The Worker, Retiree, and Employer Recovery Act of 2008 (WRERA) provided a waiver of the requirement to take Required Minimum Distributions (RMDs) for the 2009 plan year. The Retirement News for Employers – Winter 2010 Edition provides an example, noting that the first amounts distributed are RMDs from earlier years not yet distributed, followed by RMDs in the current year:

I am retired and I turned 70½ last year. I received a payment from my former employer's defined contribution (DC) plan on January 30, 2010. Can I roll over this payment?

Maybe. You may only roll over a payment from a DC plan if it is an eligible rollover distribution (ERD). Certain payments from qualified plans, such as required minimum distributions (RMDs) and substantially equal periodic payments (SEPPs), are not ERDs and, therefore, may not be rolled over.

Since you turned 70½ last year and are retired, under normal circumstances you would have had to receive an RMD for 2009 by April 1, 2010. However, the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA) waived 2009 RMDs from IRAs and most DC plans, such as profit-sharing, 401(k), 403(b) and governmental 457(b) plans. WRERA did not waive 2010 RMDs and, therefore, you must take a 2010 RMD based on your December 31, 2009, account balance by the end of 2010. To determine which payments from a plan during a calendar year are RMDs, Treasury Regulation §1.402(c)-2, Q&A-7 provides that the first amounts distributed are RMDs from earlier years not yet distributed, followed by RMDs for the current year, until the amount distributed equals RMDs due through the end of the current calendar year.

Applying this rule to your case, if the January 30 payment was the first payment you received from the plan in 2010, you must first apply the payment to the 2010 RMD (because, due to WRERA, there was no RMD for 2009). If the January 30 payment is more than your 2010 RMD, the excess may be rolled over, assuming it is not a SEPP.

Also note that ERDs are subject to mandatory 20% withholding, under Code §3405(c), on the amount includible in income if not rolled over in a trustee-to-trustee transfer.

Mandatory 20% Withholding Applies to 2009 RMDs Paid in 2010 notes that while all 2009 RMDs are eligible rollover distributions (ERDs), 2009 RMDs paid prior to January 1, 2010 are subject to the 10% optional withholding rules (per IRC Section 3405 - Special rules for pensions, annuities, and certain other deferred income) and 2009 RMDs paid in 2010 are subject to the mandatory 20% withholding rules (per IRC Section 3405 - Special rules for pensions, annuities, and certain other deferred income).

Mandatory 20% Withholding Applies to 2009 RMDs Paid in 2010

The Worker, Retiree and Employer Recovery Act of 2008 (WRERA) permits participants in defined contribution plans to waive required minimum distributions (RMDs) for the 2009 plan year. Any recipient of a 2009 RMD can roll over that amount to an eligible retirement plan or an IRA. 2009 RMDs paid prior to January 1, 2010 were subject to optional withholding rules. However, RMDs paid between January 1, 2010 and April 1, 2010 are subject to the mandatory 20% federal income tax withholding that applies to eligible rollover distributions.