RMDs Make the Big Time

Written by: Nick Curabba

While the world's finance chiefs convened over the week to staunch the global market collapse, U.S. Presidential candidates John McCain and Barrack Obama were proposing one "fix" in particular that grabbed our attention: modifying the section 401(a)(9) rules on required minimum distributions.  We're not sure if it's a sign of policy enlightenment or something more ominous, but we are quite certain that it is the first time in American history that both major party candidates have discussed the RMDs in any context during a Presidential campaign.

During his October 10 stump speech in LaCrosse, WI, Senator McCain suggested one way to protect American investors from the global financial market melt-down would be to suspend the rules that "mandate that investors must begin to sell off their IRAs and 401Ks when they reach age 70 and one half." 

Not to be out done, the Obama campaign later the same day issued a statement supporting the concept, according to an article in Plan Sponsor magazine.  As described in the article, Senator Obama's proposal would rely on immediate action by the Treasury Department to suspend the RMD rules, while it seems Senator McCain may have been talking about a legislative fix to section 401(a)(9) of the Code.

It seems an oddly narrow response to the current situation, and perhaps unnecessary since in-kind distributions are permitted to satisfy the RMD rules (as was pointed out by the left-leaning political blog Talking Points Memo). What we can fairly promise is that this will not be the last proposed rule change affecting retirement plans as a result of the Crash of '08.