Calculating RMD to owner has attained 70.5 on Plan Termination

[AdKu]

Don't I have to use the same account balance to calculate 2nd RMD when the 1st RMD is not paid out by the December 31 of the RMD year from a DB Plan?

Background information:

While the plan is on termination process in 2015, the 100% owner has attained Age 70.5. The owner elected single sum distribution from the plan to roll it over to IRA.

Based on my understanding of the Reg., one can use the exception in calculating the RMD based on the Account Balance method as if DC plan.

Also, since the owner participant didn't received the 1st RMD by December 31, 2015, he is due 2 RMD to be paid to him from the plan by his RBD of April 1, 2016.

can someone refer/provide me the section of the Reg. that tells me to use the same account balance in the above scenario?

[Lou S.]

I believe you use the PVAB divided by 2015 factor to determine the 2015 RMD

I believe you use (the PVAB - 2015 RMD) divided by 2016 factor to determine the 2016 RMD.

[Calavera]

Per Sal Tripodi - the 2002 regulations eliminated the rule of subtraction the required distribution from the account balance to calculate the RMD for the second year.

[AdKu]

Than you Lou and Calavera,

Can someone help me find the section of the Reg. that clearly spell out what Clavera stated above.

Excerpt from the Reg. 1.401(a)(9)-6 - Required minimum distributions for defined benefit plans and annuity contracts.

A-1(d) Single sum distributions. In the case of a single sum distribution of an employee's entire accrued benefit during a distribution calendar year, the amount that is the required minimum distribution for the distribution calendar year (and thus not eligible for rollover under section 402©) is determined using either the rule in paragraph (d)(1) or the rule in paragraph (d)(2) of this A-1.

(1) The portion of the single sum distribution that is a required minimum distribution is determined by treating the single sum distribution as a distribution from an individual account plan and treating the amount of the single sum distribution as the employee's account balance as of the end of the relevant valuation calendar year. If the single sum distribution is being made in the calendar year containing the required beginning date and the required minimum distribution for the employee's first distribution calendar year has not been distributed, the portion of the single sum distribution that represents the required minimum distribution for the employee's first and second distribution calendar years is not eligible for rollover.

(2) The portion of the single sum distribution that is a required minimum distribution is permitted to be determined by expressing the employee's benefit as an annuity that would satisfy this section with an annuity starting date as of the first day of the distribution calendar year for which the required minimum distribution isbeing determined, and treating one year of annuity payments as the required minimum distribution for that year, and not eligible for rollover. If the single sum distribution is being made in the calendar year containing the required beginning date and the required minimum distribution for the employee's first distribution calendar year has not been made, the benefit must be expressed as an annuity with an annuity starting date as of the first day of the first distribution calendar year and the payments for the first two distribution calendar years would be treated as required minimum distributions, and not eligible for rollover.

The complete Reg link is below:

https://www.law.cornell.edu/cfr/text/26/1.401(a)(9)-6

[Calavera]

1. There is no mentioning of subtracting in the 1.401(a)(9)-6. It simply says: "...treating the amount of the single sum distribution as the employee's account balance as of the end of the relevant valuation calendar year."

2. The Individual Account rules are covered by 1.401(a)(9)-5.

3. 1.401(a)(9)-5 Q&A-3© states that the account balance is decreased by distributions made in the valuation calendar year after the valuation date. There was an extra paragraph 1.401(a)(9)-5 Q&A-3©(2) in the pre-2002 regulations describing the subtraction adjustment that was removed. You will need to find the 2001 proposed regulations for more details.