DB RMD related - a refresher/double check

Hi

A bit confused due to intensive number crunching and brain is fried so need to double check the following and also the client may not be listening to me.

Client turned 73 in 2025, so RMD is due 4/1/2026. Already 100% vested

Q Part 1

12/31/2025 AB is 1,000/month and AE at 4/1/2026 is 1,090/month (making up the numbers)

Starting 4/1/2026, monthly would get 1,090/month till 12/31/2026 (9 payments).

Now they want to take the full amount on 4/1/2026 i.e. 9,810 (9*1090)

Any problem with this?

Q Part 2

Come 1/1/2027, the RMD continues to be 1,090/month till 4/1/2027 but does not take any monthly as he wants to take a lump sum.

Say 12/31/2026 AB is now 2,200/month and next payment cycle is 4/1/2027 and the AE at 4/1/2027 is 1,300/month.

So starting 4/1/2027, RMD is 1,300/month+1,090/month

Clients says I want to take out all in one lump sum on 4/1/2027 i.e. 1,090*12 + 1,300*9

And future years continue with the same cycle.

What am I calculating/thinking wrong?

"...take a lump sum..." implies there is a distributable event.  Is there?

By the way, the RMD at 4/1/26 is not based on the accrued benefit at 12/31/25, but on the AB at 12/31/24.  (Of course, the participant can take more than the RMD.)

Sorry, misworded, what I meant was, getting the RMD all in one shot rather than as monthly benefit, not lump sum per se.

To satisfy the RMD in a DB plan, the participant must commence distribution of their entire accrued benefit no later than the RBD.

What does the plan document say about the available forms of benefit? I suspect it offers a few annuity options, with monthly or annual frequency. The participant would need to elect one of the available forms of benefit and commence distribution under the selected form. Conversion of the accrued benefit to the elected optional form must be done according to the plan document's rules.

In regard to your questions, consider this: I'm assuming your acccrued benefit numbers are single life annuity amounts. What would happen if the participant commenced distributions as a monthly life annuity on 4/1/2026 at $1,090/month and then died on 4/2/2026? Now compare that to what would happen if they took $9,810 on 4/1/2026 instead. Do you see the problem?

As an aside, this is why you should never do RMDs from DB plans as life annuities. Use a term certain only annuity without life contingencies, that way if the participant dies, the undistributed part of their accrued benefit is not forfeited. Alternatively, you can do a lump sum distribution of the entire accrued benefit, use the DC account balance method to calculate the portion that is an RMD, and roll over the rest. Just be aware of 436 restrictions and the 110% funded rule if you go this route.

Hi Corey, thank you for taking the time with the explanation and warning but my question was about the technique rather than the available options - they are always presented to the clients. I would never let the client go off too easily on any option other than the term, in the least, and always and strongly advise them to choose J&S, if married or have other beneficiary options.

David, yes, I am aware of the 12/31/2024 but I was just providing as an example however, thanks for pointing it out, just in case.

I am trying to confirm that it is ok the client can get 12x the payment in one shot rather than monthly withdrawals. It is a fight with them and at the end of the day, they do whatever they want despite my written CYA.

All I am looking for is some suggestions/comments on the math technique.

Isn't this the technicality on the difference between Nx and N(12)x?

Mathematically yes, how about the method, is that acceptable if yes, does it need to be adjusted by any interest adjustment?