RMD started with no election, can method now change?

[John A]

A participant was not given any election form when the required minimum distribution was first due, so the plan administrator paid the amount based on a single life. What should be done currently? Can the participant now change the method? If the participant does change the method, can it be effective only prospectively, or would it be retroactive? Should APRSC be used due to failure to provide the participant with election forms?

[KJohnson]

Under 411, consent is not required to begin MRDs. See 1.411(a)-11©(7).

If you are dealing with a money purchase or defined benefit plan subject to 401(a)(11) and 417 you also may need to pay attention to QJSA rules. For QJSA purposes if a benefit is no longer "immediately distributable," consent is not required to distribute in the form of a QJSA. 1.417(e)-1©.

If a benefit is "immediately distributable" then the propsed 401(a)(9) regs would imply that you have to try and contact the particpant and obtain consent. If you cannot reach them, then you could go ahead and distribute in the form of a QJSA even though this might otherwise violate the consent rules-- Prop. Reg. 1.401(a)(9)-1 H-3.

For a Plan in which the QJSA rules apply, I would think that you would always need consent to begin distributions in a form other than a QJSA.

I guess this is a long way of saying that, depending on your situation, the lack of consent may not be a problem.

As to changes in the form of a distribution, after MRDs have begun, you may need to check your plan document. As long as you are not "slowing down" distributions, I would think that you could make a distribution which exceeds the MRD. For a DB Plan there are certain special rules for annuities.

[This message has been edited by KJohnson (edited 12-02-1999).]

[Dave Baker]

The participant might be stuck, under the rules in the IRS proposed regs -- has he (she) passed the April 1 of the year that follows the calendar year in which he or she attained age 70-1/2?

If so, maybe there's a loophole -- is the individual still working for the company sponsoring the plan, but has a 5.0% or less ownership interest in the company?

[KJohnson]

I realize that there is language in the proposed regs about irrevocable elections as to the form of required distirbution for death benefits, but is there "irrevocable" language with regard to distributions prior to death?

[John A]

I've learned a few more details of the situation. The participant is not a 5% owner and made an affirmative election to start the RMD. The plan is a 401(k) profit sharing plan that is not subject to the J&S rules. However, the participant failed to return the form electing what method to use to determine the amount of the RMD, so the TPA determined the amount on single life, one-age. The TPA is now wondering if the participant should be allowed to complete a form now which changes the method used to determined the amount.

[Guest P A Weick]

If he had a designated beneficiary on his required beginning date the required minimum distribution was to be calculated over his and his designated beneficiary's joint lives. That he was paid previously on a single life does not seem to foreclose a joint life caluculation and payment under the 401(a)(9) Proposed Regulations as you can always withdraw more than the required minimum. However, if he had no designated beneficiary he is stuck with single life.

You may want to check the plan provisions to be sure they do not prevent this.

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