Refuse RMD - Now What

[BenefitsRUs21]

A participant in the cash balance plan refuses to cash his RMD.  He even sent the check back to the plan.  I am not sure how to proceed.  I know the IRS has issued guidance regarding missing participants with respect to uncashed RMDs, but in this case, we know of the participant, he just refuses to cash his check.

[C. B. Zeller]

There were some good ideas in this thread last year:

 

[jpod]

Yes, no qualification problems for the plan.  I would send the check back to him with a CYA letter.  If he sends it back to you again I would stick it in the file with an explanatory note (for your plan auditor, if applicable, and in the event of an IRS or DOL examination).  Do not skip subsequent year's RMDs just because you expect the same result.   

[CuseFan]

Thanks CBZ, I was going to repeat that. Send, withhold taxes if required, re-issue checks if necessary, issue 1099-R's and repeat annually - that is the plan's obligation. A letter/notice to participant from the IRS might change his/her disposition but until then, the plan needs to comply even w/o cooperation.

[david rigby]

A brief caution: make sure (when returning the check) that you emphasize the nature: spell out Required Minimum Distribution, as well as the taxability.  (Perhaps this has already been done, just being cautious.)

[Mike Preston]

This whole thread reads like the RMD is being paid from a DC plan, not a cash balance plan.  Sounds to me like the participant gets the normal form distribution as required by 1.401a9-6. Hope the election forms indicated same.  Anything else is just creating a bigger problem for the future when somebody comes in that knows what they are doing.

[ACK]

I would be inclined to point out to the participant that his failure to take the REQUIRED distribution will result in a 50% penalty and that   he needs to  complete a Form 5329 and send the applicable fee to the IRS.  That might get his attention and make him decide to cash the check :)

 

[BG5150]

23 hours ago, CuseFan said:

Thanks CBZ, I was going to repeat that. Send, withhold taxes if required, re-issue checks if necessary, issue 1099-R's and repeat annually - that is the plan's obligation. A letter/notice to participant from the IRS might change his/her disposition but until then, the plan needs to comply even w/o cooperation.

No "if" involved with the taxes.  You must withhold 10% if the participant does not give you a W-4P (or equivalent).

[fmsinc]

Perhaps I am missing something, but I don't see anything on the IRS website that requires a RMD from a cash balance plan.  See https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-required-minimum-distributions

And if this is truly a cash balance plan the Participant would have an option to take his payments as an annuity.  

And a cash balance plan is a form of defined benefit plan per the DOL ESBA - https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/cash-balance-pension-plans

Some people online have suggested that RMD payments from a "cash balance plans" are really just annuitized payouts based on single line annuity actuarial tables after age 70 and 1/2.  

[Lou S.]

Send him a cashier's check by registered mail?

[david rigby]

2 hours ago, fmsinc said:

Perhaps I am missing something, but I don't see anything on the IRS website that requires a RMD from a cash balance plan. .  

Do you find an exemption in IRC 401(a)(9)?

[Mike Preston]

2 hours ago, fmsinc said:

Perhaps I am missing something, but I don't see anything on the IRS website that requires a RMD from a cash balance plan.  See https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-required-minimum-distributions

Dear Lord, give me strength!

[Mike Preston]

fmsinc, have you read 1.401(a)(9)-6?