Minimum distribution requirement for initial Plan Year

[Guest haydenks]

A 73-year old owner-employee establishes a profit-sharing plan on 12/31/98 with an effective date of 1/1/98. The initial Plan Year contribution is not made until 3/15/99. What,if any,is the minimum distribution requirement for this owner-employee for 1998?

Thanks for any assistance!

[Guest Mike Burmeister]

The amount to be distributed in a given year is determined by dividing the participant's balance at the close of the previous calendar year by the applicable factor. To do the calculation for 1998, you would look at his 12/31/97 balance, which was 0. Since I am not aware of any exceptions for initial plan years, I would say that this individual doesn't have any distribution requirement for 1998.

[Dan]

I agree with Mike's post.

[Guest Mike Burmeister]

The way I read those proposed regs is that we are still talking about the 12/31/97 account balance - on an accrual basis. Contributions made for 1997 after the close of 1997 are the ones that need to increase your 12/31/97 cash account balance. The examples in F-5 support this interpretation - only consider adjustments attributable to that year (1997), regardless of when made.

[david shipp]

Take a look at prop. reg. 1.401(a)(9)-1 Q&A F-5(B)

"The account balance is increased by the amount of any contributions or forfeitures allocated to the account balance as of dates in the valuation calendar year after the valuation date. Contributions include contributions made after the close of the valuation calendar year which are allocated as of dates in the valuation calendar year."

[david shipp]

Mike,

you are, of course, correct. My y2k breakdown came 8 1/2 months early.