Plan termination - RMD

[doombuggy]

I have a mom & pop plan that came in yesterday to tell us they are going to retire and close the business. "Pop" started receiving RMD in 2010. "Mom" will turn 70 1/2 next month. I do not anticipate having the plan terminated by 1/17/12 when she turns 70 1/2, so I am running with the assumption that she will need to take an RMD out of the 12/31/11 balance of her prortion of the assets and then the rest can be rolled over (or whatever she decides). Already planning on doing an RMD for "pop."

If they had come to us a month ago and I had been able to terminate the plan and liquidate the assets before she turned 70 1/2, could she have avoided the RMD for 2012 (her first year)?

they will complain about the 4 distributions and I wanted to make sure that terminating the plan was not a way she could avoid an RMD.

Thanks for your thoughts!

[pmacduff]

I think her first RMD could be delayed as late as 04/01/2013 per the following from the IRS website, does this help?

"An account owner must take the first RMD for the year in which he or she turns 70 ½. However, the first RMD payment can be delayed until April 1st of the year following the year in which he or she turns 70 ½. For all subsequent years, including the year in which the first RMD was paid by April 1st, the account owner must take the RMD by December 31st of the year."

[masteff]

But to clarify what pmacduff cited... it would only have delayed it, not avoided it. Since you can't delay because of the planned termination, she could delay by rolling in full to an IRA prior to 12/31 of this year. But she'd still have the same number of distributions and same amount of MRD in the long run.

[pmacduff]

masteff is correct - I wasn't citing to "avoid" RMD but perhaps a way that the plan wouldn't have to deal with the RMD before termination.

[doombuggy]

I won't be able to terminate the plan that fast. They have assets in 2 places which I don't get the monthly or quarterly financials from, so the assets won't be liquidated until sometime in February, most likely.

My thought about taking the RMD with the termination, while it is early, it's based on the 12/31/11 plan account asset for her. I am concerned that if I tell them she'll need to take it out of the IRA at a later date, it will never get done. She made a deposit of $1700 into this plan in April of 2007, told me in February of 2008 that it was meant for her IRA and has yet to move it! You see where I am going with this....

On the flip side, if I tell her the amount of the RMD she'll need to take by 4/1/13 and she doesn't do it, not my problem.....