RMD from Profit-Sharing Plan of S-Corporation

Submitted by Christopher Combs on Thu, 2014-04-03 20:38

FAYE:

• DOB: 8/15/1943
• Married to Harold
• Harold’s DOB: 8/6/1942 DOD: 10/10/2013
• Harold took his RMD in Feb 2013 (based on 12/31/12 balance in the PSP)
• Faye inherited Harold’s PSP by bene designation. She received a $2,261,245 check payable to her ML IRRA on March 14, 2014 when the PSP terminated; Harold’s church received a $200,000 check and Harold’s favorite athletic foundation received a $500,000 check
• Faye received her PSP check of $3,116.47 payable to her ML IRRA on March 14, 2014 when the PSP terminated
• Ownership of the S-Corp:
 Jan. 1, 2013 – Aug. 29, 2013: Harold’s Rev Trust owned 41.6%; Faye’s Rev Trust owned 41.6%
 Aug. 29, 2013 – Dec. 31, 2013 (post-gifting): Harold’s Trust owned 22.4%, Faye’s Trust owned 22.4%
• Faye is still a compensated officer of the company
• Faye received employee compensation through the end of October

Question:

1) Does Faye need to take an RMD on her PSP 12/31/13 balance?
If NO, will she need to take two in YR2015?
2) Does Faye need to take an RMD on Harold’s PSP 12/31/13 balance this year?
3) Is it typical for the TPA to charge for providing the December 31st balances for RMD purposes (the plan has historically only provided annual balances, as of Fiscal Year End 9/30)?



Submitted by Alan - IRA critic on Fri, 2014-04-04 03:55

  1. Faye is considered a greater than 5% owner as her trust is attributed to her under Sec 318. Therefore, 2014 is her first RMD year using the 12/31/13 balance. She can defer that RMD till 4/1/2015 but would have to take 2 RMDs in 2015 if she does. However, the 3,116 direct rollover is considered toward the first year RMD because it was a distribution from the plan.
  2. Similar to above she already has, since a portion of the large direct rollover check was the 2014 beneficiary RMD for the plan. Neither of these RMD amounts were eligible for rollover and need to be removed from the IRAs.
  3. Don’t know, but since the fiscal year is different from the calendar year there might be some extra cost involved.

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