House bill introduced to suspend required minimum distributions

A bill that would suspend required minimum distributions from defined contribution plans for the current year has been introduced in the House.

The bill, the Retirement Protection Act, unveiled Monday by Reps. Jennifer Wexton, D-Va., and Jamie Raskin, D-Md., is in response to the coronavirus pandemic.

After passage in December of the Setting Every Community Up for Retirement Enhance Act, known as the SECURE Act, the age at which individuals are required to begin withdrawing a percentage of their tax-deferred retirement plan was raised to 72 from 70½.

"Americans' hard-earned retirement savings plans are being devastated by the economic fallout from the COVID-19 pandemic," Ms. Wexton said in a news release. "For households whose account balances have lost value due to the pandemic, withdrawing funds now when the stock market is down forces them to take significant losses on their investments. By temporarily suspending the RMD, families will be allowed to leave money in tax-deferred accounts without incurring a tax penalty, providing time for the markets to recover."

Currently, individuals who do not follow RMD rules face a penalty of 50% of the amount that should have been distributed, the lawmakers noted.