IRS Extends Deadline to Roll Over 2009 RMDs

Individual Retirement Account (IRA) owners who have already received a 2009 required minimum distribution (RMD) this year are getting a break from the Internal Revenue Service (IRS).

IRS announced Wednesday that individuals have until the later of Nov. 30, or 60 days after the date the distribution was received, to roll over a distribution.

An RMD is the smallest annual amount that must be withdrawn from an IRA or qualified plan once the account owner reaches age 70 1/2.

Late last year, The Worker, Retiree, and Employer Recovery Act of 2008 waived RMDs from IRAs and qualified retirement plans for 2009. Because of this legislation, IRA owners and beneficiaries who would have been required to receive an RMD for 2009 are not required to receive a distribution.

Most financial institutions notified their IRA owners about the waiver and gave them the option of whether to waive the 2009 RMD or receive it as a distribution. But some IRA owners didn't have time to notify their financial institution, didn't realize that they could waive the RMD, or if they received the distribution, didn't know that they had 60 days to roll over the funds. In many cases, the IRA owner had no choice but to keep the RMD and pay taxes on it.

IRS Notice 2009-82 grants relief for these IRA owners by extending the 60-day deadline for rolling over a distribution of the 2009 RMD from an IRA until Nov. 30. However, the extension does not affect the once-a-year rollover rule, so at most an IRA owner can roll over one distribution under this extension.

"The IRS recognized the short amount of time financial institutions had last year to notify their IRA owners about the 2009 RMD waiver and the fact that many IRA owners received 2009 RMDs they may not have wanted and were not required to take," said Dennis Zuehlke, compliance manager for Middleton, Wis.-based Ascensus IRA Services, which serves 80% of credit unions offering IRA programs.

By permitting IRA owners extra time to roll over a 2009 RMD distribution, the IRS is helping them avoid taxes on distributions they were not required to take, Zuehlke said.

Notice 2009-82 also provides guidance for qualified retirement plan sponsors and contains sample plan amendments that sponsors may use to stop or continue 2009 RMDs, he said.

Budgeting for Boomerang Kids

More unemployed adult children are moving back in with Mom and Dad during these tough economic times, and although most parents are happy to help out emotionally and financially, some basic ground rules can help keep the peace and balance the budget (Kiplinger's October).

According to Collegegrad.com, more than three-quarters of college graduates in 2008 said they planned to move back home, up from two-thirds in 2006 (Bankrate.com June 8). The recession is only partly to blame. Faced with mounting credit card debt, steep student loan obligations, and the high cost of living in some areas, young adults wind up carrying a lot of baggage in the form of IOUs through Mom and Dad's front door.

Experts encourage parents of boomerang kids not to sacrifice their own retirement. Have an open discussion and establish ground rules from the start:

• Determine the timeframe. Make sure the arrangement is temporary by establishing how long the adult child will live in your house. "Until I find a job" may not provide sufficient incentive for some individuals to get back on their feet in a timely manner.
• Charge a modest rent. Give them some semblance of reality - even if the amount charged is half the going rate. Some parents have used the money collected as a form of forced savings for their own future expenses. Or, use the rent collected to help pay off the adult child's student loan.
• Establish house rules. Have the talk about chores, smoking, house guests, and - yes - curfew. It's your house. The more topics you cover before the suitcases are unpacked, the less likely you'll have boomerangst down the road.
• Stick with your plan. If you don't, you'll become an enabler with a financially irresponsible adult child living off you, rather than with you.

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New Initiatives Aim to Boost Retirement Savings

New initiatives announced this month by President Obama and Treasury Secretary Timothy Geithner will make saving for retirement a lot easier and more automatic, particularly for the estimated 78 million working Americans - approximately half the workforce - who don't have a retirement savings plan at work (The New York Times Sept. 6).

A White House document released Sept. 5 outlines four steps, effective immediately, to expand the range of retirement savings options for workers:

• Streamline automatic enrollment. Behavioral research indicates that workers are more likely to contribute to a retirement plan if they're automatically enrolled. Although many large- and medium-size companies already have adopted automatic enrollment, the new initiatives target very small firms that often use a simpler system called the "simple I.R.A." Watch for new guidelines from the Labor Department on how small businesses can use automatic enrollment, and how to institute an automatic "step up" to increase the worker's savings rate each year or with each pay raise. Workers can opt out of automatic enrollment or stop the increases at any time.
• Redirect tax refunds. Beginning in early 2010, taxpayers can check a box on their tax return and use their refund to purchase U.S. savings bonds, which will be mailed to the taxpayer. Beginning in 2011, taxpayers can add co-owners, such as children or grandchildren, to the bonds purchased with tax refunds.
• Use plain language. To help workers understand the confusing rules governing retirement plans when changing jobs, the Treasury Department and the Internal Revenue Service are publishing an easy-to-read, plain-English guide. This road map explains how to transfer plan balances, what key decisions need to be made, and what the tax consequences are for each decision. Look for new user-friendly website materials, too, at irs.gov/retirement.

