Search the Community

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?

For persons retired and receiving benefits who are over age 70-1/2 at the time benefits are distributed and who elect to rollover the non-employee contribution of their lump sum, is the terminating plan sponsor required to calculate an RMD that cannot be rolled over? If so, do monthly benefit payments made in the year count toward the RMD? If so, would that include both the employer and employee portion? If there are employee contributions being paid in cash that cannot be rolled over, do they count against the RMD?

I'm sure this has been discussed before, so if someone could point me to earlier discussions, I would be grateful. I know that 'retire' isn't defined under the 401(a)(9) regulations. Is there any guidance out there that might help determine whether someone who has greatly reduced his work schedule and responsibilities has retired for RMD purposes? He hasn't ever stopped working for the employer completely and has no plans to stop. Thanks

I have a question about determination of 5% owners for purposes of RMD rules. Law firm partnership has a 401(k) profit sharing plan. Several partners have P.C.s that have adopted the plan as participating employers. The owner of one of these P.C.s has just attained age 70 1/2 in 2015. He owns less than 5% of the partnership by capital interest or profits, but of course own 100% of his P.C. For testing purposes, all of the employers of the plan are aggregated under 414(m). Does aggregation apply for determining 5% owners for 401(a)(9) purposes? 5% owners are defined as under the top heavy rules, and aggregation applies for top heavy, but does that mean aggregation applies and only those who own 5% of the partnership are treated as 5% owners for RMD purposes? Put another way, is this partner's first distribution calendar year 2015 or will it be deferred until the calendar year in which he retires?

An individual is a less than 5% owner when he turned 70 ½. As such, under the terms of the plan the participant does not have to commence required minimum distributions. The regulations under 1.401(a)(9)-2 provides that for purposes of Section 401(a)(9), a 5% owner is an employee who is a 5% owner (as defined in Section 416) with respect to the plan year ending in the calendar year in which the employee attains 70 ½. The individual continues to work for the Company and has not taken any distributions. Due to a reorganization of the Company stock, he becomes a 5% owner at age 74. The question is, since he was not a 5% percent owner when he turned 70.5 is he still exempt from taking required minimum distributions now at age 74 while he continues to work or must he commence taking minimum distributions.

Active Participant will attain 70 1/2 in 2014. He currently owns more than 5% of profits interest, but he will reduce his ownership by 12/31/13 to not more than 5%. Plan Year = Calendar Year. No RMD for 2014 if he continues working. Suppose in 2015 he continues working, but increases ownership to greater than 5%? Literal reading of 1.401(a)(9)-2 Q&A 2© says no required minimum distribution as long as he continues to work because the ownership test is done in the year of attaining 70 1/2. "© For purposes of section 401(a)(9), a 5-percent owner is an employee who is a 5-percent owner (as defined in section 416) with respect to the plan year ending in the calendar year in which the employee attains age 70 1/2. " Agree that if he isn't a 5% owner in 2014, becoming a 5% owner later won't matter for RMD purposes?