Defined Benefit Plans!
My client is a business owner with an LLC currently taking RMD’s from his IRA. He wants to roll over his IRA into a Defined Benefit Plan because he has been told that this would eliminate his RMD’s and he could continue to defer taxes until he decided to take money out no matter what his age.
I contacted the IRS and was told that he could do exactly as he described, and I relayed this to him.
His attorney now says that this is not true, so I contacted the IRS again and explained what I had been told before and asked where in the IRS code this information could be found. I was told that the attorney is correct and there is no code to be found.
I’m getting two different answers from the IRS. Does anyone know the correct answer. Can my client can roll his IRA into a Defined Benefit Plan, eliminate the need for RMD’s, and continue to defer taxes until he decides to take money out no matter what his age??? And if he can, where in the IRS code can this be found?
Permalink Submitted by Martin Helmer on Mon, 2008-11-17 21:29
Client can’t delay required minimum distributions if he’s a 5% or greater owner of the LLC. If he isn’t a 5% or greater owner and if the DB allows for rollovers as most do and if the plan allows non 5% owners to defer RMD’s until April 1 of the calendar year following retirement, as many plans do, then he can continue to defer. See Internal Revenue Code section 401(a)(9)(C)(i)(II) and 401(a)(9)(C)(II)(i).