Required Minimum Distributions

[Gary]

Say we have a plan that is sponsored by a married couple who fully own (100%) a company.

The other three plan participants are the parents of the couple.

For purposes of determining 5% ownership as applicable to the RMDs, it seems that IRC section 318 provides that the parents would be 5% owners. Let me know if anyone disputes this reasoning.

With that said, it would follow that once the parent reaches age 70 1/2 he would be required to receive his RMD.

However, let's say that the participant enters the plan at age 74 and the normal retirement provisions provide for age 65 & 5th anniversary of participation.

Could the plan provide that the participant can wait until he reaches NRD before being required to receive his RMD?

That is, could the plan enable the participant to defer his pension at least until NRD?

Thanks.

[WDIK]

Could the plan provide that the participant can wait until he reaches NRD before being required to receive his RMD?

I do not believe this is permissible. On the other hand, the plan's vesting schedule is a factor in this situation.

[Gary]

So for example if the plan provided 100% cliff vesting after say 3 years, then since the NRD is 65 & 5, the participant over 70 1/2 would have at least the three years of service to complete?

[WDIK]

That is my understanding.