Rep. Rodney Frelinghuysen (NJ-11) and House Financial Services Committee Ranking Member Spencer Bachus (AL-6) today introduced legislation to protect the retirement savings of older Americans affected by the nation's economic crisis and asked President Barack Obama to include it in the stimulus plan now moving through Congress.
The Individual Retirement Account (IRA) Equity for Seniors Act, retroactively suspends mandatory IRA and 401(k) drawdown requirements for 2008. Older Americans will not be forced to pay taxes on the withdrawals made in 2008 if the funds are recontributed into their retirement account.
Under current law, Americans 70 ½ years and older are required to withdraw a minimum amount of money each year from their Individual Retirement Accounts (IRAs) and 401(k) plans.
In December, Congress waived mandatory withdrawal requirements for 2009 due to the economic crisis and drop in financial markets. However, the same suspension was not extended to required withdrawals in 2008. Last November, Rep. Frelinghuysen urged government officials and introduced legislation to suspend the withdrawal requirements for both 2008 and 2009. However, Congress only acted for 2009.
"With the recent financial downturn, many Americans have seen significant decreases in the value of their investments, particularly their IRAs and 401(k)s," said Frelinghuysen. "I have heard from many older Americans forced to make mandatory withdrawals from their retirement accounts at the end of 2008. Because of the state of the economy, they were required to take financial losses."
"In December, Congress unanimously passed legislation waiving the retirement account mandatory withdrawals in 2009. It was certainly a good step but did nothing to immediately help older Americans in coping with the current economic crisis.
"My legislation will allow those hurt by mandatory requirements to reinvest their money into their retirement accounts without tax penalty or economic loss. This will allow seniors to hopefully see their accounts appreciate when the financial markets get back on track."
Rep. Frelinghuysen, Rep. Bachus, and 18 members of the House have written President Obama and requested that the Individual Retirement Account (IRA) Equity for Seniors Act be included in the final economic stimulus plan.