Confusion Over Change in IRA Distribution Rules Slowly Easing Philadelphia Inquirer (02/18/01) No. 3719 p.C2; Gelles, Jeff
New rules regarding mandatory distributions from Individual
Retirement Accounts have caused confusion for some bank employees and
the older taxpayers to whom the rules apply. The Internal Revenue
Service (IRS) surprised the banking sector with the changes in how much
taxpayers must withdraw every year from IRAs and other tax-deferred
retirement accounts, such as 401(k) plans, after they reach age 70.5.
The new rules allow those with savings in such accounts to stretch out
their withdrawals over more years, potentially saving them thousands of
dollars in taxes. One major item of confusion is the new rules'
immediacy. Although the new rule takes effect Jan. 1, 2002, IRA owners
can abide either by the new or the old rule this year. However, at
least two of the Philadelphia region's largest banks--First Union and
Mellon--said they will not be able to make distribution changes for IRA
owners until next month, when new forms and schedules will be in place.
Ironically, the changes are meant to simplify procedures and could
reduce individuals' minimum annual withdrawals by as much as 40 percent.
In addition, the federal government stands to benefit by getting its
proper share of revenue from tax-deferred retirement accounts.