Required Minimum Distributions - 5% Owner Sold His Stake

[newplananalyst]

So I have a client who is turning 70.5 in December. He was a 5% owner until he sold his stake on June 1st of this year. Does he have to take a RMD (or MRD, this acronym seems to change with each source I research) in 2015. He has not separated from service, nor does he plan on it in the foreseeable future.

[ETA Consulting LLC]

He was a 5% owner in the year he turned age 70.5; so he's RMD all the way through.

Good Luck!

[ESOP Guy]

Agree with ETA.

[newplananalyst]

Thanks guys! Appreciate the help.

[chc93]

Check out post #6...

http://benefitslink.com/boards/index.php?/topic/49863-rmd-requirements-for-a-rehire/?hl=rmd+rehire#.VIZHEBY7fCV

referencing the 2012 presentation on the IRS website. On Page 39, the IRS response ...

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If you’re still working and began taking RMDs but you’re no longer a 5% owner for 2012, is an RMD required for 2012? The answer is no.

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I think I read somewhere that this is a plan document issue.

[austin3515]

If you’re still working and began taking RMDs but you’re no longer a 5% owner for 2012, is an RMD required for 2012? The answer is no.

I don't know, I researched this once before. The EOB was pretty clear, as stated above, once you've begun there is no mechanism to stop. RMD's must be done each year following your RBD. That's the only reasonable interpretation of what the code says. There is no provision in the code or regulations to suspend RMD's after your RBD. Considering the 50% excise tax you'd be nutso not to take them (a random informal power point on the IRS website notwithstanding).

[ETA Consulting LLC]

The fact pattern presented by newplananalyst has nothing to do with whether or not an individual is terminated (and began to take RMDs as a result) and then is subsequently rehired. In such instance, the regulations are not clear, perhaps because it was never anticipated an individual older than 70 would be rehired.

However, the regulations are very clear that your 5% owner status is determined only in the year you turn age 70.5. If you are a 5% on in the year you turn age 70.5, then your RBD is April 1st of the following year. Any subsequent changes in ownership would not eliminate your requirement to take your RMDs.

Good Luck!