First, for 2009 there was no RMD because all 2009 RMDs were waived and further, there was no year end 2008 balance for the plan.

For 2010, the fact that he is related to the owner does not matter. But if he is a 5% owner himself, he will have a 2010 RMD based on the 12/31/2009 balance.
If he is not a 5% owner, and the plan conforms to IRS requirements, there is no RMD due for 2010 unless he retires before the end of the year. His 2010 RMD would then be due by 4/1/2011.

If he is not a 5% owner and the plan contains a tougher requirement than the IRS required beginning date, then he will be treated as if he were a 5% owner as stated above and have an RMD due by 12/31/2010 based on the 12/31/09 balance. What is interesting here is that IF he does have to take such an RMD, it is a plan RMD only and not an IRS statutory RMD. Therefore, he could take it and roll it over to an IRA if he wanted and could do that as long as he continues to work there. MOST plans follow the IRS required beginning date, ie the year after retirement, but not all plans.

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Since he retired in 2010, this year is an RMD distribution year with respect to the 401k. While he has until next 4/1 to take out that RMD if he leaves the account in place, if he wants to proceed with an IRA rollover, then he must take out the RMD before or at the same time as the rollover. He cannot transfer the 401k RMD to the IRA account. Therefore, there would be no RMD requirement for 2010 for the new IRA account.

If he waits to do the rollover until 2011, then the 2011 RMD as well as the 2010 RMD must be distributed prior to the 401k rollover, so he might as well proceed now. He could then wait to take the 2011 RMD from the IRA until the end of 2011.

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Martin,
Sec 318a does appear to apply via reference in 401a9 to Sec 416 and 416 references 318a.

With respect to the rollover of a non statutory plan RMD, a reference to that appears below:

http://www.ataxplan.com/choatesNotes/CNotesV9N1.pdf

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I don’t have the book, but she has had this posted on her website for a few years now. She is widely recognized as one of the top 5 technical resources in the US on retirement plan issues. Perhaps there was a letter ruling to support her position, since she apparently is sticking with it.

402(c) indicates that a distribution required by 401(a)9 is not rollover eligible.
401(a)9 itself makes no reference to an exception to the requirement of RBD being the later of retirement or 70.5
But the IRS Reg 1.401(a)9-2, on the RBD question is copied below:
>>>>>>>>>>>>>>>
Q–2. For purposes of section 401(a)(9)(C), what does the term required beginning date mean?

A–2. (a) Except as provided in paragraph (b) of this A–2 with respect to a 5-percent owner, as defined in paragraph (c) of this A–2, the term required beginning date means April 1 of the calendar year following the later of the calendar year in which the employee attains age 70 1/2 or the calendar year in which the employee retires from employment with the employer maintaining the plan.

(b) In the case of an employee who is a 5-percent owner, the term required beginning date means April 1 of the calendar year following the calendar year in which the employee attains age 70 1/2 .

(c) For purposes of section 401(a)(9), a 5-percent owner is an employee who is a 5-percent owner (as defined in section 416) with respect to the plan year ending in the calendar year in which the employee attains age 70 1/2.

(d) Paragraph (b) of this A–2 does not apply in the case of a governmental plan (within the meaning of section 414(d)) or a church plan. For purposes of this paragraph, the term church plan means a plan maintained by a church for church employees, and the term church means any church (as defined in section 3121(w)(3)(A)) or qualified church-controlled organization (as defined in section 3121(w)(3)(B)).

(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.

>>>>>>>>>>>>>>

Provisions a-d follow the tax code in 401(a)9, but (e) does not appear in the code, but indicates that a plan may incorporate an optional (“is permitted”) provision for an earlier plan RBD for non 5% owners. Natalie apparently takes the position that this option is NOT a requirement of 401(a)9, but only a plan option allowing the plan to use the same RBD for all employees regardless of ownership %. As such, since it is not a requirement of 401(a)9 and is not even included in 401(a)9 itself, it should be rollover eligible. Again, perhaps she has more documentation to support her position than these arguable points.

It may even be the complex set of rules you cited in 416 and 318 that plan administrators wish to avoid, ie. determining the actual relationships of all staff, or the valuation date to measure the 5% equity. Making the plan RBD the same for all avoids the risk of allowing some staff to miss the statutory RMD.

If I can locate anything more specific such as an IRS letter ruling or Notice, will post back. Thanks for catching the Sec 318 provision.

Edit addition: here is another source that agrees with Natalie Choate. See p 9:
http://www.abanet.org/rpte/publications/ereport/2009/3/TE_Harvey-Wallace…

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Thanks for posting that reference. Always better to have the true source if possible.

And here is the latest challenge for qualified plans in determining taxable amounts of distributions from in plan Roth conversions, particularly those that were made partially from after tax contributions into a pre existing designated Roth account, but then distributed under the 2010 conversion acceleration of income provisions. This continued portability expansion is providing flexibility at the expense of heightened complexity:

http://benefitslink.com/IRS/notice2010-84.pdf

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