RMD & Change in Ownership

[austin3515]

Got a 5% owner participant who turned 70.5 in May 2010. He will be selling his ownership interest in the next week or so.

Is he required to take a minimum distriubtion? It becomes a critical question since I've learned once you're treated as passing your RBD as a 5% owner, you are alwasy considered a 5% owner. And his RMD's are a lot...

All I can find is references to be a 5% owner "for the plan year"

What I've found so far. It doesn't seem to say "at any time during the year" anywhere:

1.401(a)(9)-2 A-2©:

© For purposes of section 401(a)(9), a 5-percent owner is an employee who is a 5-percent owner (as defined in section 416) with respect to the plan year ending in the calendar year in which the employee attains age 701/2.

416(i)(B)

(B) Percentage owners

(i) 5-percent owner For purposes of this paragraph, the term “5-percent owner” means— <A name=i_1_B_i_I>(I) if the employer is a corporation, any person who owns (or is considered as owning within the meaning of section 318) more than 5 percent of the outstanding stock of the corporation or stock possessing more than 5 percent of the total combined voting power of all stock of the corporation, or http://' target="_blank">(II) if the employer is not a corporation, any person who owns more than 5 percent of the capital or profits interest in the employer

[Tom Poje]

my understanding is 'yes', min distribution still required. especially since 416 (1)(A) says 'key employee' means anyone who at any time during the plan year...owned 5%

since you indicated the distributions would be sizable, you probably would be wise in reminding the individual the tax consequences involved if you delay the first distribution until 2011.