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I have a combo 401(k) PS/CB. Owner died unexpectedly in December 2022 while in his 50's. He has no spouse, children, or completed beneficiary forms. His parents (in their late 70's) are the beneficiaries for both plans. There was some up in the air, but now both plans are being terminated. My question is on RMDs. Are the parents required to take RMDs from the plans due to their ages or not since the owner was not of RMD age? The plans should be paid out by the end of 2023 or early 2024. There will be required payments from the inherited IRAs, but that is outside the plans. I am more concerned that while the plans are open, the RMD rules are being followed.

Participant (80 yo) took an RMD in 2022 and a total distribution in 2022. His 2022 profit sharing deposit went in in August 2023. Now rolling that amount out of the plan. No 2022 balance to calculate his 2023 RMD prior to the rollover. What's the procedure? TYIA!

Just received this question from a CPA friend. One of his tax client who was a 5% owner in a small consulting firm (about 5 years back) and then reduced his ownership to 2% later. He received RMD while he was a 5% owner. Since then he never received any RMD from the plan (for 5 years). Recently he received a letter from the TPA that he missed taking his RMD for the past 5 years and they will be processing all of his RMDs and he will owe taxes and penalties (for failure to take RMD) as well as the TPA has told this participant that the plan now has a compliance failure and that needs to be corrected and said that they (the TPA) will bill him about $5,000 for the filing fee + TPAs fee. What should be the response by the participant.

I need some help with this. Participant turned 70 1/2 on 11/16/2019. DOT 12/31/2003. Deferred RMD to 4/1/2020. RMDs were suspended in 2020. Did not take one in 2021. Should the first one have been in 2021? Thanks in advance!

A defined contribution plan has an age 72+ Active Participant who is not a 5% owner, who would like to receive an in-service distribution which the plan permits. Required Minimum Distributions are generally required for non-5% owners in this plan upon the later of the year that he or she reaches 72 (70 ½ if you reach 70 ½ before January 1, 2020), or, the year in which he or she retires. Q: The question is whether or not a Required Minimum Distribution is necessary since the Active Participant is beyond Age 70.5/72 but has not retired and does not intend to retire this year?

i put this out here once before but struggle with the right answer. I have a participant over age 72 that passed away in 2020. Non owner – The RMD was waived in 2020 His spouse (beneficiary) passed away in 2021. She was over age 72 as well. Money is still in the participants name in the plan. The plan is terminating, assets will be rolled over to an inher IRA The 3 children are the beneficaries. RMD is required for 2021, based on 12/31/2020 value. I am trying to figure whose age I would based the RMD on. Owner? Spouse or oldest child? Any thoughts? Thanks, I appreciate your help.

We have a situation where a participant erroneously took their first RMD in 2020 because they met the old rule's requirement for RMDs rather than the new one. Is she required to continue taking an RMD annually even thought she isn't 72 yet? For reference: DOB: 4/1/1950, Retired 12/31/2019, Took RMD 2020. On the one hand, she isn't aged 72 yet (which is her RMD age), so I would think it's not necessary to continue her RMDs this year. But on the other hand, we haven't had a problem like this before so I figured I would see if others had any input. Thanks!

A QDRO alternate payee has left their transferred balance in a qualified group 401k plan, essentially becoming a non-contributing participant. assets were transferred during 2018, and the alternate payee was already over 70 1/2. does the alternate payee take a 1st RMD from the plan for 2019, by 12/31/19 or by 4/1/20? thanks for any guidance!

Hypothetical: Non-5% owner is age 75 and rolls 100% of balance to IRA in May 2019. Terminates employment in August 2019. It seems there may be an RMD requirement. But if he had not terminated employment there would be none. Another example: Non-5% owner 70 years old retires in April 2019. He will turn 70 1/2 in November 2019. He requests 100% rollover in July. I don't believe there is any question - he must take RMD and rollover the balance in July even thoguh not yet 70 1/2.

A vested terminated participant has been taking RMDs the last few years from the qualified DC plan using the ULT table (the one that assumes a 10-year younger spouse). Suppose this year we are told that, all along, their spouse (and designated beneficiary) is actually 20 years younger than they are. Does that mean the joint table (with its larger divisor factors) is required to be used for determining the RMD? If so, was 20% mandatory withholding missed on the non-RMD portion of the amount distributed for the prior years because those amounts could have been rolled over?

Is there an additional requirement that if an Owner who is LESS than a 5% owner, over age 70 1/2 and is still employed MUST take RMDs because they are in a "position of control" with the Plan Sponsor/Employer? The TPA is stating this to our client, but I haven't been able to easily find anything requirement this by the IRS. Perhaps it's a Plan Document requirement? Trying to find an answer for the Owner/Employee. They actually serve as the "Chairman of the Board". Not really sure how much "control" they really have. Your help is greatly appreciated!

