Required distribution?

[richard]

Can you delay the mandatory distribution (age 70.5) for an owner if he is not vested in his benefit?

Consider a business with a 5% owner who is an active employee and is over age 70.5. He must start his pension (or profit sharing plan) distribution by the April 1, etc. I don't see a problem with him making deductible contribution at the same time as him making a mandatory distribution.

Let's say he just started the pension plan (and has never had one in the past). If we use a vesting schedule, we could generally delay his mandatory distribution until he is vested (or at least partially vested), right?

However, participants automatically become fully vested upon attainment of normal retirement age. If normal retirement age in the plan is age 65, he would already be fully vested, therefore he would have to start his distribuition, right?

But, if the plan's normal retirement age is the later of age 65 and 5 years of participation (thus ignoring all prior service), the full vesting wouldn't automatically occur for 5 years.

So, would a age 65 / 5 years of participation together with a vesting schedule (let's say 5 year cliff vesting, assuming the plan is not top heavy) effectively delay his mandatory payout for roughtly 5 years?

[Larry M]

yes, an individual can not receive a benefit until he or she has a vested interest in the benefit.