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!



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.

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.

The regulation defines a 5% owner based on the plan year ending in the year he reaches 70.5. If there was no plan in effect that year then there was no plan year, so he would not be a 5% owner for RMD purposes if the plan was started later.

The IRS Reg referred to above is 1.401(a)(9)-2, Q 2.

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