RMDs for Non-Owners (In-Service Not Allowed)

Let's say a plan does not allow for in-service. Also, the plan document states that there is an exception for non-owners who are still employed (that they don't have to take an RMD until separated from service). I have two questions:

1) Can a non-owner (who is over 70 1/2) still elect to take an RMD even though he's not terminated? Meaning does that provision give an option for the non-owner to take an RMD or wait until terminated, OR is it a requirement to wait until terminated.

2) If the answer to Question 1 is "yes", can he stop the RMDs at any time after starting them or does he have to keep taking RMDs once he takes the first one?

Thanks.

You're asking can you arbitrarily refuse to follow the terms of the plan :-)

Good Luck!

1: No

Amend the plan to allow in service after age 70 1/2: problem solved!

It's not required, so it's not an RMD. Calculating the amount of this in-service distribution using the RMD calculation procedure doesn't make it an RMD -- it's just an in-service distribution that would happen to satisfy the RMD requirement if one were actually required.

Irony at its best.... as I was discussing similar situation yesterday with colleagues.

The procedure as it has been explained to me by co-worker........Active 70 1/2 participants are sent the RMD material.  Participants choose if they want to take an RMD.  If they say yes, then they get an RMD every year going forward. 

I'm thinking to myself that an active participant wouldn't be taking an RMD, but an In-service Withdrawal as the plan allows.  You can call what you want, but don't call it "the participant started their RMDs".

Unless someone corrects me, I'll say the participant requested an In-Service distribution.

And of course, an optional in-service withdrawal would be an eligible rollover distribution with 20% withholding.  A real RMD would not be.

6 hours ago, Vlad401k said:

Let's say a plan does not allow for in-service. Also, the plan document states that there is an exception for non-owners who are still employed (that they don't have to take an RMD until separated from service). I have two questions:

1) Can a non-owner (who is over 70 1/2) still elect to take an RMD even though he's not terminated? Meaning does that provision give an option for the non-owner to take an RMD or wait until terminated, OR is it a requirement to wait until terminated.

2) If the answer to Question 1 is "yes", can he stop the RMDs at any time after starting them or does he have to keep taking RMDs once he takes the first one?

Thanks.

The plan language is important and I don't think we know what your plan actually says.  My documents define Required Beginning Date and, for a non-owner, that is NOT UNTIL the later of the calendar year in which the participant attains age 70 1/2 or the calendar year in which the Participant retires.There is no option; the rule automatically applies.

So, if the plan does not allow inservice distributions, and the individual is not subject to RMDs because he is still working, then he cannot take an in-service distribution which is what it would have to be since it would not be an RMD.

So, what is the exact document language?  You said the document said he doesn't HAVE to take a distribution, but does it define the RBD the way I said above, or something else.  If it says it my way, then he CAN'T take the RMD because there is none. What does the document say?  We can't answer Question 1 until we know that.

Since (in my plans) he can't arbitrarily start distributions except as in-service distributions, then the answer to your second question (for my plans) is NA because the answer to Q1 is NO.

All of the other answers could be right or wrong because we don't know what your plan language says.  If it is like mine, then Mike is right, K2Retire is answering a question not asked but might be a solution if your plan has language like mine, duckthing's comments are also true if your language is like mine (and not like what you said in the posting).

Mr. Bagwell's response is not in line with my plan documents. The participant has no choice to start RMD (though the RMD suspension that applied for 2009 was subject to participant choice). So I would like to know what the language is in Mr. Bagwell's plan that allows the choice.  Maybe that language is what is in your plan?

Lots of questions; would be nice if we had all the information from the beginning. Exact plan language is what our world revolves around! :-)

6 hours ago, Larry Starr said:

My documents define Required Beginning Date and, for a non-owner, that is NOT UNTIL the later of the calendar year in which the participant attains age 70 1/2 or the calendar year in which the Participant retires.

Our plan document has the same language.

There was much conversation with co-worker and manager that I left out of my post above.  Somewhere in the past the procedure became convoluted. I was laying out the case to co-worker and manager that the active participant is really taking an In-Service withdrawal vs an RMD based on the plan doc.

6 hours ago, Larry Starr said:

There is no option; the rule automatically applies

I wish I had this line to use during the discussion.

Thanks, Larry.