RMD/RBD

[doombuggy]

The plan is made up of the owner, his son and an employee. the plan is a 401(k) with safe harbor non-elective. they have individual accounts at Valic, but we do only annual administration on this plan.

Owner was born on 6/23/42. This means that he turns 70 next month; it also means he turns 70 1/2 on 12/23/12.

So the question is should his Reuqired Beginning Date be 4/1/13? If I am going to caluclate his RMD, I need to use the 12/31/11 balance then? It just didn't sound right....

Thanks for your thoughts.

[ETA Consulting LLC]

RBD is 4/1/2013 for the 2012 RMD. You would use the 12/31/2011 balance.

Good Luck!

[Tom Poje]

there is no reason I am aware of you can't make the first distribution by 12/21/2012.

depending on the balance, this would be the difference between taking 2 distributions in one year or spreading that over 2 years, which can make a big difference on the taxes/

[ETA Consulting LLC]

there is no reason I am aware of you can't make the first distribution by 12/21/2012.

depending on the balance, this would be the difference between taking 2 distributions in one year or spreading that over 2 years, which can make a big difference on the taxes/

Correct. The first distribution must happen between 1/1/2012 and 4/1/2013; so he can take it in 2012 to avoid two distributions in 2013.

Good Luck!

[doombuggy]

I have cranked out many RMDs (more before the changes of 1996), but I can't ever remember one so close to the end of the year like that.

and I do agree with Tom. I usually encourage my first year RMDers to take the first one by 12/31 for the same reason he sited.

thanks for your thoughts!

[david rigby]

there is no reason I am aware of you can't make the first distribution by 12/21/2012.

depending on the balance, this would be the difference between taking 2 distributions in one year or spreading that over 2 years, which can make a big difference on the taxes.

As always, check the plan document.

[doombuggy]

The client called me yesterday to tell me he got the distribution form and was puzzled. His broker & CPA told him that he did not have to take an RMD from the plan since he was not retired. I asked him if he was a more than 5% owner of his company - his answer was yes. My response was then "yes, you have to take it because you are more than a 5% owner, regardless of your work status."

He then proceeded to tell me that he rolled a great deal of IRA money into the plan this year.

While I calculated an RMD on his 12/31/11 balance, shouldn't someone calculate an RMD on that IRA money that he has now rolled into the plan? It was in an IRA (assuming just one, but don't know for sure) on 12/31/11 and you have to take an RMD from your non-Roth IRAs, correct? We are talking close to a million dollars apparently. I received a voice mail from the broker who is on vacation watching his child graduate from law school....can you believe this?

[Belgarath]

Yes, the IRA is subject to the RMD requirements. Refer the CPA and Borker to 1.408-8, Q&A-4. whether they actually took an RMD prior to the rollover is something they will need to confirm. This amount wasn't an "eligible rollover distribution."

[masteff]

And while you're giving them regulations to ponder, RBD for 5% owners is discussed at: § 1.401(a)(9)-2 Q&A-2(b)