Cash Balance and RMDs

[rcline46]

How do we compute RMDs from Cash Balance plans?

Do we do annuity calculations like regular DB plans?

Do we do factor calculations like DC plans?

Oooooh - good questions.

[mbozek]

How do we compute RMDs from Cash Balance plans?

Do we do annuity calculations like regular DB plans?

Do we do factor calculations like DC plans?

Oooooh - good questions.

I thought that CB plans are deemed to be DB plan for distributions, e.g., annual benefit at retirement under plan formula and under reg. 1.401(a)-9-6 the MRD would be the amount of the annual benefit.

[frizzyguy]

How do we compute RMDs from Cash Balance plans?

Do we do annuity calculations like regular DB plans?

Do we do factor calculations like DC plans?

Oooooh - good questions.

Both. The answer to this questions is found in section 1.401(a)(9) Q-1.

If you are distributing the entire Accrued Benefit as a single sum, you can use the DC method. If you have a 5% owner and you don't want to completely force them out, pay them in direct annuity payments and take this into account when calculating their cash balance.

I would be interested to hear if others are doing this differently.

"(e) If distributions from a defined benefit plan are not in the form of an annuity, the employee’s benefit will be treated as an individual account for purposes of determining the required minimum distribution. See §1.401(a)(9)-5."

[frizzyguy]

I thought that CB plans are deemed to be DB plan for distributions, e.g., annual benefit at retirement under plan formula and under reg. 1.401(a)-9-6 the MRD would be the amount of the annual benefit.

Mbozek is right though, cash balance plans are DB plans. If you are researching how to handle them, they are always DB. The reg I quoted saying you could use the DC method is true of all DB plans.

[Effen]

I agree with mbozek, the MRDs should be based on the monthly accrued benefit generated by the cach balance account, unless you are making a complete distribution.

[mbozek]

How do we compute RMDs from Cash Balance plans?

Do we do annuity calculations like regular DB plans?

Do we do factor calculations like DC plans?

Oooooh - good questions.

Both. The answer to this questions is found in section 1.401(a)(9) Q-1.

If you are distributing the entire Accrued Benefit as a single sum, you can use the DC method. If you have a 5% owner and you don't want to completely force them out, pay them in direct annuity payments and take this into account when calculating their cash balance.

I would be interested to hear if others are doing this differently.

"(e) If distributions from a defined benefit plan are not in the form of an annuity, the employee’s benefit will be treated as an individual account for purposes of determining the required minimum distribution. See §1.401(a)(9)-5."

1. What reg are you refering to? There is no reg 1.409(a)(9) Q-1. Regs are numbered from 1.401(a)(9)-1 to-9.

2 what reg is paragraph (e) from?

[frizzyguy]

Sorry, I left off a part.

1.401(a)(9)-6 Q-1. (e) is in the answer.