RMD amount is greater than current balance

Submitted by Alan Warren on Sat, 2009-01-10 21:04

Obviously you can’t get blood from a stone, but what is the proper procedure in this case?

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Permalink Submitted by Alan Spross on Sat, 2009-01-10 23:59

I guess you would have to file a Form 5329, and explain that you took a total distribution but it was less than the RMD due to investment losses, and request that the penalty be excused. There does not seem to be an automatic safe harbor written into the code for this.

Permalink Submitted by Denise Appleby on Sun, 2009-01-11 19:43

There should not be a penalty.

Techincally, your RMD is the [i]lesser of [/i]the calculated RMD amount and your account balance. Therefore, if your case, withdrawing the entire balance will satisfy your RMD requirement.

Alan, I don’t think he needs to file Form 5329 since it is the lesser of, right?
I have to dig up the code or regulation that provides for this. Will do so later.

Permalink Submitted by Leann Detmer on Sat, 2022-10-29 15:23

Did anyone find the code pertaining to this lesser of rule?

Permalink Submitted by Alan - IRA critic on Sat, 2022-10-29 16:11

IRS Reg 1.401(a)(9)-5 QA #1 states that the RMD will not exceed the account balance. For an a non Roth IRA, it is the balance of all such accounts. Reg is copied below:
Q-1. If an employee‘s benefit is in the form of an individual account under a defined contribution plan, what is the amount required to be distributed for each calendar year?A-1.(a) General rule. If an employee‘s accrued benefit is in the form of an individual account under a defined contribution plan, the minimum amount required to be distributed for each distribution calendar year, as defined in paragraph (b) of this A-1, is equal to the quotient obtained by dividing the account (determined under A-3 of this section) by the applicable distribution period (determined under A-4 or A-5 of this section, whichever is applicable). However, the required minimum distribution amount will never exceed the entire account balance on the date of the distribution. See A-8 of this section for rules that apply if a portion of the employee‘s account is not vested. Further, the minimum distribution required to be distributed on or before an employee‘s required beginning date is always determined under section 401(a)(9)(A)(ii) and this A-1 and not section 401(a)(9)(A)(i).

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RMD amount is greater than current balance

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