RMD from terminating DB plan

[Flyboyjohn]

DB participant reaches age 70 1/2 in 2016.

DB plan is terminating and making lump sum distribution 3/1/2017which participant intends to roll to IRA..

TPA firm is saying no 2016 RMD required since plan termination distribution occurs before required beginning date of 4/1/2017.

Which means there will be no RMD with respect to this $$ for 2017 either since $$ not in IRA on 1/1/2017.

Doesn't seem right so requesting thoughts of others more familiar with DB RMD rules.

Thanks

[My 2 cents]

DB participant reaches age 70 1/2 in 2016.

DB plan is terminating and making lump sum distribution 3/1/2017which participant intends to roll to IRA..

TPA firm is saying no 2016 RMD required since plan termination distribution occurs before required beginning date of 4/1/2017.

Which means there will be no RMD with respect to this $$ for 2017 either since $$ not in IRA on 1/1/2017.

Doesn't seem right so requesting thoughts of others more familiar with DB RMD rules.

Thanks

On occasion, TPA firms can get it wrong.

My understanding* is that the person having reached age 70 1/2 in 2016, there must be a 2016 RMD taken out of any total distribution made from the DB plan on or after 1/1/16. Further, as the distribution is to be made in 2017, the 2017 RMD must also be carved out. So both the 2016 and 2017 RMDs must be taken from the terminating plan and not be allowed to be rolled over to an IRA.

* I have been known to sometimes get things wrong.

[Flyboyjohn]

My 2 Cents:

Your understanding is the same as mine and is what happens in the DC world but I'm wondering if there are different rules in the DB world.

[My 2 cents]

My 2 Cents:

Your understanding is the same as mine and is what happens in the DC world but I'm wondering if there are different rules in the DB world.

I am only really familiar with the DB world. In the DB world, one can satisfy the RMD by starting lifetime benefit payments by the April 1 following the year of attainment of age 70 1/2 (with increased periodic payments starting with that year's 12/31 and any other 12/31 if additional benefits will have accrued). I suspect that the circumstances under which RMDs are required are the same for both, even if acceptable ways to deal with RMDs may differ. And IRAs are subject to slightly different RMD rules than either DB or DC (such as it not mattering whether one is a 5% owner or still employed).

[AndyH]

There are no differences in this MRD rule; My 2 cents states the requirements correctly.

[Flyboyjohn]

How do we calculate the RMD in the absence of an account balance?

[Calavera]

Rules are in 1.401(a)(9)-6. 2 RMD are not eligible for rollover (one for 2016, and one for 2017). Account balance method still could be used for the full lump sum payment. The actual lump sum amount divided by the factor corresponding to his full age as of 12/31/2016 (27.4 for age 70, or 26.5 for age 71) will give you the amount not eligible for a rollover due to RMD for 2016 year. The same lump sum amount divided by the factor corresponding to his full age as of 12/31/2017 will give you the amount not eligible for rollover for 2017 year. Factors may be higher if spouse more than 10 years younger.