Refusal to Cooperate with RMD

[mal]

I know this discussion has come up on the Boards before, but I cannot seem to find it.

A DB plan has a participant who will need to take an RMD by April 2013. We have contacted the participant but he absolutely refuses to cooperate with the plan. He will not complete paperwork or return calls.

Before wasting half the day researching this, can anyone give me a push in the right direction? How should this be handled by the plan?

Thanks in advance.

[Andy the Actuary]

I know this discussion has come up on the Boards before, but I cannot seem to find it.

A DB plan has a participant who will need to take an RMD by April 2013. We have contacted the participant but he absolutely refuses to cooperate with the plan. He will not complete paperwork or return calls.

Before wasting half the day researching this, can anyone give me a push in the right direction? How should this be handled by the plan?

Thanks in advance.

Apply the Plan's default election, which may be construed as a J&S. If the plan is totally silent, consult legal counsel.

[AndyH]

The plan probably says that the payments must be made and consent is not required. If so, I would send him a letter along with the check and a Benefit Information Pamphlet (IRS boilerplate) tell him that he will receive a 1099 at year end, and that without such action he would be subject to the 50% excise tax.

Key part is follow the plan.

[mbozek]

The plan probably says that the payments must be made and consent is not required. If so, I would send him a letter along with the check and a Benefit Information Pamphlet (IRS boilerplate) tell him that he will receive a 1099 at year end, and that without such action he would be subject to the 50% excise tax.

Key part is follow the plan.

Some participants do not want to commence MRDs because they have not done tax planning and receiving MRDs will move them into a higher tax bracket.

Qualified plans must require that MRDs commence no later than 70 1/2 in order to retain qualified status which is why benefits must commence at MRD under default option w/out participant consent. Only 2 exceptions are 1) active participant who is not a 5% or more owner can defer MRDs until termination if plan permits and 2) former participants if plan provides for forfeiture of benefits because participant cannot be located.

[SoCalActuary]

And, it is not the Plan Administrator's job to worry about the client's tax consequences. One choice: create a savings account on behalf of the participant, pay the J&S benefit, less withholding, and send the 1099.

But be certain that the participant does not have an exemption from receiving the benefit under the document. The old 242b elections, still employed exemptions, etc.