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The Legal Pad of Richard Magnone |
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The Legal Pad of Richard Magnone
this month: Should I Review My Pension Plan?
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IRS LOOSENS PENSION PLAN
DISTRIBUTION RULES Recently, President Clinton signed a diverse and important piece of legislation into law. The Small Business Job Protection Act of 1996 amends the Internal Revenue Code section requiring that qualified plan participants must begin required distributions by age 70½. The new rule changes the "required beginning date" for distributions to the later of the calender year in which the employee reaches age 70½ or the calender year in which the employee retires. As a result, workers may delay making withdrawals until they retire. This change appears to allow an increased period for tax deferred growth of assets. Unfortunately, in many cases, the distribution amounts will likely be calculated based upon a shorter life expectancy. As such, plan distributions will likely be larger and perhaps subject to an additional taxes on excess distributions. However, with careful beneficiary designations and election, which must be made by a certain date, participants may extend the period of tax deferred growth and reduce the required distribution amount. The deferral rule does not apply to IRAs. Plan distributions should be coordinated with an estate plan with legally prepared elections, as IRA and plan benefit distributions are not determined by living trusts or wills. Consult an estate planning attorney to explore your pension and IRA options. Check These Sites Too: Reda | Ciprian | Magnone, LLC, 8501 W. Higgins Suite 440, Chicago, Illinois 60631 DISCLAIMER: This website is intended to supply general information to the public. Although the information is generally accurate, it cannot be guaranteed. The nature of Legislation is that laws change quickly, and visitors should always insure that legal information is accurate before relying on it. The above information applies the law of the State of Illinois. The law in your jurisdiction may be different. This information is necessarily brief and may or may not apply to your situation. In all cases, PLEASE, consult a lawyer before acting. This website is not intended to be advertising, solicitation, or legal advice. Thus, the reader should not consider this information to be an invitation for an attorney-client relationship, should not rely on information provided herein, and should always seek the advice of competent counsel in the reader's state. |