Retirement Plans Recent IRA Developments The Tax Reconciliation Act provides that in 2010 and thereafter, all taxpayers, regardless of modified adjusted gross income (MAGI), will be allowed to convert a traditional IRA to a Roth IRA.    If  taxpayers convert in 2010, they can elect to spread the income tax liability created by the conversion over the following two tax years.   For example, if taxpayers converted all or part of a traditional IRA in 2010, one half of the taxable converted amount could be included in gross income in 2011 and the rest in 2012, assuming there are no distributions from the Roth IRA during that period.   Converting traditional IRA's prior to 2010 triggers income tax on the taxable amount in the tax year in which the conversion is made.   Once converted to a Roth IRA, the conversion amount plus all income earned will be tax free at withdrawal as long as it's been five years or more since you made the conversion and  you're 59 1/2 or older.   New law waives required minimum distributions (RMDs) for calendar year 2009.    A new law enacted in late 2008 provides that retirement plan account participants, IRA owners, and their beneficiaries do not have to take RMDs for 2009. Thus, taxpayers who can take advantage of this change won't be forced to sell stock or mutual fund shares held in retirement accounts when their value is exceptionally depressed. This change helps retired taxpayers who do not need to rely on their RMDs for living expenses. By not making the RMD for 2009 (or withdrawing less than the RMD) from their qualified plan accounts and/or IRAs, they will wind up with less taxable income for 2009, and, possibly, avoid (or mitigate the effect of) AGI-based phaseouts of tax breaks. They will also have more tax-sheltered amounts to leave to their beneficiaries.  The Pension Act did not waive any 2008 RMDs, even for individuals who were eligible and chose to delay taking their 2008 RMD until April 1, 2009.  RMDs cannot convert to a Roth IRA.   New law requires qualified plans to offer post-2009 rollover option for nonspouse beneficiaries.  A provision in late 2008 legislation requires employer sponsored qualified retirement plans to offer nonspouse beneficiaries the opportunity to rollover an inherited plan account balance to an IRA set up to receive the rollover on the nonspouse beneficiary's behalf. This rule will become effective for plan years beginning after 2009. Until then, under current rules, qualified plans may, but are not required to, offer nonspouse beneficiaries this rollover option. The rollover option will give much-needed flexibility to those who inherit retirement plan accounts from someone other than their spouse, (such as a parent, an uncle, or a same-sex partner).