Mindi Transfer From Db To Ira

[Guest SCUDDESLER]

A participant in a DB plan turns 70-1/2 in 2003. The participant is also the sole plan participant and the plan sponsor. He terminated the plan effective as of 12/31/2002. He receives a lump sum distribution from the DB plan as a result of the termination in 2003. He makes a rollover contribution of the entire amount of his DB distribution to an IRA. He must take his first MINDI by April 1, 2004. For purposes of determining his 2003 MINDI (which might be made in 2003 or between January 1, 2004 and April 1, 2004), what account balance is used? Is it the present value of his DB benefit as of the determination date in 2003, even though the distribution is being made from the rollover IRA? Or, is the account balance something else, e.g., the account balance in the IRA at some point in time during 2003? Thank you for your help.

[mming]

I'm thinking it would be based on the results of the DB plan's last valuation in the calendar year immediately preceding the calendar year for which the distribution is being made. In other words, the DB valuation performed during 2002.

As far as which results of that valuation to use, I've seen different actuaries use different methods - some use the participant's PVVAB and divide by the applicable life expectancy multiple, while others just pay out 12 times the monthly benefit (much easier to figure out).

[Mike Preston]

Check out 1.408-8 Q&A 7.

It basically says, if I'm reading it right, that if there wasn't any distribution from the qualified plan in 2003, then you "pretend" that the assets in the IRA as of 12/31/2002 were the amount rolled in, and you calculate the 2003 minimum distribution based on that amount being in the IRA on 12/31/2002.