DB RMD (>72) DOT=12/31

[TPApril]

Defined Benefit Pension Plan non-owner participant is age 75 and terminates on 12/31

Suddenly I'm confused if there is an RMD requirement for year of termination (due by 4/1 of next yr) or if pension payments can simply begin 1/1 of subsequent yr?

[C. B. Zeller]

RBD is April 1 following the year the participant attains age 72 (actually 70.5 in this case, since if they are 75 in 2020 they were born before the cutoff for the SECURE Act changes, but regardless) and terminates employment. They terminated employment and were over 72 in 2020, so RBD is 4/1/2021.

RBD for a DB plan means benefits must commence by that date. If the participant elects to commence an annuity on 1/1/2021, they are in compliance with the RMD rules. The latest allowable annuity starting date would be 4/1/2021.

If they are eligible for a lump sum distribution, the RMD could also be computed using the account balance method. In that case the lump sum would have to be distributed no later than 4/1/2021.

[Calavera]

In addition, if eligible for a lump sum distribution, full lump sum amount will not be allowable for a rollover. Not allowable amount will need to be calculated for two years, 2020 and 2021. If termination will be postponed until next year, then only amount for 2021 will need to be calculated.

[TPApril]

I could be totally off on this, but...

As related to the SECURE Act for >70.5 in 2020:

EE terminates in 2020, actuarial adjustment is from 70.5 to current age (75)

EE terminates in 2021, actuarial adjustment is from 72 to current age, and therefore may actually be smaller than if terminated in 2020, simply due to SECURE Act age change rule?

(no lump sums applicable to plan in question).

[Luke Bailey]

TPApril, where the non-5% owner employee terminates after RBD, the first distribution year is year of termination, so here 2020, but RBD is April 1 of next year, here 2021.

Also, the actuarial adjustment required for delayed benefits stayed at 70-1/2; did not move with the RBD to 72.