Retirement Plan and IRA Updates

Required Minimum Distributions resume in 2010 – Although Congress suspended the requirement that Required Minimum Distributions (RMD) be made in 2009 as a result of the economy, it does not appear that Congress will continue this benefit for 2010 and RMD will be required as usual. This applies to required distributions from retirement plans as well as IRA accounts. Keep in mind that RMD are not required from Roth accounts.

Termination of Matching Contributions – As a result of the economy, many employers have terminated or are considering terminating their matching contributions whether they are safe harbor or other forms of matching contributions. There are three important things to remember when terminating matching contributions: (1) Such terminations can only be made on a prospective basis with appropriate plan amendments and notice to the participants; (2) Terminations can be made during the middle of a plan year but again prior notice and a plan amendment is required; and (3) Once a safe harbor matching contribution is discontinued, the employer is required to resume discrimination testing for the plan. If a safe harbor matching contribution is terminated during the middle of a plan year, discrimination testing is required for the entire plan year and not just from the date of termination forward.

Conversion to Roth IRAs – With Congress searching for additional tax dollars, 2010 may be a great year to convert your traditional IRA account to a Roth account. The income limits have been removed for 2010 so anyone with a traditional IRA can convert it to a Roth IRA and the tax due on the conversion can be deferred so that one-half is paid in 2011 and the remainder in 2012. However, you will need to weigh the value of the tax deferral versus the anticipated increase in tax rates after 2010.

Curtis & Curtis, P.C. is a full service law firm located in Jackson, Michigan providing superior legal services and advice to individuals, families and businesses throughout mid-Michigan since 1901.

This publication is provided for general informational purposes only and does not constitute formal legal or other professional advice. No attorney-client relationship is created with you when you read this information. The above information may be changed without notice and is not guaranteed to be complete, correct or up-to-date, and may not reflect the most current legal developments. If you have any questions or need assistance, please contact Curtis & Curtis, P.C.