RMD Calculations Pooled Accounts

How do you calculate an RMD from an individual account plan that has a non-calendar year plan year and uses pooled investments?  Assume the plan has an 09/30 plan year and gets a valuation only once year on 9/30.  The regs suggest you take the account balance as of 09/30.  Then you add contributions and forfeitures allocated from 10/1 to 12/31, and subtract distributions during that same period.  For pooled investments, it is as simple as taking the 9/30 account balance, adding the 401(k) contributions (and forfeitures, if any) from 10/1 to 12/31, subtracting any distributions, and that is the value that gets divided by the life expectancy?  What about the earnings from 10/1 to 12/31?  My read of the regs is they are not picked up until the following year. 

That is my understanding of the rules, and the ERISA Outline Book would agree as well.

as an added thought, lets suppose you weren't discussing RMD. Lets just say the person quit. what would you use for the payout balance? I doubt you would credit earnings, nor that the document would even allow it. you simply use the balance as of the last val date and adjust for any contributions/distributions that might have been made.  the only exception I can think of would be if the stock market collapsed and you would do an interim valuation to protect the balances of all participants.

Agreed.  It's actually in the regs; see prior post

Thank you.  That is good point, Tom Poje, about how the distribution would be calculated.  

I am reading the regs again, and it seems to me if an employer contribution is actually made during the stub period in the calendar year after the end of the non-calendar year plan year, that contribution counts, regardless of the effective allocation date. 

Using the same example above, but assuming a 10/1/2016 to 09/30/2017 plan year, the 401(k) contributions made from 10/1/17 to 12/31/17 are allocated to the plan year beginning 10/2017, but they are still included in the account balance when calculating the RMD due by 12/31/2018 (assume this is not the first RMD).   If the employer makes a profit sharing contribution on 11/15/2017 that is allocated as of 09/30/2017, that profit sharing contribution must also be included.  That contribution is not optional.  If the employer makes a profit sharing contribution on 12/15/2017 that is allocated as of 12/15/2017, that contribution must also be included in the 12/31/2018 RMD.  If the employer makes a profit sharing contribution on 01/15/2018 that is allocated as of 10/1/2017, the inclusion of that amount to calculate the RMD due by 12/31/2018 is optional.  And finally, if the employer makes a profit sharing contribution on 01/15/2018 that is allocated as of a date after 12/31/2017, that amount cannot be included in the calculation of the RMD due 12/31/2018.  

Does this seem to be a reasonable interpretation of the regs?  

What about a contribution that is made in 2018 but allocated as of 09/30/2017 or earlier in the plan year?  I am thinking that amount must be included in the calculation for the 12/31/2018 RMD, because it was not allocated as of a date after the valuation date.  

3 hours ago, ERISAAPPLE said:

I am reading the regs again, and it seems to me if an employer contribution is actually made during the stub period in the calendar year after the end of the non-calendar year plan year, that contribution counts, regardless of the effective allocation date. 

I can't say that I looked at the regs but I don't think so.  Oh wait, I just read your comments and yeah, I think you got it right - see, we always do our vals on an accrual basis so when you talk about a 9/30/17 account balance that would already include any contributions made after the end of the year for the year.  In most cases, that would include accruals made after 1/1/18, but I do think you could exclude them.

Thank you Bird.  That is how I read it.  I also think that any contributions made in a later calendar year that is allocated within the plan year (in my example, on or before 09/30/2017) must be included.  If somehow an employer could make a contribution on 12/31/2018 that gets allocated as of 09/30/2017, that allocation would be included in the 12/31/2018 RMD.  That's just how I read the language the regs.