Required Minimum Distributions. Lump Sum

[Gary]

An owner of a company has been receiving an RMD for several years and is now age 77. He is still actively employed by his company.

He is interested in receiving a lump sum now.

To my knowledge, he would either have to retire or terminate his plan in order to do so. This is set forth in 1.401(a)(9)-6 Q&A 13.

Does anyone know of a way he can receive his pension as a lump sum and remain an employee? Conceptually it does not seem like a radical payment form, as long as he takes at least the RMD and rolls over the rest to an IRA.

Any thoughts?

Thanks.

[david rigby]

Does the plan permit distributions to any participant who is over NRA, even if still employed?

[Gary]

The plan provides for the RMDs if over 70 1/2.

The plan is a one participant plan, where the participant is the owner.

The plan can be amended to provide for the desired payout.

So I am interested in the legality of the payout I presented above.

[Gary]

As another alternative payment. If provided in the terms of the plan, is an annuity option defined as being an annuity where such payments are made annually in an amount that is at least as much as the RMD and no more than the single payment lump sum amount at such date.

So in other words a person with an annuity of say $50,000 (assume the plan is frozen for purposes of this exampple) begins receiving this amount at his RBD and then subsequently receives say 50,000 again the next year then 70,000 the following year and then say a lump sum of his remaining pension of 250,000.

Anything wrong with this type of payment stream, assuming, of course it doesn't violate 415? Where this funky payment stream is in accordance with a very flexible payment option allowed and provided for by the plan.

Thanks.

[JAY21]

I see nothing wrong with funky annuity stream or the entire lump sum distribution if the plan has the in-service (post-NRA) distribution options that include all these variations.

[david rigby]

ditto