Initial Required Minimum Distributions
(Defined Contribution Plans)
In general, participants in a defined contribution plan are required to receive minimum distributions after turning age 70.5 if they have separated from service or are a 5% owner in the company (regardless if the owner is actively employed). The initial Required Minimum Distribution (RMD) must begin by April 1 in the year following turning age 70.5 with the subsequent RMDs due by December 31.
Age 70.5 is calculated as 6 months after the day the participant turned age 70. For example, a retired participant that turned age 70 on June 30, 2018 reached age 70.5 on December 30, 2018; therefore, the initial RMD is due April 1, 2019. The following RMD would be due December 31, 2019 and then each 12/31 thereafter.
However, if this same participant had a July 1 birthday, he/she would turn age 70.5 on January 1, 2019 and, therefore, could choose to receive the first RMD until April 1, 2020, with the next RMD on December 31, 2020.
April 1 is quickly approaching, so now is the time to verify if you or any of your employees must receive an initial RMD on April 1, 2019.
For additional information about Initial Required Minimum Distributions, please refer to our other resources:
Please contact your Watkins Ross Retirement Plan Administrator with questions regarding your specific plan participants.
Related Articles You Might Like
A common operational failure for retirement plans is when plan sponsors fail to apply the correct definition of compensation for retirement plan testing and benefit allocation purposes. Using an incorrect compensation total can impact the average deferral percentage...
What Are Controlled Groups and Controlled Group Rules?Controlled group rules exist to prevent business owners from subdividing their company into two separate companies - one employing highly compensated employees (HCEs) with a retirement plan and the other employing...
Code section 402(g) limits the amount an individual can defer to a 401(k) plan during a calendar year, and it applies at an individual level, not at a plan level. An individual’s elective deferrals are the sum of all pretax and Roth deferrals to a 401(k) plan plus any...