Profit Sharing Plan RMD Calculation

[rfahey]

The TPA is advising me that a 2013 RMD is based on the owners 12/31/12 account balance for his profit sharing plan.

THis sounds correct.

But they are also saying that this calculation will be impacted if the client decides to make a 2012 profit sharing contribution ( in 2013 ) and he gets an allocation.

Is this correct ?

THank you.

[Tom Poje]

is this like the question "Did Perry Mason ever lose a case?"

1.401(a)(9)-5 Q and A 3 (b) says

contributions...allocated...after the valuation date, but not actually made during the valuation calendar year are permitted to be excluded.

(the old regulations required these amounts to be included.)

[mbozek]

This reg as been in effect for 10 years.

[Gary Lesser]

Probably not.

The Preamble to the 401(a)(9) regulations state:

"Calculation Simplification

"An employee's account balance for the valuation calendar year that is also the employee's first distribution calendar year is no longer reduced for a distribution on April 1 to satisfy the minimum distribution requirement for the first distribution calendar year. Contributions made after the calendar year that are allocated as of a date in the prior calendar year are no longer required to be added back. The only exceptions are rollover amounts, and recharacterized conversion contributions, that are not in any account on December 31 of a year. These changes are made to the qualified plan rules as well as IRA rules to maintain the parity between the rules."

From the 1.401(a)(9)-5 regulations Q&A-3---

Q-3. What is the amount of the account of an employee used for determining the employee's required minimum distribution in the case of an individual account?

A-3. (a) In the case of an individual account, the benefit used in determining the required minimum distribution for a distribution calendar year is the account balance as of the last valuation date in the calendar year immediately preceding that distribution calendar year (valuation calendar year) adjusted in accordance with paragraphs (b) and © of this A-3.

(b) The account balance is increased by the amount of any contributions or forfeitures allocated to the account balance as of dates in the valuation calendar year after the valuation date. For this purpose, contributions that are allocated to the account balance as of dates in the valuation calendar year after the valuation date, but that are not actually made during the valuation calendar year, are permitted to be excluded.

© The account balance is decreased by distributions made in the valuation calendar year after the valuation date.

(d) If an amount is distributed by one plan and rolled over to another plan (receiving plan), A-2 of §1.401(a)(9)-7 provides additional rules for determining the benefit and required minimum distribution under the receiving plan. If an amount is transferred from one plan (transferor plan) to another plan (transferee plan), A- 3 and A-4 of §1.401(a)(9)-7 provide additional rules for determining the amount of the required minimum distribution and the benefit under both the transferor and transferee plans.