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.


Back   |  IRA.com Home   |  News Archive