Plan termination & RMD

[Guest M. Martin]

An active, non-owner participant is age 71 and under normal circumstances could elect to defer his first RMD payment until after he retires. Due to an impending company merger this retirement plan was terminated with the goal being to have all accounts paid out before the end of the year. The participant wants to rollover his entire account balance to an IRA; however, must he first receive an RMD?

Alternatively, what if he elected to rollover his balance to the surviving plan of the merged companies?

An additional note, the plan allows for in-service distributions of all vested accounts at age 59 1/2; could this be considered an in-service distribution where it appears that the RMD would not be required since individual is still active (provided he doesn't retire before the end of the year)?

[Lou S.]

The Plan needs to satisfy RMD.

If he rolls it to new company plan and is still working he can delay future RMDs while still working (assuming non-5% owner), if he rolls it to an IRA he will have future RMDs. I don't see any way around the RMD for this year in Plan that is terminating.

[Appleby]

Here is a thread on the topic http://benefitslink.com/boards/index.php?/topic/32774-rmds-and-plan-terminations/

[Guest M. Martin]

Thank you! I sought additional guidance as well and received a similiar response as discussed in the link provided.

[Appleby]

You are welcome M.