No, participant is still working but is the 100% owner of the business/plan sponsor

• Flag as spam
• Log in to Reply

There are two methods and the plan must select one and advise the participant. These methods are outlined in IRS Reg. 1.401(a)(9)-6 with respect to single sum distributions copied below. Method 1 is very simple, 2 not so much. The 2017 RMD must be determined before the direct IRA rollover is done because the RMD is not eligible for rollover. Note that if participant had actually started annuity payments, this type of plan conversion is no longer allowed per IRS Notice 2015-49:

(d) Single sum distributions. In the case of a single sum distribution of an employee’s entire accrued benefit during a distribution calendar year, the amount that is the required minimum distribution for the distribution calendar year (and thus not eligible for rollover under section 402(c)) is determined using either the rule in paragraph (d)(1) or the rule in paragraph (d)(2) of this A-1. (1) The portion of the single sum distribution that is a required minimum distribution is determined by treating the single sum distribution as a distribution from an individual account plan and treating the amount of the single sum distribution as the employee’s account balance as of the end of the relevant valuation calendar year. If the single sum distribution is being made in the calendar year containing the required beginning date and the required minimum distribution for the employee’s first distribution calendar year has not been distributed, the portion of the single sum distribution that represents the required minimum distribution for the employee’s first and second distribution calendar years is not eligible for rollover. (2) The portion of the single sum distribution that is a required minimum distribution is permitted to be determined by expressing the employee’s benefit as an annuity that would satisfy this section with an annuity starting date as of the first day of the distribution calendar year for which the required minimum distribution is being determined, and treating one year of annuity payments as the required minimum distribution for that year, and not eligible for rollover. If the single sum distribution is being made in the calendar year containing the required beginning date and the required minimum distribution for the employee’s first distribution calendar year has not been made, the benefit must be expressed as an annuity with an annuity starting date as of the first day of the first distribution calendar year and the payments for the first two distribution calendar years would be treated as required minimum distributions, and not eligible for rollover.

• Flag as spam
• Log in to Reply