2 RMDs Not Needed In Same Year When 1st One Is Delayed?

[mming]

I had my doubts when I first heard about this as I was under the impression that when a participant is due their first RMD and they delay it until the 4/1 of the following year that they must take a 2nd RMD in that same year by 12/31. It seems that most others who monitor this kind of stuff also believe this to be the case.

However, it was recently pointed out that to me that 1.401(a)(9)-6©(1) says "Annuity payments must commence on or before the employee's required beginning date (within the meaning of A-2 of § 1.401(a)(9)-2). The first payment, which must be made on or before the employee's required beginning date, must be the payment which is required for one payment interval. The second payment need not be made until the end of the next payment interval even if that payment interval ends in the next calendar year."

So it appears that if a participant must take their 1st RMD no later than 4/1/15 (i.e., the RBD), the second one wouldn't have to be taken until 12/31/16. I'm wondering what others' take on this is since so many of my colleagues haven't been using this approach.

[GMK]

There are timing differences when you choose to satisfy the RMD with an annuity, rather than taking individual RMD distributions each year.

[ESOP Guy]

The second payment need not be made until the end of the next payment interval even if that payment interval ends in the next calendar year."

I believe the end of the next payment interval is the the same year as the 4/1 payment.

I just don't see that sentence as saying the 12/31 of the year following the 4/1 payment.

[Belgarath]

MM - I think you are misunderstanding what the "next payment interval" means here. The next payment interval ends on 4/1/2016. Note that this IS in the next calendar year, which means you don't have to make a second payment by 12/31/2015.

The annuity payment interval cannot be longer than annual. So, you commence the RMD on 4/1/15, under an annual payment annuity payout. Let's just assume that the annual annuity payment will be $10,000 per year for life. April 1 of 2015, the recipient receives the first annual payment of $10,000. He does NOT have to receive a second payment by 12/31/15, because you are using the annuity payment method. HOWEVER, the next payment of $10,000 must be made April 1, 2016 (because the payment interval is annual.) It can NOT wait until 12/31/2016. The reason no one has been using 12/31/2016 is that this would fail to satisfy the minimum distribution requirement.

Hope this helps.

[Bird]

The second payment need not be made until the end of the next payment interval even if that payment interval ends in the next calendar year."

I believe the end of the next payment interval is the the same year as the 4/1 payment.

I just don't see that sentence as saying the 12/31 of the year following the 4/1 payment.

I agree with this interpretation. I was going to go into a longer explanation but Belgarath beat me to it...

[My 2 cents]

Doesn't it work like this:

Participant elects an annuity that meets the distribution requirements (i.e., periodic payments no further apart than 12 months, restrictions on variability of payments, etc.): First payment due 4/1 of year after later of 70 1/2 and retirement (or just 70 1/2 if 5% owner), second payment due after payment interval, ergo no later than 4/1 of next year (or no later than 5/1 of same year if monthly annuity).

Participant elects something other than annuity (i.e., individual MRD): First payment due 4/1 of year after later of 70 1/2 and retirement (or just 70 1/2 if 5% owner), second payment due by 12/31 of that same year.

[mbozek]

Question. If a participant in a DB plan elects to commence annuity benefits on 4/1 of the year after 70 12 is attained, is the participant required to take a second distribution by 12/31 of that year? Or can the second payment be delayed until 4/1 of the following year?

Or does the participant just receive payments on a periodic basis, e.g., each month beginning 4/1 after age 70 1/2 is attained?

[GMK]

page 6-32 and 6-33 of this useful link:

http://www.irs.gov/pub/irs-tege/epchd603.pdf

[Mike Preston]

Question. If a participant in a DB plan elects to commence annuity benefits on 4/1 of the year after 70 12 is attained, is the participant required to take a second distribution by 12/31 of that year? Or can the second payment be delayed until 4/1 of the following year?

Or does the participant just receive payments on a periodic basis, e.g., each month beginning 4/1 after age 70 1/2 is attained?

Q1: The second payment is due at the end of the payment interval elected (you have to know what the payment interval is in order to determine the annuity payment so the payment interval is a known item). The maximum payment interval is one year.

Q2: See Q1