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
Understanding Your Retirement Plan's Force-out ProvisionsAre you aware of your plan's force-out provisions? If not, now would be an excellent time to find out. What force-out limit does your plan contain? When you find out, send out the appropriate paperwork to...
Getting 401(k) Participants Back in the Game in a Post Pandemic WorldThere is no doubt the coronavirus pandemic has impacted financial decisions many workers made during 2020. As the primary means of saving for retirement, 401(k) post pandemic balances were adversely...
SECURE Act: Plan Amendment Options The SECURE Act was signed into law on December 20, 2019. Your plan will require an amendment prior to the end of your 2022 plan year. Below are provisions that you will be able to elect in the plan amendment: Qualified Birth or...