Required Minimum Distribution in a DB plan

[Dennis Povloski]

I have a client who has his first RMD coming up 4/1/06. The plan is scheduled to terminate in July 2006.

Under the DB plan, he has the option of starting a monthly annuity for the RMD or taking an annual annuity each 4/1.

If he decides that a monthly annuity is the best choice for him, and the plan terminates in July, he has only taken 4 monthly installments from the DB. At this point, if he rolls his remaining lump sum into an IRA, how is his rest of his RMD calculated?

Thanks!

Dennis

[Guest mjb]

I dont understand the issue. What will be the form of benefit when the plan terminates? Will the plan provide an annuity purchased from an ins. co or will the plan pay a lump sum distribution of the value of his remaining benefits. I thought the participant had a right to receive an annuity contract when the plan is terminated because this is the normal form of payment. If the client can elect a lum sum why not pay out the balance to the credit of his account on 4/1 and just withhold the 2006 RMD from the payment allowing him to rollover the remainder of the LSD?

[AndyH]

I think in the latter case the new regs require 2 years of min distribs if a lump sum is taken but otherwise I agree that some clarity would be useful.