RMD from Segregated DB Assets

[carrots]

The DB plan document reads as follows:

"The Administrator, at the election of the Participant, shall transfer, as of the Participant's Normal Retirement Date, the Participant's Present Value of Accrued Benefits to the Participant's Retirement Investment Account."

The participant is at age 70 1/2 and has a Participant's Retirement Investment Account of about $500,000.

Should the Required Minimum Distribution be calculated using the DC or DB method?

[mbozek]

The DB plan document reads as follows:

"The Administrator, at the election of the Participant, shall transfer, as of the Participant's Normal Retirement Date, the Participant's Present Value of Accrued Benefits to the Participant's Retirement Investment Account."

The participant is at age 70 1/2 and has a Participant's Retirement Investment Account of about $500,000.

Should the Required Minimum Distribution be calculated using the DC or DB method?

what does the plan say?

[SoCalActuary]

I will assume for this purpose that the separate account is updated as a DC account with its changes solely based on investment performance of the trust.

In that sense, it is a DC plan, and the RMD is to follow the DC rules.

[carrots]

Mbozek - the plan says that distributions shall comply with the 401(a)(9) code and regulations, incorporated by reference.

SoCal - is there a regulation that supports your view, or does it just make sense to you that it should be that way?

[SoCalActuary]

I have read that reg long ago, and not trying to keep all the regs in my head, so my answer is "both"

[mbozek]

Mbozek - the plan says that distributions shall comply with the 401(a)(9) code and regulations, incorporated by reference.

SoCal - is there a regulation that supports your view, or does it just make sense to you that it should be that way?

Carrots

The question you have raised should be answered by the plan's drafter/counsel for the plan.

The problem is whether under the plan language the participant's accrued benefit is to be treated as a DB benefit or DC benefit under 401(a)(9).

DB distibution regs are 401(a)(9)-6, DC regs are -(a)(9)-5.

[carrots]

It looks like the Participant's Retirement Investment Account falls under IRC 414(k), and under 1.401(a)(9)-8 A-1, as a DC plan.

This was discussed in 2009 under the thread, "401(a)(9) distributions from rollover in DB plan, Treated as DC account for

401(a)(9)?"

As an aside, 414(k) appears to apply the DC 415 rules to the account.