Required Beginning Date

A new DB Plan is effective 1/1/2022 and is adopted 7/6/2023.  No prior qualified plans.  63 participants.  The majority owner is age 80, works full time, and is fully vested.  His normal retirement age is age 84 (the 5^th anniversary of his 1/1/2022 entry date.)  When is the owner’s required beginning date for his first RMD?

Thank you in advance for your input.

Michael P. Burkow, EA

 Available Monday through Thursday

 401k America, Inc.

(909) 591-1724 X. 418

michael@401kamerica.com

Was the guy a 5% owner back when he turned 70½?

This is such a great question that highlights the absurdity of the the RMD rules in that the answer is not immediately obvious. It also has the bonus of the the plan being adopted no only after the PYE but after a potential 4/1 RBD date! I really don't know what the answer to the question is but best guess is he would have an RMD for 2023 by 12/31 and future ones going forward. But the rules seem so opaque that no reasonable answer would surprise.

@michael burkow, if this thread doesn't yield an answer and you find out elsewhere, please share your results here.

What was his vested accrued benefit at 12/31/22?

In the future, why not design a plan on the graded 100% upon completion of 3 years of service, and service is determined from the effective date of the plan.

Exactly, no reason NOT to do that, especially when you can fully vest on death or disability to protect against those contingencies. And I agree with Lou. They keep pushing out the age so why not just make it age based for everyone with a 12/31 due date, with a one-year delay for new plans like the above situation?

Thank you all for your input.

The majority owner has had a 77% stake for many years.  His 2022 accrued benefit is 12% of average compensation.  His compensations have been in excess of $400,000 per year for many years.

FYI, I plan to calculate his RMD options using a start date of 1/31/2024.  That will give everyone involved adequate time to do what needs to be done.