Bill temporarily suspends mandatory withdrawals from IRAs, 401(k)s

WASHINGTON – Congressman Vernon J. Ehlers is cosponsoring a bill in the U.S. House which will help older Americans protect their retirement investments. The Temporary IRA Distribution Suspension Act (H.R. 7277) will temporarily suspend a federal law that requires people over the age of 70 and ½ to withdraw funds from their Individual Retirement Accounts (IRAs), which include 401(k), 403, 408, and 457 retirement plans, as defined in the Internal Revenue Code.

      “I have heard from many of my constituents who fear they will lose money if they are forced to withdraw funds from their retirement account while the stock market is down,” said Congressman Ehlers. “This bill will allow seniors to hold on to their investments until the market improves, and they will not be penalized for doing so. Considering the current state of the stock market and the poor economy, the government should not force older Americans to take a significant financial loss.”

      Under current law, people over the age of 70 and ½ must withdraw a minimum amount of funds based on their life expectancy. If they do not, they would be penalized 50 percent of the amount that should have been taken. This would have forced IRA account holders to sell the securities in their accounts at a major loss, which is not tax deductible.

      The bill cosponsored by Congressman Ehlers would suspend the penalty, allowing older Americans to hold on to their investments. It does not prevent seniors from being able to access their retirement accounts.