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ESOP Distribution and RMD

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2 replies to this topic

#1 MoShawn


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Posted 09 June 2011 - 08:53 AM

Trying to calculate the amount for distribution for a terminated employee age 71 in 2011. Plan has a 5-year payout schedule for terminees (1/5 per year).

Account balance at 12/31/10 is $25,000.
Plan formula (for year 1) yields a distribution amount of $5,000.
RMD amount would be approx $945.

I am unsure whether the individual should receive both amounts, or receive the $945 as ineligible for rollover then the remaining $4,055 as an eligible rollover distribution. I do not see language in the document that addresses items such as this. Thoughts?

#2 QDROphile


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Posted 09 June 2011 - 10:28 AM

If what you say is true, the plan sucks. Take it up with the person responsible for plan terms and the fiduciary repsonsible for interpreting the plan. But read very carefully. It is very unlikely that the plan requires a regular distribution and an additional amount relating to the 401(a) (9) required distribution. The regular distribution for the year probably covers the required distribution and part is not rollable. It may help to keep in mind that the required distribution provision in a plan are often mindlessly drafted to conform to the statutoty requirements and thrown into the plan separately withot integration with the regular distribution provisions, subject to some hard-to-understand qualifying language about how the required distribution provisions provide only a minimum floor for distributions. ESOPs in particular are not drafted to implement separately the required distribution amounts.

#3 GMK


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Posted 09 June 2011 - 10:29 AM

receive the $945 as ineligible for rollover then the remaining $4,055 as an eligible rollover distribution.

This one. The first moneys distributed are deemed to be RMD until the RMD amount is covered. The rest is rollover eligible.