Complete Analysis of the Worker, Retiree, and Employer Recovery Act of 2008 Available From the Tax & Accounting Business of Thomson Reuters

/PRNewswire/ -- Both the House and Senate unanimously and in record-time passed the Worker, Retiree, and Employer Recovery Act of 2008 at the end of last week, clearing the way for the President's signature. This new tax law, which is already available in full analysis on Checkpoint, the premier tax research platform for the Tax & Accounting business of Thomson Reuters, temporarily suspends the requirement for taxpayers age 70-1/2 and older (and their beneficiaries) to make annual minimum distributions from their retirement plan accounts. This will provide older Americans some much-needed financial flexibility as they struggle to manage their finances during this difficult economic time.

According to Bob Trinz, Senior Tax Analyst for the Tax & Accounting business of Thomson Reuters, tax laws generally require individuals with retirement accounts to make required withdrawals based on the size of their account and their age every year after age 70-1/2. The new law suspends the required minimum distribution from retirement accounts in 2009. This waiver, available to everyone regardless of their total retirement account balances, applies to all defined-contribution plans, including 401(k), 403(b), 457(b), and IRA accounts. Suspending the mandatory withdrawal allows retirees to keep the money in their account if they choose, and possibly recover some losses. The suspension for 2009 also applies to beneficiaries of retirement plan accounts and IRA owners.

The new law also provides relief for single-employer plans by allowing employers to "smooth" the value of pension plan assets over 24 months instead of having to apply the mathematical average that Treasury requires. This change will soften the accounting of 2008 plan losses. "The adjustment of this phase-in rule will provide great relief," says Trinz.

The new law also helps multiemployer plans, which may elect to "freeze" their status as (or as not) "endangered" or "critical" for one year. Plan years that started between October 1, 2008 and October 1, 2009 may elect to retain their status from the previous year. As before the new law, plans in endangered or critical status must adopt a funding improvement or rehabilitation plan, respectively. While a plan is in critical status, employers obligated to contribute must make additional contributions not required for plans in endangered status, but are relieved from the obligation to make general funding contributions. Under the new law, the election to freeze a plan's status would delay the need to respond to any lack of progress under the terms of the funding improvement or rehabilitation plan until the following plan year.

The new law also provides an election for sponsors of multiemployer plans in endangered or critical status in plan years beginning in 2008 or 2009, allowing a three-year extension of a funding improvement or rehabilitation plan. That allows these plans to accomplish their goals in 13 years instead of 10 (18 years instead of 15, for seriously endangered plans).

The new law makes numerous technical corrections to the Pension Protection Act of 2006. "The technical modification of greatest interest is for nonspouse beneficiaries of qualified plan participants and IRA owners," says Trinz. "For plan years beginning after 2009, company sponsored plans will have to offer nonspouse beneficiaries a rollover option. This gives much-needed flexibility to those who inherit retirement plan accounts from someone other than their spouse."

"The extent of the technicalities and scope of this new law is far-reaching and taxpayers should contact their tax preparers to ascertain how it will affect them in the long and short-term," says Trinz. "For our seniors, we can conclusively say: 'this will help.'"

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