RMD

[CJS07]

Plan had a terminated employee as of 4/1/16 who needed (and did) take first RMD. Person has since been rehired by same company. Does employee have to continue taking RMDs where he has been rehired and is not an owner?

[Lou S.]

Unless something has changed since the last time I looked at this, the regs are silent on this issue.

I believe IRS informal guidance (possibly from the podium at an ASPPA conference) was that the safest course was to continue the RMDs that had begun. I do not know if there have been further comments on this issue.

[My 2 cents]

The participant, having separated from service, was treated as having reached his or her Required Beginning Date with respect to the plan. I wonder if it is implied that, having reached the Required Beginning Date, future RMDs must be paid. There is nothing in the law, regulations, or plan document addressing unreaching one's Required Beginning Date, is there? There would have to be something like that to relieve the participant of being paid RMDs as a result of reemployment. I suspect it would not be acceptable.

[jpod]

That can't be right. You leave and come back on March 31 and there are no RMDs, but if you come back April 2 you must take RMDs forever?

[Lou S.]

That can't be right. You leave and come back on March 31 and there are no RMDs, but if you come back April 2 you must take RMDs forever?

Are you expecting logic from the folks at Treasury?

[RatherBeGolfing]

I agree with Lou and M2C here. The regs are silent as to what happens when a non 5% owner terminates after 70 1/2 but is rehired after the RBD. A 5% owner who has started taking RMDs can't stop taking them by becoming a non 5% owner, so applying the same logic, you can't stop RMDs for a rehired non 5% owner.

Lou is also correct that the IRS agreed with that position at an ASPPA annual Q&A. It is not an official position, but still...

[Belgarath]

The ASPPA conference being referenced was in 2010. I'm not aware of anything on this since then.

And with the penalty being so extreme, certainly not worth taking the aggressive position as far as I'm concerned.

[jpod]

I am aware of what the regs say and what they don't say. And if I were the plan administrator and concerned with the tax-qualification of my plan I would take the conservative approach too. I'm just sayin' that this obviously wasn't contemplated and needs to be cured in some fashion if the Treasury could be persuaded to do so. I see 5% owner situation as different for policy/anti-manipulation reasons.

[CJS07]

Checked the Document and it is silent. I agree safest to take the money.