Hi to All, BACKGROUND: I have a very difficult client who is already perturbed with me because we can't process her RMD for free, we can't give it to her in quarterly installments, and we can't endorse a rollover of all her assets into her IRA and THEN taking her RMD. All of my research indicates that she must take the RMD first and then roll the remainder from the 401(k) to the IRA. She is terminating her plan effective 05/31/2019; her date of birth is 08/26/1948; she turned 70.5 on 02/26/2019. QUESTION: Her RMD is a bit over $31,000. She has called several times insisting that when it is processed, her broker will send $10,000 straight to the United Way, tax free, and the remainder which is of course taxable, will go to her. Now that I go to actually research and try to accommodate her wishes, I am finding that this is not permissible. According to my research, she could have done this out of an IRA, but not out of a 401(k). Do any of you know any way that she can somehow avoid taxation on the portion she wants to donate to charity? Can she recoup it somehow when her 2019 personal taxes get prepared next spring? Thank you for any observations or advice.

Good morning to all, A client has posed an interesting question that I do not see addressed in our version of the Distribution Answer Book nor Sal's encyclopedia. John will turn 70.5 on July 7, 2019. Although he could delay until April 1, 2020, he wants to take his first RMD in 2019. His question: Does he literally have to be 70.5, thus taking his first RMD after July 7, 2019, or is any date in 2019 okay (like tomorrow for instance)? My first instinct is to think that any day in 2019 should be fine, but I don't know that for a fact. Thank you in advance!

Question for my fellow admins. I know that 10% withholding is required on RMDs, but in practice do you withhold 10% unless the participant completes a W-4P, or do you process the RMD with no withholding unless the participant tells you otherwise?

Good morning to all, Something new to us came up this morning. We put in a good number of brand new 401(k) plans in 2018, with effective dates of 01/01/2018. Therefore nobody in those plans had an account balance at 12/31/2017. If a 73 year old employee made salary deferrals in 2018 to his employer's new plan and then quit during the year, must he take a RMD before 12/31/2018? What would the distribution be based upon, since there was no balance at 12/31/2017? Same concept if it was a working owner of the business: a 73 year old owner installs a new 401(k) plan in 2018 and makes salary deferrals. He's still working at 12/31/2018, but because he is the owner, he would normally have to take a RMD by 12/31/2018. What is it based upon, since there was no balance at 12/31/2017? At first blush we thought maybe they don't have to take one until 2019, but nothing is ever that simple or easy. Advice as to what the rest of you are doing will be greatly appreciated!

An IRS agent wants an EZ filer to change to full 5500 filing with schedules, because sole participant takes RMD and has non-standard asset (private loan). I don't see that in the instructions for 5500EZ. Any authority for this request?

Participant died in 2001. Spouse continues the MRDs each year until she dies in 2007. Daughter continues RMDs each year based on the life expectance of the spouse as of the spouse's birthday in the year of death, reduced by one each year. Spouse's single life expectancy in 2007 was 11.4. Therefore, factor for 2018 is 0.4. I am assuming this converts to 1.0. For discussion purposes, account balance at 12/31/2017 was $100,000, and balance as of today is $105,000. My question is, must the daughter close the account in full by 12/31/2018, or can she take the 12/31/2017 balance of $100,000 as the RMD by 12/31/2018, and carry over the earnings each year with continued RMDs on that substantially declining balance?

2018-7-22 the ESOP RMD Question The client is a participant (employee) in a ESOP which holds 100% of the "employer securities" of the Plan Sponsor corporation (employer). A. The client is almost 70 years of age, is currently employed and plans on continuing to work for the corporation until age 75 (W-2 income). The client-employee is presently inquiring regarding possible approaching RMD requirements and distributions. 1. We are informed that if the client-employee continues to be employed beyond age 70 1/2, then RMD distributions are not required until retirement. 2. We are also informed that if the client-employee is a "5% owner", then the exception deferring RMD distributions until retirement may not apply. 3. We are also informed that for purposes of determining the "5% owner" rule of the plan sponsor, the employer securities held by the ESOP are not used in determining the "5% owner". QUESTION 1: Is this correct? And do you have any legal authority or citation on this issue? B. Under the terms of the ESOP plan, the client-employee-participant can be offered a partial or lump-sum distribution of the employer securities (e.g. annually) which, if elected is distributed to the participant by the ESOP as employer securities under a "repurchase-buyback" provision required by the plan sponsor corporation who buys back the distributed shares resulting in the retirement income to the participant ( 1099-R). QUESTION 2 : Can the client received both W-2 income and 1099-R distributions beyond age 70 1/2 as long as he is still employed? Thank you tdslaw@cox.net

A brand new DB plan is started 2-1-2018, plan year ends 1/31. It excludes years of service prior to 2-1-2018 for vesting purposes. Vesting is a 3-year elapsed-time cliff. One participant is also a 20% owner and they are 71 years old now. The owner becomes fully vested on 1/31/2021. The first RMD is the accrual on 12/31/2018, but it is not vested, so it gets added to the next year's RMD. The second RMD is the accrual on 12/31/2019 plus the prior unpaid (nonvested) RMD, but it is still not vested, so it gets added to the next years' RMD. The third RMD is the accrual on 12/31/2020 plus the prior amounts, but it is still not vested, so it gets added to the next year's RMD. By 12/31/2021, the participant must take the distribution of their RMDs. They terminate in 2021 and elect a lump sum payment. The RMD for a full lump payment can be calculated using the "Account Balance" method (like a DC plan). Can all of these RMD's be determined using the account balance method, or must the 3 prior year's RMDs be based on the DB annuity calculation method?

