RMD for active owner rolled balance

[pmacduff]

Pooled funds balance forward Profit sharing plan has an active owner who took his RMD for 2018 and then rolled the rest of his balance to his IRA account.  He still takes a small salary so there will be a new balance in 2019 due to the 2018 profit share allocation/deposit done in 2019 (some time between now and 03/15).  I believe that RMDs can be computed on a cash basis and his balance as of 12/31/2018 was $0.00, so in theory the 2019 RMD would be $0.00.  He will have a balance as of 12/31/2019, however, so RMD would again be required for 2020 anyway. OR - because the plan is reported on an accrued basis including the 2018 profit share allocation is the RMD required for 2019 as he has an accrued balance as of 12/31/2018?

I assume if he rolls his 2019 balance once the ps deposit is made, then the RMD would have to come out prior to the rollover?

 

[Tom Poje]

Forsooth Lady MacDuff

Shakespeare himselfeth told me to look at 3b or not 3b

 

1.401(a)(9)-5 Q3

3(b)...for this purpose, contributions that are allocated to the account balance as of dates in the valuation calendar year, but that are not actually made during the valuation calendar year, are permitted to be excluded.

[pmacduff]

Thanks Tom.  Now the other question would be does that have to be the same year-to-year?

In other words, can you use an accrued balance once year and cash balance the next?

[Tom Poje]

The bard rolled over in his grave when I tried to ask him.

I'm not sure if there is a consistency rule, I certainly wouldn't flip flop every year

[pmacduff]

Yes - my thoughts exactly - just didn't know if it was spelled out anywhere.

BTW - how is the weather in Fla?  We're expecting below zero temps with the wind chill here in NY later today and through Thursday ☹️.  Must admit it makes the Spring that much sweeter!!

 

[Tom Poje]

we made it down to 35 in Jacksonville

...............

by the way, if the Senate ever passes the Family Savings Act, and they iron things out with the House which passed the Bill in Sept

it is possible there would be no minimum distributions if total balance is less than 50,000 anyway. so I guess they have until 9/2 or so.

(c)

Effective date

The amendments made by this section shall apply to distributions required to be made in calendar years beginning more than 120 days after the date of the enactment of this Act.

[pmacduff]

35 - can't even remember when we last saw 35 - right now it is 6 but feels like -15 with the wind chill

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Yes - I'm hopeful that change to the RMD rules goes through because we have a lot of small employers where that change will be beneficial.