DB, New Plan, RMD

[Lou S.]

Owner/participant age 70 wants to start DB plan. Does not have prior plan.

Can RMD be delayed to age 73 with 3-year cliff vesting and excluding service prior to start of the Plan?

If yes, do you have to "catch-up" the "skipped" RMDs when the benefit becomes accrued in the 3rd "pop-up" year?

[FAPInJax]

Yes, minimum distributions can be delayed until vested and they do not have to be made up.

[Tom Poje]

according to Q-8 of 1.401(a)(9)-5 (last sentence)

...However, the required minimum distribution for the subsequent distribution calendar year MUST be increased by the sum of the amounts not distributed in prior calendar years because the employee's vested benefit was less than the required minimum distribution.

but then I'm a Grinch.

[Kevin C]

1.401(a)(9)-5 has the DC RMD rules. The DB rules are in 1.401(a)(9)-6 Start with Q&A 6.

Q-5. In the case of annuity distributions under a defined benefit plan, how must additional benefits that accrue after the employee's first distribution calendar year be distributed in order to satisfy section 401(a)(9)?

A-5. (a) In the case of annuity distributions under a defined benefit plan, if any additional benefits accrue in a calendar year after the employee's first distribution calendar year, distribution of the amount that accrues in the calendar year must commence in accordance with A-1 of this section beginning with the first payment interval ending in the calendar year immediately following the calendar year in which such amount accrues.

(b) A plan will not fail to satisfy section 401(a)(9) merely because there is an administrative delay in the commencement of the distribution of the additional benefits accrued in a calendar year, provided that the actual payment of such amount commences as soon as practicable. However, payment must commence no later than the end of the first calendar year following the calendar year in which the additional benefit accrues, and the total amount paid during such first calendar year must be no less than the total amount that was required to be paid during that year under A-5(a) of this section.

Q-6. If a portion of an employee's benefit is not vested as of December 31 of a distribution calendar year, how is the determination of the required minimum distribution affected?

A-6. In the case of annuity distributions from a defined benefit plan, if any portion of the employee's benefit is not vested as of December 31 of a distribution calendar year, the portion that is not vested as of such date will be treated as not having accrued for purposes of determining the required minimum distribution for that distribution calendar year. When an additional portion of the employee's benefit becomes vested, such portion will be treated as an additional accrual. See A-5 of this section for the rules for distributing benefits which accrue under a defined benefit plan after the employee's first distribution calendar year.