in which the participant passed. In this example, the participant died on May 4, 2004. Under the 5-year rule, count five years after the year the participant died: 2005, 2006, 2007, 2008, 2009. Thus, by December 31, 2009, the 5-year period would end and all the deceased participant's assets would be required to have been distributed. However, in this example, by not counting 2009, WRERA extends this to the end of 2010.

Since we do not count the 2009 year in any five year period including 2009, the 5-year period is extended to six years for an extended period, specifically from 2009 to 2015. Thus, this affects beneficiaries who select the 5-year rule for participant's who die between 2004 and 2009. The following chart will clarify this.

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