RMD withholding

[Cynchbeast]

Plan participant (owner) wants to withdraw in excess of the required MRD:

1. Is the withdrawal subject to witholding?

2. If yes: How much is the witholding from the MRD portion and how much from the excess withdrawal?

We were told by the participant that her accountant told her that no witholding is required.

[ESOP Guy]

First off is there a distributable event or does the plan have an in-service provision? If not, then under what authority is the person taking a payment in excess of the RMD?

On the amount over the RMD there is clearly 20% withholding. Those funds can be rolled over so you have to withhold 20%.

I get a lot of people telling me that an RMD you can withhold 0% which MIGHT be true if a person elects to do so, but the old 10% withholding in my mind is standard.

But in no case can the amount in excess of the RMD can the withholding be 0% in my mind.

Edit:

I seem to recall a rather long thread not that long ago where it was debated if the RMD was a minimum or a maximum.

If memory recalls correctly some plans seem to be written to allow the RMD to truly be a minimum and other you have to pay out just the RMD. But the point is unless the plan has an in-service withdrawal provision I would not assume an active owner can just take out more then the RMD.

[Cynchbeast]

So this brings up a follow-up question. If we withhold 10% on the RMD, and 20% on the distribution in excess of that amount, can we still issue just one 1099-R in January for the combined totals?

[pmacduff]

Yes because both are IRS Code 7 (Normal distributon) with total gross in the total spot & taxable spot and total taxes in the withholding spot.

[Tom Poje]

the IRS has comments on this in 2 different spots, though they don't address the issue of withholding.

neither of the comments says anything about 'unless the document says otherwise'

http://www.irs.gov/Retirement-Plans/Plan-P...ibutions-(RMDs)

The minimum amount you must withdraw from your account each year is called your required minimum distribution.

• You can withdraw more than the minimum required amount.

• Your withdrawals will be included in your taxable income except for any part that was taxed before (your basis) or that can be received tax-free (such as qualified distributions from designated Roth accounts).

http://www.irs.gov/Retirement-Plans/Retire...Distributions#7

Can an account owner withdraw more than the RMD?

Yes.

..............

thus it would seem to say the regs say

1.You have to take a distribution at age xx.

2. It has to be at least $yyy. (but there is nothing to stop it from being more )

3. taking more does not reduce the required amount in a futre year (except for the side effect of a smaller account balance)

I'd assume this implies you could not roll over the 'excess' portion of the min distribution (else that portion wouldn't be treated as a minimum distribution)

and if you tried, hopefully the document has an in service distribution feature that would permit you treat it this way - and then in that case I'd say you would have 2 withholding rates.

but then, my theories are often off the mark.