Another RMD Question

[Dougsbpc]

Have a single participant DB that terminated 12/31/16. The one participant turned 70 1/2 today.

If the plan did not terminate, he would take his first annual annuity installment on 4/1/2018.

If the plan distributes assets in a few weeks, will he need to take his first RMD as part of his full distribution?

If so, I guess I could have him elect to take his RMD in annual installments based on a 26 year certain with a 4.99% COLA and this would get him close to what it would be if it were in an IRA.

[Bri]

I'd say yes, the plan has to pay the RMD "first" rather than letting the destination (IRA, you say?) handle it.

But if it is indeed an IRA, would the plan document permit him to compute the RMD on a DC basis since everything else would be going to the IRA?

[Calavera]

As part of his full distribution he would elect a full lump sum IRA rollover. A portion of his lump sum would not be eligible for rollover due to RMD and has to be taken as cash payment. This portion may be calculated using the account balance method. See 1.401(a)(9)-6 Q-1 (d)(1) for more details.

[CuseFan]

Calavera has it nailed - deja vu - didn't this just come up a day or two ago?

[imchipbrown]

The RBD has not yet occurred.  Why would you make a RMD if it was possible to elect to delay until April 1, 2018?

[My 2 cents]

The person, having reached age 70 1/2 in 2017 (and not entitled to defer it further as a 5% owner and because the plan has terminated), must receive a minimum distribution for 2017.  That minimum distribution, being the person's first, can usually be delayed until April 1, 2018, but if the person is being paid their distribution earlier, a suitable portion must be held out of any possible rollover and taken as a minimum distribution at that time.  If the plan remained in force and no distributions were being taken, the first payment could be delayed until April 1, 2018 (with the second being due by December 31, 2018), but the plan is terminating and the distribution will be made in 2017.