Life and Death Planning for Retirement Benefits

Life and Death Planning for Retirement Benefits

1.3 RMDs During Participant’s Life

The minimum distribution rules come in two flavors, “life” and “death.” This

¶ 1.3

and

¶ 1.4

explain the “life” rules, the rules that apply during the participant’s life. For the post-death

rules see

¶ 1.5

– ¶ 1.8 .

An individual (the

participant

) who owns a retirement plan account must start taking

annual “required minimum distributions” RMDs) at a certain point in his life. This general

statement does

not

apply to Roth IRAs, which are not subject to the lifetime distribution

requirement; see

¶ 5.2.02 (

A). Accordingly, this

¶ 1.3

does not apply to Roth IRAs. Also, see

¶ 1.1.04

regarding the 2009 one-year suspension of RMDs.

For when lifetime RMDs must start, see

¶ 1.4.

Once commenced, annual RMDs continue

for the rest of the participant’s life; for this rule and its exceptions, see

¶ 1.2.01 ,

#2. Although the

computation of

post-death RMD

s can be radically different depending who is the beneficiary of

the plan (see

¶ 1.5

lifetime

RMDs are computed the same way for most people. See

¶ 1.3.01

for

the method most people use (and the list of people who do

not

use it).

1.3.01

Road Map: How to compute lifetime RMDs

Follow Steps 1–8 below to compute a participant’s “lifetime” RMD for a particular year

(the “Distribution Year”) for a qualified retirement plan (QRP) or 403(b) plan account or

traditional IRA. Reg.

§ 1.401(a)(9)-5 ,

A-4(a). This calculation must be done separately for EACH

IRA or plan account the participant owns; see

¶ 1.3.04 .

As a reminder, this method does

not

apply

to defined benefit plans or to the “annuitized” portion of any DC plan; see

¶ 1.1.05 .

Step 1:

Determine whether a distribution is required

for this year. If the participant has

not yet reached his “first Distribution Year”

( ¶ 1.4.01 )

, you’re done—no RMD is

required. For the first Distribution Year itself, see

¶ 1.4.07 .

If the participant has

passed his RBD, a distribution is required. If a distribution is required for the year,

proceed to Steps 2–8.

Step 2:

Determine the prior year-end account balance

for this plan or IRA. Se

e ¶ 1.2.05 – ¶ 1.2.08 .

Step 3:

Determine the participant’s age.

See

¶ 1.2.04 .

Step 4:

Obtain the ADP (divisor)

from the Uniform Lifetime Table

( ¶ 1.2.03 )

for the

participant’s age (Step 3), unless the sole beneficiary of the account is the

participant’s more-than-10-years-younger spouse (in which case see

¶ 1.3.03 f

where to find the divisor).

Step 5:

Compute the current Distribution Year’s RMD

by dividing the prior year-end

account balance (Step 2) by the ADP (Step 4).

Step 6:

If the current Distribution Year is 2009

, reduce the amount obtained in Step 5

to zero. See

¶ 1.1.04 .

Step 7:

Add any missed RMDs from prior years

to the amount obtained in Steps 1–6.

See

¶ 1.9.02 .