Required Minimum Distribution for 5-percent Owner????

[Guest RMM]

Assuming the plan year is a calendar year. A plan participant was a 5% owner on 3/99. On 5/99 his company was sold and he was no longer a 5% owner. The former 5% owner turned age 70.5 after 5/99. He continues working and wants to defer receiving minimum distributions.

Is this person a 5% owner "with respect to" the 1999 plan year? If he is, then he must begin receiving distributions by April 1 of 2000. However, he was not a 5% owner at the time he turned 70.5 or subsequent. I think the correct answer is he cannot defer receipt of minimum distributions, but I could not find an answer in the regs, notices or committee reports which confirmed that. Any thoughts? Thanks.

[Guest]

see reg 1.401(a)(9)-1,B-2(d)(1)

which basically says you are still considered a 5% owner even if you cease to be a 5% owner in a later year.

(remember, these are proposed regs, and there was nothing new in SBJPA indicating any change)

I think you would agree the fact he sold the ownership during the year has no effect on anything. a 5% owner is someone who ownns more than 5% ANYTIME during the year.

[John A]

Did this rule change under the finalized RMD regs?

[mbozek]

The attribution rule only applies if the 5% owner continues to be an employee of the employer whgo maintains the plan. If the employer is sold to an unrelated employer and the former sponsor ceases to exist then the employee is not a 5% owner under the regs.