70-1/2 MRD - special situation

[flosfur]

Is there an MRD in the following situation:

A new DB plan is established for 03/04 with PYE 01/31/04. The valuation date is EOY and is 01/31/04. The principal is 75 in 2004.

Under the 401(a)(9) regs, for computing the MRD, the account balance (PVAB in this case) to use is the balance @ the valuation date in the year preceeding the year of distribution.

The year of distribution is 2004 and the year preceeding is 2003 but there was no valuation in 2003!

Thanks.

[Belgarath]

I would say you have no required distribution for 2004.

[WDIK]

The plan's vesting schedule, if chosen carefully, can also plan an important role in the amount of future required distributions.

[flosfur]

The plan's vesting schedule, if chosen carefully, can also plan an important role in the amount of future required distributions.

Assume vesting is 100% immediate - is there an MRD for 2004?

[Blinky the 3-eyed Fish]

Your logic is correct. No valuation in 2003, no MRD for 2004. The vesting issue WDIK mentions is the use of cliff vesting and excluding YOS for vesting prior to the plan's effective date. That way the vested balance is 0 for a few years and you further delay the RMD's. Of course watch out for those pesky predecessor plans.