Required Minimum Distributions - 2010 Calendar Year
Retirement plans are subject to regulations that require Required Minimum Distributions (“RMDs”) to be processed. These regulations require that participants begin receiving minimum distributions from a plan upon attainment of age 70 ½ and retirement/termination of employment. Please note that 5% owners must withdraw this minimum amount regardless of employment status once they attain age 70 ½.
In late December 2008, in response to the economic crisis, the Worker, Retiree, and Employer Recovery Act of 2008 (the “Act”) was signed into law and allowed those participants who were required to take RMDs to skip their 2009 RMDs without a tax penalty being assessed.
The Treasury Department has stated there will be no similar RMD relief for the 2010 calendar year. Distributions must be processed no later than December 31, 2010 to avoid a 50% penalty tax. If 2010 is your first required distribution, you will have until April 1, 2011 to have the distribution processed, keeping in mind that the next scheduled RMD will be due by December 31, 2011. First time RMD participants wishing to take their first RMD earlier than the April 1, 2011 deadline may certainly do so.
In the coming weeks, Paragon will be providing an RMD packet for those participants that, based on the data in our plan administration system, require a distribution to be processed. Please be sure to keep an eye out for this information as these types of distributions must be processed timely to avoid any penalties.
If you should have any questions regarding the RMD regulations, please contact your Retirement Plan Consultant.