RMD - non-calendar year DC plan

[shERPA]

I’ve been retired a few years, so maybe I’m missing something?  A former client contacted me with questions re his 2026 RMD.  Non-calendar yr PS plan with an annual val date of 6/30.  So use the 6/30/25 account value less any distributions plus any contributions made between 7/1/25 and 12/31/25 to determine the 26 RMD.   He took his 2025 RMD late in 25, as well as an additional distribution rolled to an IRA.  So these distributions get subtracted from the account balance.   

His (huge, national) TPA firm calculated the RMD without this adjustment, despite the adjustment being defined in both the regs and in the RMD language of said (huge national) TPA firm’s prototype DC plan document. When my client pointed this out to them, the response was “we as a practice calculate the RMD without the adjustments for distributions and contributions after the valuation date.  If you want to use your calculation with the adjustments it is not incorrect to do so.”

So, “as a practice”, they don’t follow the regs or the plan document?  At least if there are only distributions to subtract worst case the RMD is overstated.  But if they also ignore any contributions, they’d be understating the RMD, leaving the participant subject to a potential excise tax and the employer with an operational violation of the terms of the plan.  

Am I missing anything here?  Thanks. 

Jim

[Peter Gulia]

Perhaps your former client might now discern some differences between your capabilities and the other firm’s weaknesses.

[Bill Presson]

As Peter suggested, the current TPA is wrong. 

[Peter Gulia]

We don’t know what was agreed between the TPA and its service recipient.

[shERPA]

6 hours ago, Peter Gulia said:

Perhaps your former client might now discern some differences between your capabilities and the other firm’s weaknesses.

Yeah, he does, and always did, we go back over 40 years!  He suggested I start up a little consulting gig for these sorts of things.  But I REALLY like retirement, riding my bikes, playing with the grandkids and I don’t want to have to keep up on pension stuff.  I even let my ERPA lapse, so I guess by screen name should now just be “sh”!   

I just had to share this somewhere, it astounds me because I can’t imagine not wanting to do it correctly, especially something like this that’s not even difficult or complicated. If a client had pointed out to me that my services were not following the terms of the plan document I provided them, I’d have been properly embarrassed.   

[Bill Presson]

3 hours ago, Peter Gulia said:

We don’t know what was agreed between the TPA and its service recipient.

Peter, you think the service agreement allowed the TPA to ignore the regs and documents? 

[John Feldt ERPA CPC QPA]

Jim,

Enjoy retirement. Suggest they find a good, reasonable TPA.

-John