House Votes to Suspend Unfair Retirement Tax on Seniors

House Votes to Suspend Unfair Retirement Tax on Seniors

December 11, 2008

WASHINGTON - The U.S. House of Representatives approved legislation last night that would temporarily suspend a tax on seniors who fail to take a required minimum distribution from their retirement accounts. The bill would waive the penalty for 2009, allowing seniors to recoup some of the losses they have experienced as a result of the poor economy.

“The House has protected our seniors by temporarily lifting the rules that force unwilling seniors to sell a certain percentage of their accounts,” said Congressman Thompson (D-CA), a member of the powerful Ways and Means Committee which has jurisdiction over all tax matters. “At this time of economic uncertainly, we should not jeopardize the future retirement security of America's seniors by forcing them to sell more stock than necessary, and I urge the Senate to pass this legislation as quickly as possible.”

Under the Worker, Retiree and Employer Recovery Act (H.R. 7327), all taxpayers, those who usually take the required minimum distribution amount monthly and those who take a lump sum amount at the end of the year, would have equal treatment. Under current law, individuals who have reached age 70½ must take an annual required minimum amount from their retirement plan or IRA. Failure to take the distribution would subject the individual to a 50-percent excise tax penalty on the amount that should have been withdrawn.

In addition, the bill would ease funding requirements for employer-sponsored pension plans that would be forced to make significantly increased contributions during these difficult economic times when they are very short on cash. The bill includes temporary relief for multi-employer plans that have been negatively impacted in this economic downturn. The bill would also make nominal technical corrections to the Pension Protection Act of 2006.

According to 2000 Census figures, California's 1st District is home to over 84,000 seniors.

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CONTACT: Laurel Brown at (202) 225-3311, (831) 212-2550 or laurel.brown@mail.house.gov