Robocalls Prohibited Unless You Opt In

Say goodbye to annoying, prerecorded commercial telemarketing calls--commonly referred to as robocalls. As of Sept. 1, most robocalls are banned unless the telemarketer has your written permission to make them (Federal Trade Commission, Aug. 27).

The ban is part of amendments to the Federal Trade Commission's Telemarketing Sales Rule (TSR), and it applies whether or not you previously have done business with the seller. Telemarketers who violate the new rule will face penalties of up to $16,000 per call.

Note that some robocalls are not covered by the TSR. You still may receive robocalls associated with:

• Purely "information" recorded messages that don't try to sell you anything, such as flight cancellations, deliveries, and school delays;
• Debt collection;
• Politicians;
• Financial institutions;
• Telephone carriers;
• Most charitable organizations; and
• Health care.

If you receive a robocall covered by the TSR but you haven't agreed to it in writing, file a complaint with the Federal Trade Commission by visiting the donotcall.gov Web site or calling 888-382-1222.

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New credit rules aim to help young adults, college students

Young adults stand to be the group most affected by the Credit Card Accountability and Disclosure (CARD) Act of 2009, and it's worth the effort to fully understand the changes (forbes.com Aug. 4).

Although the majority of the CARD Act won't go into effect until Feb. 22, 2010, five sections of the Act are dedicated to the protection of young adults:

• Credit usage. Anyone younger than age 21 must be an authorized user on the parent's account, or show proof indicating an independent means of repaying card debts, or have an adult co-signer.
• Special offers. Creditors may not send prescreened offers to consumers younger than age 21.
• Free gifts. Card companies may not offer free gifts for the completion of an application on or near a college campus and at college-sponsored activities or events.
• Privacy protection. Colleges, universities and alumni associations must disclose details of contracts they sign that allow credit card marketers access to student and alumni contact info.
• Full disclosure. Card issuers must file annual reports with the Federal Reserve Board listing all business, marketing and promotional deals with schools. These reports must detail the terms and conditions, list schools by name, and identify how much the issuer is paying the school.
• Education sessions. A "sense of Congress" provision--not treated as law, but rather a suggestion from lawmakers--recommends that colleges offer credit card and debt education sessions during new-student orientation.

Is that computer on campus covered by insurance?

Even if your son or daughter already is packed up and shipped off to college, check to make sure he or she is properly insured. Also, understand how this significant move away from home affects your own insurance policies (The Kansas.com Aug. 19).

Use this checklist to make sure you and your student are covered:

• Does the student have a copy of health insurance cards? The student should have a plan for obtaining referrals and approvals--if necessary--before visiting a doctor or clinic. If the student will be seeking treatment outside a provider network, your insurer may charge out-of-network prices. Understand the level of benefits that are provided.
• Does the student require a student health insurance plan? This may be a good option if she is older than the maximum coverage age, or if she is outside the network service area. Check with the school to see if the college has contracted with an insurer that offers student health insurance plans. If so, expect limited benefits and more exclusions such as treatment for injuries associated with alcohol or drug use.
• Does the student need renter's insurance? Review your homeowner's insurance policy to see if the computer, other electronics, moped, bicycle, books, furniture and clothing are covered on campus. If not, purchase a renter's insurance policy immediately. Young renters often mistakenly believe the landlord has insurance to cover theft, fire, tornados, and other disasters. A landlord's policy does not cover the renter's personal property.
• Do you have a detailed list of the student's possessions--including serial/model numbers and purchase prices? Consider using photos or videotape. Keep this list and photos in a safe deposit box or fireproof safe off-site, or scan the items and store digitally, and keep a backup at a remote site. It will come in handy if you need to file an insurance claim. Visit knowyourstuff.org.
• Have you notified the auto insurer of any changes? Notify the insurer if the vehicle will be kept or garaged at a different location; if you don't, lack of disclosure could jeopardize a future claim (Insure.com Aug. 19). If the student won't have a car on campus and won't be driving your vehicle as often, ask if your rate can be reduced. And ask whether your insurer has discounts for maintaining good grades.