RBD for family member employee of a 5% owner

Submitted by Mary Jean Wenzel on Wed, 2015-05-06 14:41

If a qualified retirement plan allows employees who have reached 70 1/2 years of age to wait until they retire to begin distributions, can a family-member-employee of a 5% owner qualify to wait until he/she retires? Or must he/she follow the 5% owner rule?
Thanks.



Submitted by Alan - IRA critic on Wed, 2015-05-06 20:02

Sec 318 applies for determining who are treated as 5% owners for RMD purposes as follows. Therefore, certain family members of the 5% owner must also be treated as 5% owners:

(1) Members of family

(A) In general An individual shall be considered as owning the stock owned, directly or indirectly, by or for—(i) his spouse (other than a spouse who is legally separated from the individual under a decree of divorce or separate maintenance), and (ii) his children, grandchildren, and parents.



Submitted by Mary Jean Wenzel on Sat, 2015-05-09 18:39

Once RMDs begin for the employee family member of 5% owner, can contributions by employer and employee elective deferals continue for the RMD recipient?



Submitted by Alan - IRA critic on Sat, 2015-05-09 18:58

Yes, contributions can continue. This is the same as for SEP or SIMPLE IRAs where both contributions and RMDs can both apply in the same year.



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