I have a client with a company that sponsors a 401(k) plan, The company also sponsors a Supplemental Retirement Plan for owners and select HCEs and managers. One of the owners is turning age 70 1/2 and must take an RMD from the qualified plan. Is there any requirement for RMDs from the SRP?

IF a participant's termination date is 12/31/17 but he is employed on that date , is his first calendar year for rmd 2017 or 2018? Seems like a simple answer but we have bot opinions in the office. PPT is 70 1/2 in 2017

We filed a VCP for late RMDs in May. Case has not been assigned. Waiver of excise tax requested but what do you recommend we tell the distributee regarding his tax return due April 15? Doubtful we will have an answer by then. Considering giving him a letter to attach to his return.

Hi folks, I've been reading these boards for a while, but this is my first post. Client has a DB plan (professional 100% owner and one other employee, not subject to PBGC). The owner reached age 70.5 in 2016 and received his first RMD in 2017 slightly before the required beginning date of April 1. The payment was a year's worth of accrued benefit (normal DB RMD paid annually). Per 1.401(a)(9)-6, A-1(c)(1), if the plan was ongoing, his next annual distribution should be made around that same date in 2018. However, he terminated the plan in 2017 and is an electing a lump sum at plan termination. Since it is the year of termination, I believe he can take his 2017 RMD via the account balance method using his lump sum as the balance. His employee only recently received her distribution materials and may not have made her payment election before the end of 2017, so we don't know the cost to the plan for her benefit yet (could be her calculated lump sum or an annuity contract purchase at an as-yet unknown price). Barring a large gain in plan assets at the last minute, the plan will not have enough assets to pay the owner's full lump sum, so he will forego some of it to the extent necessary. He does not want to make an additional contribution to allow the plan to pay his full amount. Therefore, we likely will not be able to calculate his RMD before the end of 2017 since the "account balance" is not yet known. Question: Does the fact that we are using the account balance method for the 2017 RMD shift the payment due date to the end of 2017, or would it still be considered timely if he takes it by March of 2018 (one year after the first annual RMD was paid)? We're aware that the RMD should be excluded from any rollover to an IRA.

I apologize, I don't have as much familiarity with DB plans as I do with DC plans, so if there is another thread that answers my questions, or website, or reference material somewhere, please point me in that direction. Plan Information Traditional DB plan, does not allow distribution prior to NRA, nor does it appear to allow for single lump sums( don't ask me why, its a convoluted individually designed document, I had nothing to do with it, it came to me that way). Normal benefit is regular single life, with 50% JS for married participants. Plan has several participants that need RMD - they can't locate them, or in some instances the participants won't respond. I suspect for some of the participants, if they received their RMD check in the mail, they would just cash it. The question is - the plan does not know the participant's marital status - on what basis do they calculate the annuity, and thus the RMD amount? And before you tell me to check the document, it appears to be silent. As I said it is individually drafted and not a typical one at that. We are getting less than clear answers from the actuaries and financial institution. The actuary isn't willing to calculate any sort of RMD without knowing marital status and Date of birth. The financial institution isn't willing to process any sort of RMD without participant consent, which I think is actually a separate issue that we are addressing, but certainly doesn't help matters. If it was a 401(k) plan and I didn't know the spouse date of birth (or even if there was one) I would just calculate and have the plan payout based solely on the participant's DOB. But the actuary doesn't want to calculate the RMD based on a single life annuity without actually knowing, so I'm a bit at a loss. Surely someone else has figured out a way to handle this?

Filing for excise tax refief for missed RMD (through VCP) and struggling to correcting answer this: At least one affected participant is either an owner-employee (see IRC Section 410(c)(3)) or, if the plan sponsor is a corporation, a 10 percent owner of such corporation." Plan sponsor is a partnership. Some partners are professional corporations. Affected participant is the 100% owner of her P.C., which is less than a 10% partner of the partnership sponsoring the plan. For 401(a)(9), she is a 5% owner because Section 416 is cross referenced for that determination and those rules apply ownership test separately for members of the affiliated service group. But it isn't clear to me whether the VCP form question is intended to refer to the partnership that sponsors the plan or would include owners of the P.C.s that are members of the affiliated service group (and related participating employers in the plan). I'm not seeing an answer in either the form or the definition in 401(c)(3). There is no reference to 416 so I am inclined to apply the ownership test only at the partnership level. Can you offer any insights?