another RMD question

[thepensionmaven]

It has been awhile since we calculated an RMD if the participant wants to take two distributions in one year.

As far as I can remember

DC

12/3115 account value used for both 2016 and April 2017 divided by life expectancy uniform table for age in 2016.

The second distribution has to be taken by 12/31/2016 and is based on the 12/31/2015 account value less the amount of the first distribution using the factor for the participant's age in 2016.

DB

Can't use the account balance method after 2005.

Actuary has advised accrued benefit as of end of prior year x 12, but that seems too simplistic.

How do you calculate if two distributions in one year?

[Tom Poje]

I am confused, you speak of April 2017 which implies a first distribution date but then say the second has to be taken by 12/31/2016, which would be before April 2017!

so, assuming 12/31/2016 is the 2nd distribution dating...

working backwards, the first distribution was due by 12/31/2015 (but was delayed until 4/1/2016).

so the way I think of it

first distribution uses 12/31/2014 balance and is dues 4/1/2015 (but you are allowed to delay it until 4/1/2016)

the second distribution uses the 12/31/2015 balance (adjusted for the distribution made after 12/31/2015), but you don't use the same end balance twice.

1.I still have a sense of humor

2 it may be very dry. but I still have one

3. conclusion: I am not an actuary so won't attempt to answer the DB portion, except to say if the person is still accruing a benefit you need to adjust the amount every year as far as I know.

[thepensionmaven]

Thanks, I guess I was not clear.

Participant 55+ owner turns 70 1/2 September 2016.

The calculation for 12/31/2016 is straightforward.

If delayed until 4/1/16, I believe the MRD due 4/1/ is the same amount, but the life expectancy would be her age in 2017.

The calculation for the second distribution would be based on the (12/31/2016 account value less first distribution) / life expectancy in 2017.

How do we do the MRD for a DB under the same circumstances.

I now after 2005 can't use the account balance method.

TX.

[GMK]

In the DC case, the RMD amount for 2016 is the balance as of 12/31/2015 divided by the life expectancy based on her age on her birthday in 2016 (or her age at the end of 2016 or however you want to remember it), regardless of whether it is paid in 2016 or in early 2017.

The RMD amount for 2017 is the balance as of 12/31/2016 divided by the life expectancy based on her age on her birthday in 2017 and is due by 12/31/2017.

I don't know DB.

[ESOP Guy]

Thanks, I guess I was not clear.

Participant 55+ owner turns 70 1/2 September 2016.

The calculation for 12/31/2016 is straightforward.

If delayed until 4/1/16, I believe the MRD due 4/1/ is the same amount, but the life expectancy would be her age in 2017.

The calculation for the second distribution would be based on the (12/31/2016 account value less first distribution) / life expectancy in 2017.

How do we do the MRD for a DB under the same circumstances.

I now after 2005 can't use the account balance method.

TX.

The is confusion here still.

If a person turned 70.5 in 2016 and is a 5% owner then:

They need a 2016 RMD. That RMD can be paid either by 12/31/2016 or 4/1/2017. The amount paid is the SAME regardless of which of those two dates is picked. You would use the 12/31/2015 balance and the person's age as of 12/31/2016.

For the 2017 RMD it has to be paid by 12/31/2017 it would use the balance as of 12/31/2016 with no adjustment and the age as of 12/31/2017.

I don't know DB plans either.

[thepensionmaven]

Thanks, guys.

[Tom Poje]

the difference being (or at least the option offered the participant)-

take the first distribution in 2016, and pay the taxes now, and then take the next one in 2017

otherwise, it is no taxes in 2016

but tow distributions taxed in 2017.

might make a big difference.

[John Feldt ERPA CPC QPA]

If it is a DB plan, to satisfy the RMD, the annuity payment must start. That's why the actuary said life annuity x 12. But, if the plan allows a lump distribution and the full lump sum will be paid, you can use the account balance method that you normally only see with DC plans.