RMD in 1st 401K plan year
Client (over age 70.5 and 5% owner) established and contributed to a new 401K in 2017. Since he is required to take RMDs even though he is still working, was a distribution required in 2017? The plan had $0 value as of 1/1/2017 so I do not think one was required but I cannot find any specific clarification. Thanks!
Permalink Submitted by Alan - IRA critic on Thu, 2018-01-04 15:35
RMDs are calculated using the prior year end balance which was 0, therefore there is no 2017 RMD. However, was this employee a 5% owner in the plan year ending in the year he reached 70.5? For example, if he was hired after that year and acquired the stake after that year, he would not be subject to RMDs unless the plan requires ALL employees to start RMDs at 70.5.
Permalink Submitted by Niki Sturm on Thu, 2018-01-04 16:21
He has owned this business for more than 30 years with no retirement plan, until 2017. If I understand your comment correctly, since he aquired this ownership prior to 70.5, he is subject to RMDs in 2018 and beyond.