70 1/2 Minimum Distribution

[Guest Richelle]

With the recent changes in the 70 1/2 Minimum Distribution laws I understand they no longer HAVE TO take a distribution but I am questioning whether an individual over the age of 70 1/2 that has no ownership and is still working CAN take a distribution from their plan? If so, can they take the full amount, partial or only the minimum distribution?

[Guest Robin Vatalaro]

I think whether a participant can take an in-service withdrawal after attaining a certain age (e.g. 59 1/2) depends on the language in the plan document. I handle many 401(k) plans and some documents allow these withdrawals and some do not.

[elleny]

What is the "last valuation date" for a fiscal year plan for purposes of the "account balance as of the last valuation date in the calendar year immediately preceding any distribution calendar year" under 1.401(a)(9), Q&A F-5A?

If you have an April 30 year end and do semi-annual valuations, can you use Oct. 31 or do you have to make the adjustments in the regulations?

If the adjustments are not required, what is the authority for this?

If the adjustments are required, how do you adjust for a profit sharing contribution to be determined as of April 30 of the following year?

Please cite authorities on all responses.

Thanks.

[Guest kp]

A savings plan allows regular withdrawals from the plan at any time (not a loan or hardship). If the plan keeps the 70 1/2 rule that mandates distributions what happens in the following example? Employee, age 69 takes a regular withdrawal. Does that withdrawal count towards the minimum required distribution under the age 70 1/2 rule? How do the hardship and loan rule affect this? Reg cites? Other authority?

[Guest karthur]

When is the initial minimum required distribution date for a participant, also a 5% owner, over age 70 1/2, for a first year plan?

Ex. If a plan becomes effective January 1, 1996 and a participant attains age 70 1/2 during that year, is the first required minimum distribution April 1, 1997 or, is the distribution date extended, because there is no account balance for the period ended December 31, 1995, until April 1st of the following year?

[Tom Poje]

My understanding is that it shouldn't matter if there is no account balance. The ees required begining date is 4/1, with a distribution of 0. (What if ee had a balance but was 0 vested- his minimum distribution would still have to be 0)

And it is not a matter of being a moot point. Suppose ee elects not to recalc. Then the required begining date makes a big difference!

[Guest DaveB]

A profit sharing plan terminates, distributes and files the final 5500 in 1998. It is later discovered that a non-owner participant turned 70 1/2 in 1998. The participant has previously rolled over his entire distribution. The plan document was not amended to allow non-owners to forego their 401a9 distributions. Is there any way to allow the distribution from his current IRA???

[Alonzo]

Your 70-1/2 participant does not have a problem, since his entire distribution is an eligible rollover distribution. There is an IRS Notice from late 1996 to this effect.