Compass
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Bates & Company, Inc.
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Loan & Distribution Specialist AimPoint Pension
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Defined Benefit Combo Cash Balance Compliance Consultant Loren D. Stark Company (LDSCO)
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AimPoint Pension
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Regional Vice President of Sales The Retirement Plan Company
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Timing of RMD from Terminating DB Plan
BenefitsLink Message Boards Dec. 21, 2017
Client has a DB plan (professional 100% owner and one other employee, not subject to PBGC). Owner reached age 70-1/2 in 2016 and received his first RMD in 2017, slightly before the April 1 required beginning date. The payment was a year's worth of accrued benefit (normal DB RMD paid annually). Per Treas. Reg. 1.401(a)(9)-6, A-1(c)(1), if the plan were ongoing, his next annual distribution would need to be made around that same date in 2018. But the owner terminated the plan in 2017 and is an electing to receive a lump sum at plan termination. Because it's the year of termination, I am thinking that he can take his 2017 RMD via the account balance method using his lump sum as the balance. His employee recently received her distribution materials and may not have made her payment election before the end of 2017, so we don't know the cost to the plan for her benefit yet (it could be her calculated lump sum or an annuity contract purchase at an as-yet unknown price). Barring a large gain in plan assets at the last minute, the plan will not have enough assets to pay the owner's full lump sum, so he will forego some of it to the extent necessary. He does not want to make an additional contribution to allow the plan to pay his full amount. Therefore, we likely will not be able to calculate his RMD before the end of 2017 because the "account balance" is not yet known. Question: Does the fact that we are using the account balance method for the 2017 RMD shift the payment due date to the end of 2017, or would it still be considered timely if he takes it by March of 2018 (one year after the first annual RMD was paid)? We're aware that the RMD should be excluded from any rollover to an IRA.
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