President Bush signed legislation today that offers a measure of tax relief to retirees next year. The Worker, Retiree, and Employer Recovery Act was also passed by both houses of Congress earlier this month.
The bill allows retirees to avoid making withdrawals from depleted 401(k)s, IRAs, and 403(b)s in 2009. But seniors over age 70 ½ need to take withdrawals this year by December 31 or face an excise tax of 50 percent of the amount that should have been withdrawn plus income tax. The Treasury Department and Internal Revenue Service also considered suspending the penalty for 2008, but ultimately decided against it.
Businesses will also get temporary relief from their pension funding requirements under the Pension Protection Act. “We did have some concerns with this bill because we think it will increase the cost of near-term claims on the Pension Benefit Guaranty Corporation -- the PBGC -- and could also result in some benefits lost to workers over the long term,” says White House spokesperson Tony Fratto. “Our concerns with the legislation remain, but we do believe that in this current economic environment and current economic circumstances, that the benefits of the legislation outweighed our objections.”