Required Minimum Distributions

[Nassau]

If a person holds an ownership interest of greater than 5% in a Company, but the person is not an employee of the Company, and he or she does not receive a salary /guaranteed payments from ABC Company, Is this person required to take an RMD from the Company if he or she meets the RMD requirements?

I thought for purposes of section 401(a)(9), a 5-percent owner is an employee of the company and in this situation since the person is not an employee of the Company and did not receive a salary/guaranteed payments from the Company he or she would not be required to take an RMD from the Company.

[K2retire]

If the person is not an employee, how does he or she have any money in the plan to withdraw?

[masteff]

If the person is not an employee, how does he qualify to delay distribution under 401(a)(9)©(i)(II)?

© Required beginning date.— For purposes of this paragraph—

(i) In general.— The term “required beginning date” means April 1 of the calendar year following the later of—

(I) the calendar year in which the employee attains age 701/2, or

(II) the calendar year in which the employee retires.

[GMK]

Is this a different ABC Company from the one in your post earlier today?

http://benefitslink.com/boards/index.php?/topic/53254-required-minimum-distributions/

[Nassau]

Yes, this is the same question from earlier yesterday.

If a person holds an ownership interest of greater than 5% in a Company, but the person is not an employee of the Company, and he or she does not receive a salary /guaranteed payments from the Company, Is this person required to take an RMD from the Company if he or she meets the RMD requirements?

I agree that If the person is not an employee, how does he or she have any money in the plan to withdraw.

[Belgarath]

Sorry, but this question is very confusing.

1. does ABC sponsor a plan?

2. if so, does this person have an account balance in the plan?

3. Is this person a former employee of ABC? How did this person ever get an account balance if never an employee?

Really don't understand what you are trying to ask here, so some background information would be helpful

[MoShawn]

Just guessing, but maybe they were an employee at one time in the past but not any longer? If not, then you have larger issues than an RMD.

[BG5150]

Yes, this is the same question from earlier yesterday.

Then why ask it again?

[GMK]

My response is the same as before:

RMD's are due from ABC retirement plan

http://www.irs.gov/R...ributions-(RMDs)

or are you asking if he has to start selling off his ownership?

[masteff]

If a person holds an ownership interest of greater than 5% in a Company, but the person is not an employee of the Company, and he or she does not receive a salary /guaranteed payments from the Company, Is this person required to take an RMD from the Company if he or she meets the RMD requirements?

You seem to have the decision making process out of sequence (frankly, it appears you have yourself stuck inside a trick question of your own making). You first determine under 401(a)(9)(c )(i) whether the person has attained 70 1/2 and/or has retired. You don't care about them being a 5% owner at this point. Since you appear to be saying your person is not currently an active employee of the company (and thus cannot "retire" from active employment at a later time), then they have reached their RBD by virtue of age 70 1/2 (and therefore must start taking MRDs).

Age 70 1/2 is under (c )(i)(I). The delay for those not yet retired is under (c )(i)(II). The exception for 5% owners only applies to persons not yet retired under (c )(i)(II); but your person hit their RBD under (c )(i)(I), so you don't even look at the exception for your person.

In short: Later of 70 1/2 or retired; except if 5% owner then ignore "or retired" and use 70 1/2 only.