Distribution moratorium doomed

Lack of 'political oomph' in time of deficit

Feb 7, 2010 @ 12:01 am

By Jessica Toonkel Marquez

Bills introduced recently to give seniors another year's grace on required minimum distributions from retirement accounts won't get any traction in Congress, according to experts.

The most recent bill, HR 4421, which was introduced last month by Rep. Joe Sestak, D-Pa., would extend the one-year moratorium on distributions established under the Worker, Retiree and Employer Recovery Act of 2008 through this year. Mr. Sestak's bill joins similar proposals S 157 and HR 424.

Under the minimum-required-distribution rules that went back into effect this year, workers must start receiving life-expectancy-based minimum payments from their retirement plans when they reach 701/2.

The initial moratorium was enacted in the wake of the 2008 market crash and during the presidential campaign, noted James M. Delaplane Jr., a partner at Davis & Harman LLP. “A lot of seniors were talking about it,” he said.

But the climate has changed, and there isn't as much interest in passing these bills, Mr. Delaplane said, noting that lawmakers aren't hearing from senior citizens on this issue like they did during the market meltdown.

“There doesn't seem to be any appetite in Congress for this,” Mr. Delaplane said. “There is no political oomph, and given the deficits, this isn't appealing legislation.”

Advisers should be managing older clients' assets on the assumption that the required-minimum distributions will apply this year, said David L. Wolfe, a partner at Drinker Biddle & Reath LLP.

“The market has rebounded, but it hasn't completely come back, and to the extent that we could still see some market reversals in 2010, this could be an issue for clients,” he said.

E-mail Jessica Toonkel Marquez at jmarquez@investmentnews.com.

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