House passes plan to suspend retirement tax

Excise taxes imposed on retirement savings account holders who do not take minimum distributions by age 70½ would be suspended for 2009 under legislation unanimously approved last night by the House of Representatives. The Worker, Retiree and Employer Recovery Act gives equal treatment to taxpayers who take minimum required distributions monthly and those who take a lump sum at the end of the year, according to a release issued by the House Ways and Means Committee and House Education and Labor Committee. The bill, which is part of legislation to ease requirements for pension plans that are having problems meeting funding requirements in the current economic crisis, waives the 50% excise tax penalty that is imposed if minimum withdrawals are not taken by age 70½ from individual retirement accounts, 401(k)s and other retirement savings accounts that receive tax preferences. Both President-elect Barack Obama and Republican presidential candidate John McCain had called for suspending the tax. “Americans have seen trillions of dollars evaporate from their retirement accounts over the last few months as a result of our economic crisis,” Education and Labor Committee chairman George Miller, D-Calif., said in the release. “The minimum distribution rules are especially burdensome in the face of sharp financial market declines,” House Ways and Means Committee ranking member Jim McCrery, R-La., said in the release. “Suspending these rules for 2009 will provide some much-needed relief to senior citizens,” he said. The Senate has not yet acted on a similar measure.