Accrued Contribs Included in Year-End Bal for RMD?

[Guest ResearchGirl]

I have a 5-percent owner who has to start taking RMDs. The plan & plan sponsor file for extension every year and the contributions are often made in August of the following year. Are the participant's accrued contributions included in his 12/31 balance for RMD purposes? This is a profit sharing plan.

[PLAN MAN]

The RMD for 2007, due by 4/1/2008, is based on the participant's account balance on 12/31/2006, for a calendar year plan. The RMD for 2008, due no later than 12/31/2008, will be based on the account balance on 12/31/2007.

[Guest ResearchGirl]

...but, are contributions due to the participant for 2007 but not paid into the plan until 2008, included in the 12/31/2007 account balance? Using accrual accounting, the contribution would be reflected on his participant statement.

[PLAN MAN]

Aren't you concerned about the contributions made in 2007 for the 2006 year, too? You should check the plan document to determine if there is language that requires the accrued contributions to be included in the account balance for RMD calculations. I believe under the current IRS regulations a plan may, but is not required to, include these contributions.

This IRS regulation may be helpful:

§ 1.401(a)(9)-5 Required minimum distributions from defined contribution plans.

Q–3. What is the amount of the account of an employee used for determining the employee's required minimum distribution in the case of an individual account?

A–3. (a) In the case of an individual account, the benefit used in determining the required minimum distribution for a distribution calendar year is the account balance as of the last valuation date in the calendar year immediately preceding that distribution calendar year (valuation calendar year) adjusted in accordance with paragraphs (b) and © of this A–3.

(b) The account balance is increased by the amount of any contributions or forfeitures allocated to the account balance as of dates in the valuation calendar year after the valuation date. For this purpose, contributions that are allocated to the account balance as of dates in the valuation calendar year after the valuation date, but that are not actually made during the valuation calendar year, are permitted to be excluded.