Help

BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.

To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.

To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.

Login Register Subscribe

Bill would accelerate retirement plan distributions

Reprints
Bill would accelerate retirement plan distributions

Distributions from retirement plans, such as 401(k) plans, generally would have to be made to designated beneficiaries within five years after the death of the account holder under legislation the U.S. Senate could take up this week.

The only exceptions to the new five-year distribution requirement would be beneficiaries who are within 10 years of the account holder's age, an individual with special needs or who is disabled, a minor or the account holder's spouse. They would have to begin taking distributions starting at age 70½, like current law.

However, under the current law, “a loophole in the tax law allows taxpayers to stretch those distributions over many years if they leave their account to a very young beneficiary. When the account holder dies, the taxation of the account is then delayed as it is spread over the life of the beneficiary,” according to a summary of the bill, S. 953, introduced last month by Sens. Tom Harkin, D-Iowa and Jack Reed, D-R.I.

Aside from 401(k) plans, the legislation would affect any defined contribution plan as well as individual retirement accounts. The Senate could vote on the measure as soon as this week.

Revenue generated by the retirement account tax change, which is estimated at $4.6 billion over 10 years, would be used to help offset the cost of keeping the interest rate on federally subsidized college loans at 3.4%. Without a change in the law, the interest rate is scheduled to double to 6.8% as of July 1.