RMD not sure if this person is an owner

[ESOP Guy]

I have an ESOP client and here are the facts:

Person A owned >5% of the stock in Company XYZ until 100% of the shares were sold to the ESOP in March of 2018.  The ESOP was effective on the date of the sale of the stock to the ESOP. 

This person was 70.5 in 2018.  He was 70.5 in 2013.   It just dawned on my he got a balance allocated to him as of 12/31/2018.  We didn't get the work done until August of 2019.  So is the 5% rule you are a 5% owner any time during the year regardless if the plan exists or not or do you have to be a 5% owner on or after the effective date of the plan? 

Does this person need an RMD for 2019 because he was a 5% owner in 2018 when he was over 70.5 or does the fact he stopped being a 5% owner on the day the plan was effective change this?

The RMD will be <$30 so the amount is the issue it is a simple compliance question.  I guess the balance could grow to the point the RMDs become more meaningful. 

[Larry Starr]

14 hours ago, ESOP Guy said:

I have an ESOP client and here are the facts:

Person A owned >5% of the stock in Company XYZ until 100% of the shares were sold to the ESOP in March of 2018.  The ESOP was effective on the date of the sale of the stock to the ESOP. 

This person was 70.5 in 2018.  He was 70.5 in 2013.   It just dawned on my he got a balance allocated to him as of 12/31/2018.  We didn't get the work done until August of 2019.  So is the 5% rule you are a 5% owner any time during the year regardless if the plan exists or not or do you have to be a 5% owner on or after the effective date of the plan? 

Does this person need an RMD for 2019 because he was a 5% owner in 2018 when he was over 70.5 or does the fact he stopped being a 5% owner on the day the plan was effective change this?

The RMD will be <$30 so the amount is the issue it is a simple compliance question.  I guess the balance could grow to the point the RMDs become more meaningful. 

Ignoring all of the above, you just want to know the rule, right?  The rule is that you can't be a greater than 5% owner in the year your turn 70 1/2.  So you would have to reduce your ownership BEFORE the year you turn 70 1/2.  The first line of your second paragraph makes no sense.