Allocation of contribution to over 70 1/2 greater than 5% shareholder

[Guest Ron Grodzinsky]

Can a profit sharing plan that makes discretionary annual contributions, allocate a portion of its annual contribution to the plan to a greater than 5% shareholder who is still employed receiving a salary but is receiving required minimum distributions from the plan since he reached age 70 1/2?

[Chester]

Even though this employee is receiving distributions after reaching age 70 1/2, the employee is still considered an active participant in the plan. You need to check the plan document to see if this participant satisfies the requirements for receiving an allocation; if so, then the employee should share in the allocation of the contribution.