401k RMD 5% owner
I am stumped. All help is appreciated
401k participant, > 70.5, >5% owner, sold his share of the company; sale occurred after he reached his RBD
He is now an employee of the company (details are fuzzy; sounds like it was an M & A situation). Company now has a new name
Is he still required to take RMDs? My understand is RMDs must continue as he is “locked in” because he was a
5% owner upon his RBD
Is there a scenario where an owner starts 401k RMDs and is able to cease due to manuvering below the 5% ownership threshold?
Thank you
Permalink Submitted by Alan - IRA critic on Wed, 2016-07-27 17:32
You are correct. The RMD for that particular plan is locked in when ownership exceeds 5% for even one day starting in the 70.5 year. The family attribution rules also can result in an individual who is personally not a 5% owner being treated as a 5% owner due to ownership by certain other family members. Acquisition of his employer and absorption of his plan into the plan of the acquiring company should not change this. However, were he to separate from employment and move to an unrelated company, he could take his current RMD from the old plan and roll the excess into the employer plan for which he was never a 5% owner, and the RMDs on that balance would cease the following year. http://www.unitedretirement.com/docs/default-source/newsletters/march-april-2015-retirement-plan-news.pdf?sfvrsn=2