Annuity contract holders were offered a welcome dose of fiscal relief last month as President Bush signed into law the Worker Retiree and Employer Recovery Act (WRER). Signed on December 23, 2008, the WRER Act stipulates that investors will not be required to take RMDs in 2009.

Normally, individuals over age 70 ½ holding retirement accounts in IRAs, 401(k), 403(b) and other tax efficient savings vehicles would be required to take a minimum distribution or face a fifty percent excise tax on any remaining mandatory funds not distributed. However, as many contract values have diminished over the course of 2008, individuals may elect to leave funds within the account, avoiding distributions from lower contract values. The Act applies to IRA, 401(a), 401(k), 403(a), 403(b) and 457(b) plans only in the calendar year 2009. RMDs must be taken for 2008 and will resume in 2010.

It will be interesting to see how many individuals choose to take their normally distributed minimums, or leave them invested within the accounts as allowed by the WRER Act. Some individuals have come to rely on the RMD payouts as supplemental income and will continue to receive distributions, regardless of lower contract values. On the other hand, leaving funds invested within the account presents an opportunity for increased payouts during a market rebound, with attractive tax consequences.

Among the firms we track in Annuity Monitor, we have seen online promotions on both the public and private sites for the aforementioned Act. So far, Fidelity, ING, TIAA-CREF and Vanguard have posted detailed online announcements that notify individuals of the relief they can receive for 2009. We do expect more firms to follow suit.