Senator Susan Collins (R-Maine) issued her call in a letter to U.S. Treasury Secretary Henry Paulson in which she urged Paulson to use his authority to suspend the RMD regulations “to mitigate the impact on retirees over age 70 Â½ who are required to withdraw funds from their 401(k) accounts or face stiff penalties,” and waive any penalties at least for the 2008 tax year.
If older Americans do not take the distributions, current law requires a penalty of 50% of the amount that should have been distributed. Collins said the law gives Paulson authority over the details of the RMD requirement.
Collins also asked that the regulations governing the calculation of the RMD be revised so that the amount of the minimum distribution is set to the lesser of the account balance on the first day of the calendar year, and the account balance that existed on the last day of the calendar year.
“Forcing our nation’s retirees to liquidate (plan) assets at distressed prices makes little sense,” Collins wrote. “Such an outcome would not only be unfair to retirees, but would also work against our efforts to stabilize the financial markets.”
Two Congressional lawmakers called on the Treasury Department to suspend the RMD tax penalty in mid-October (See Lawmakers Call for End of RMD Penalty ).