RMD from ERISA 401k plan
Hi Everyone,
i just attended Ed’s 2-day workshop and it was terrific! Full of relevant knowledge!
We have a client that turned 70 1/2 in 2017. He was 50% owner of his company through 4/31/2017 and then sold his business to a publicly traded company on 5/1/2017.
Does he have an RMD from his 401k for 2017? If he does not own 5% or more of the company, then no. But he did through May 1st of the year he turned 70 1/2.
Can anyone help?
Thank you,
David
Permalink Submitted by Alan - IRA critic on Mon, 2018-02-26 19:50
Client must only be a 5% owner at any time in the applicable year for the plan year that ends in 2017. The fact that the plan did not reach the end of the plan year does not appear to matter since he was a 5% owner before the plan ended. As such his required beginning date is 4/1/2018, and once RMDs begin they must continue in subsequent years even though client does not remain a 5% owner. To avoid RMDs the business needed to be sold by 12/31/2016. That said, if the new plan accepts IRA rollovers and he is working for the acquiring firm, he could do a direct rollover of the old 401k plan to a rollover IRA, and then roll that IRA into the new plan. That would stop the RMDs as long as he continues working for the acquiring firm, but he would need to take an RMD for the 2017 and 2018 years at the time of the direct rollover to an IRA.