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RMD Question for 5% owner


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We have a plan where the owner (more than 5%) started to participate in the plan when she was 72 years old (in 2015). When would be her RBD for the first RMD distribution?

 

In 2015, she made some contributions, but had no required RMD, because her 12/31/2014 was $0 in the plan.

 

In 2016, she is required to take an RMD because she has a 12/31/2015 balance. Does her first RMD in the plan have to be processed by 12/31/2016 or 4/1/2017?

 

This seems like a unique situation because the owner started to contribute to the plan after turning 70 1/2. The regulations state that the RBD for owners is April 1 following the year in which the owner turns 70 1/2. However, would be RBD for this participant (who at the time of the first RBD) is over 70 1/2 be April 1st of the following year or 12/31/2016 of the same year since the participant is over 70 1/2 at the time of the first RMD?

 

Thank you.

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I have always thought you should do 12/31/2016 for the following reasons:

1)  I think the first year was 2015 so they had to 4/1/2016 to get the $0 payment made by if you get my meaning

2) It is safer.  I mean how big can the RMD be if they have had 1 or 2 contributions?  So if you do it by 12/31/2016 will it impact much on their personal taxes?  If you do it 4/1/2017 and get it wrong now there is a 50% excise tax and a plan qualification issue.  Risk/return say 12/31/2016 to me.

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as a side note, or as back up, or whatever

I would add the following

1.401(a)(9)-2 A2 …the calendar year in which the EMPLOYEE attains age 70 ½…

so the regs say employee not participant, so it doesn't appear to matter the person in question was not a participant on 12/31/2014

1.401(a)(9)-5 Q8

what the heck happens if the person is not vested? (ok, I paraphrased a little)

A8 - only the vested portion is required to be distributed (hence, if 0, then 0)

HOWEVER, the required min distribution MUST (under penalty of torture) be increased by the sum of the amounts not distributed in prior calendar year's because the employee's vested benefit was less than the required minimum distribution.

granted in your case if the balance was 0, then obviously no increase for prior distribution not made. but if there had been a balance and the person was 0% vested then you have to carry forward stuff. I suppose that could happen if you have 65/5 for being fully vested, or something like that.

 

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