DB plan - RMD related

Hi

Owner just took the 2022 RMD in one shot based on 60% vested balance.

Now decides to terminate the plan in 2022 i.e. becomes 100% vested.

Does he need to get additional RMD or still based on 12/31/2021 vested percentage?

Thanks

Intresting question. However, what would happen if the sponsor in 22 decided to amend to 100 percent immediate vesting?  The RMD would seemingly still based on the 12 31 21 value of 60% as the amendment occurred in 22. The same should apply for a termination that increases vesting to 100% during 22. 

I agree with SSRRS.  The 2022 RMD is based on the 12/31/2021 balance, and doesn't change for events occurring after 12/31/2021.

I'm a little confused here, the thread title says "DB Plan" but the post says "vested balance" which would mean a DC plan - which is it?

Assuming it's a DB plan, and the post actually meant to say "vested accrued benefit," then....

The portion of the benefit that becomes vested in 2022 is treated as accruing in 2022. Additional benefits that accrue in 2022 must commence distribution in 2023. See 1.401(a)(9)-6 Q&A-5 and -6 of the current regs, or 1.401(a)(9)-6(e) and (f) of the 2022 proposed regs.

Assuming that the termination completes and the final distribution is made in 2023, then you can use the DC method to calculate the 2023 RMD, treating the total amount distributed as the account balance.

CB, it is AB, not balance, slipped here.

Thank you all for your comments.

On 11/17/2022 at 7:24 AM, C. B. Zeller said:

I'm a little confused here, the thread title says "DB Plan" but the post says "vested balance" which would mean a DC plan - which is it?

Assuming it's a DB plan, and the post actually meant to say "vested accrued benefit," then....

The portion of the benefit that becomes vested in 2022 is treated as accruing in 2022. Additional benefits that accrue in 2022 must commence distribution in 2023. See 1.401(a)(9)-6 Q&A-5 and -6 of the current regs, or 1.401(a)(9)-6(e) and (f) of the 2022 proposed regs.

Assuming that the termination completes and the final distribution is made in 2023, then you can use the DC method to calculate the 2023 RMD, treating the total amount distributed as the account balance.

I agree with this analysis but have a follow up question. Many actuaries seem to think the 2022 accrual would need to be included in the 2022 RMD (per prior CPEs, review notes, etc). However, I cannot find anything in a Plan Document, the regs, the ERISA outline book, or anything to legally back up this interpretation. It seems like a "you can but do not have to situation". My best guess is that actuaries have this interpretation based off not working on or understanding DC Plans. But maybe there is something in 417 or another section that I have not seen yet. I'm still digging to prove myself wrong!

Any follow up comments are greatly appreciated as I am giving a part 2 CPE on DB RMDs in a few weeks, and none of my peers agreed with my stance during part 1. I am always happy to be wrong, but I believe i am dealing with an overly conservative interpretation. 

2 hours ago, Jeffry Lamb said:

I agree with this analysis but have a follow up question. Many actuaries seem to think the 2022 accrual would need to be included in the 2022 RMD (per prior CPEs, review notes, etc). However, I cannot find anything in a Plan Document, the regs, the ERISA outline book, or anything to legally back up this interpretation. It seems like a "you can but do not have to situation". My best guess is that actuaries have this interpretation based off not working on or understanding DC Plans. But maybe there is something in 417 or another section that I have not seen yet. I'm still digging to prove myself wrong!

Any follow up comments are greatly appreciated as I am giving a part 2 CPE on DB RMDs in a few weeks, and none of my peers agreed with my stance during part 1. I am always happy to be wrong, but I believe i am dealing with an overly conservative interpretation. 

Are we talking about someone whose RBD occurs in 2022 or who commenced distributions prior to 2022 and has an additional accrual for 2022?

In the case of the distribution that commences on RBD, you have to pay whatever the participant's accrued benefit is on the benefit commencement date, including any current year accrual, adjusted to their selected form.

For the participant who commenced distributions prior to 2022, and has an additional accrual in 2022, I think the regs are pretty black-and-white that the additional amount does not have to be distributed before the first payment interval occurring in 2023. The plan could specify a sooner date, I suppose.