The economic downturn and mounting stock market losses are shrinking retirement accounts and impeding employers’ ability to meet pension funding requirements. The Worker, Retiree and Employer Recovery Act of 2008 (WRERA) is designed to help seniors recover some of the value their retirement accounts have lost this year and ease employer pension funding requirements that could have forced businesses to make large pension fund contributions at a time when cash is in short supply. In addition, the act “corrects” several technical provisions of the Pension Protection Act of 2006 (PPA).

Excise tax affecting seniors suspended

WRERA temporarily suspends the required minimum distribution (RMD) excise tax for 2009 for IRAs as well as all defined contribution plans, including 401(k), 403(b) and 457 plans. This gives seniors the option to keep remaining funds in their plans for another year without incurring a tax penalty — providing time for their investments to perhaps recoup recent losses. This provision applies to all individuals age 70Ѕ or older, regardless of their retirement plan’s account balance or whether the plan has incurred any losses.

Seniors, of course, still have the option of withdrawing funds from their plans if they need the money. But even before the recent stock market volatility, many have preferred to withdraw only the RMD to maximize continued tax-deferred growth. And now, thanks to WRERA, they can choose not to withdraw at all — at least in 2009.

Employer pension funding requirements eased

The economic downturn has also greatly affected employers’ ability to fund pension plans. WRERA eases the pension funding requirements enacted in PPA. Contact us for further information on employer pension plans.

Allowing nonspouse beneficiary rollovers now mandatory

WRERA makes it mandatory that, beginning after 2009, qualified retirement plans, 403(b) plans or 457 plans allow nonspouse beneficiaries of a deceased participant to roll over their balance directly to an “inherited IRA.” PPA had made this a permissible option, but not a requirement.

Know how WRERA affects you

Even though WRERA’s main provisions are relatively simple, knowing exactly how they affect you and what to do about them is a more complicated matter. To find out, please contact us at 251-476-5500. We would be glad to answer any questions you have and help you take advantage of this legislation to mitigate the impacts of the current recession.

This written advice is not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer.