Defined Benefit Plan RMDs

[Vlad401k]

Hi,

I don't usually work with Defined Benefit plans. Could someone please confirm if the RMD dates are different for DB plans than for DC plans? Is the RBD April 1st of the year following the year in which the first RMD is required and then it switches to December 31st of each year after that?

Thank you.

[FAPInJax]

The rules are the same for DB plans

[CuseFan]

you also satisfy RMDs if you commence an annuity beginning on or before the RBD (i.e., don't need to be concerned with actual amount distributed in the first or subsequent year like in a DC plan)

[Mike Preston]

I'm not sure I'd characterize it as the rules being the same for DB plans.  Other than a full distribution of a participant's interest in the year which contains the required beginning date, the only way to satisfy the RMD rules is to commence an annuity as CuseFan describes.  While the definitions of Distribution Calendar Year and Required Beginning Date are the same, the practical impact is materially different.

[FAPInJax]

True. However, the original question was only whether the dates are different for RMDs for DB versus DC. 

[Mike Preston]

True dat.  But the OP also asked whether it switches in the year "after that" and your answer might leave somebody with the impression that, like a DC plan, something switches in the year "after that" and, as you know, it doesn't.

[FAPInJax]

Ah! Missed that little ditty. Thanks for catching it!

[Vlad401k]

Hi,

So, does that mean that the date by which the distributions have to be made in DB plans stays as April 1st of every year?

Thanks.

[My 2 cents]

If the person is receiving periodical benefits paid once a year, it is my understanding that they are all going to be payable on April 1 (if the first payment was made on the latest possible date).  Most of the RMDs I have seen were either full lump sums or monthly periodic payments.

True, the first payment is due on the April 1 following the later of the calendar year in which the participant attains age 70 1/2 or separates from service (if not a 5% owner, in which case the RMD is not delayed by not separating from service.  The second RMD is due that December 31 (i.e., first RMD is April 1, 2017, second is December 31, 2017).  If the person cashed out or took a periodic annuity, the second and subsequent RMDs only come into play if the participant accrues any additional benefits, which must then also commence payment.

[Mike Preston]

Huh?

[FAPInJax]

Once an RMD starts from a DB plan - the form of annuity and frequency does not change (unless the plan terminates and a lump may be available). The first payment may be April 1 and the next payment will follow the frequency elected by the participant (usually monthly but I have seen annual). The choice of monthly will cause the next payment to be May 1, then June 1, etc. The choice of annual means the second payment is due April 1 of the following year.

The amount of the RMD does not change unless the participant is continuing to work accruing additional benefits. The additional benefit can then be added to the original form of annuity and frequency or a different form may be elected.

[Mike Preston]

Finally some fealty to the regulations.

[AndyH]

fe·al·ty

ˈfē(ə)ltē/

noun

historical

noun: fealty

1. a feudal tenant's or vassal's sworn loyalty to a lord.

   "they owed fealty to the Earl rather than the King"

   • formal acknowledgment of this.

     "a property for which she did fealty"

      

[david rigby]

My hunch, and hope, is Mike intends definition number 2:

2. fidelity; faithfulness.

 

[My 2 cents]

I think he intends it to have a meaning similar to "adherence".

"When I use a word, it means just what I choose it to mean - neither more nor less." [from Through the Looking Glass]

[Mike Preston]

I don't see the controversy.  Both definitions apply.  ERISA. IRC. ERISA's Regulations. IRC Regulations. Joint Board regulations. ASOP's. We are all vassals in service to each.