RMD - Less than 100% vested

[Vlad401k]

A participant is over age 73 and has an RMD for 2025. He terminated before NRA and because of that, he is not 100% vested. Is the RMD amount calculated based on full account balance or vested account balance?

 

Thanks.

[justanotheradmin]

vested account balance. 

[C. B. Zeller]

I assume this is a DC plan? If so then 1.401(a)(9)-5 applies.

Quote

1.401(a)(9)-5(g)(1) Treatment of nonvested amounts. If the employee's benefit is in the form of an individual account under a defined contribution plan, the benefit used to determine the required minimum distribution for any distribution calendar year will be determined in accordance with paragraph (a) of this section without regard to whether or not all of the employee's benefit is vested. If, as of the end of a distribution calendar year (or as of the employee's required beginning date, in the case of the employee's first distribution calendar year), the total amount of the employee's vested benefit is less than the required minimum distribution for the calendar year, only the vested portion, if any, of the employee's benefit is required to be distributed by the end of the calendar year (or, if applicable, by the employee's required beginning date). However, the required minimum distribution for the subsequent calendar year must be increased by the sum of amounts not distributed in prior calendar years because the employee's vested benefit was less than the required minimum distribution determined in accordance with paragraph (a) of this section.

So the default rule is that you use the entire balance, vested or not. However if the RMD exceeds the vested balance, then you only distribute the vested amount.

If we're talking about someone who terminated during 2025, then also be sure to check the plan document's rules about when forfeitures occur. If they are deemed to have a forfeiture immediately upon termination (say because their vested account balance is less than $7,000) then their account balance as of 12/31/2025 (for the 2026 DCY) would only be the vested amount. For 12/31/2024 (used for the 2025 DCY, due by 4/1/2026) there couldn't have been a forfeiture by then so I think there's no question that the full account balance is used.