RMD for participant who turns becomes an HCE after age 70.5

[Guest SVogel]

An individual is a less than 5% owner when he turned 70 ½. As such, under the terms of the plan the participant does not have to commence required minimum distributions. The regulations under 1.401(a)(9)-2 provides that for purposes of Section 401(a)(9), a 5% owner is an employee who is a 5% owner (as defined in Section 416) with respect to the plan year ending in the calendar year in which the employee attains 70 ½. The individual continues to work for the Company and has not taken any distributions. Due to a reorganization of the Company stock, he becomes a 5% owner at age 74. The question is, since he was not a 5% percent owner when he turned 70.5 is he still exempt from taking required minimum distributions now at age 74 while he continues to work or must he commence taking minimum distributions.

[John Feldt ERPA CPC QPA]

Correct. There is no RMD requirement if the owner is still working, even though they own over 5% for the first time now at age 74.

[masteff]

Concur w/ John.

Prior discussion: http://benefitslink.com/boards/index.php?/topic/54786-401a9-ownership-change-after-year-of-70-12/