Finance Questions? Ask a Financial Expert for Answers ASAP
As long as you own less than 5% of the employer and the plan document does not require mandatory distributions at age 70 1/2 regardless of continuing to work, then you do not have to take RMDs until after you retire.
Can individual plans sponored by the employer require RMDs even though the employee is still working?
I am not sure who's court the ball is in. Please answer the above reply.
No they cannot. Federal law takes precedence.
I guess we have a shoot out. The University of Texas thinks they can require RMDs.
I have to leave the office now. I want to hear your opinion, but I will accept the answer
whatever your reply.
A plan is permitted to include a provision requiring RMDs after age 70 1/2 even if a participant is still working for the employer.
From the IRS website:
"The required beginning date is April 1 of the first year after the later of the following years:
However, a plan may require that the participant begin receiving distributions by April 1 of the year after the participant reaches age 70½, even if the participant has not retired." http://www.irs.gov/retirement/sponsor/article/0,,id=151926,00.html
Also see page 19 - http://www.irs.gov/pub/irs-pdf/p560.pdf
See Treasury Regulation 1.401(a)(9)-2, Q & A #2(e)
(e) A plan is permitted to provide that the required beginning date for purposes of section 401(a)(9) for all
employees is April 1 of the calendar year following the calendar year in which an employee attains age 70
1/2 regardless of whether the employee is a 5-percent owner.
I am a CPA but federal law takes precedence. They may call your plan a 401k or a 401(3)b but it is the same. They CANNOT force you to take a distribution from that plan if still employed by them.
They CAN if it is a pension plan.
I need to know EXACTLY the type of plan. Plan name.
A 401(k) or 403(b) plan document can require you to take an RMD while still employed. Most plans don't but it depends on the specific language in the plan.
The treasury regulation I referenced above is the federal law.