Required Minimum Distributions
Learning Objectives Explain the delayed required beginning date option Identify the issues that may affect the required minimum distribution (RMD) calculation Identify the aggregation rules for RMD purposes 2
Review of RMD Starts at 70½ year Minimum amount IRS calculation method 3
Age 70½ Year Born between January 1 and June 30 Birth Year + 70 Born between July 1 and December 31 Birth Year + 71 4
Required Beginning Date IRA Owner 70½ year First distribution year 4/1/2019 = RBD 1/1/2018 12/31/2018 12/31/2019 5
Required Beginning Date Plan Participant LATER OF: 70½ year OR Retirement year 4/1/2019 = RBD 1/1/2018 12/31/2018 12/31/2019 Plan document defines RBD Delayed RBD not available for greater than 5% owners 6
My name is Jon, I was born in 1937 and I retired from my job earlier this year. My employer said that I have to start taking an RMD from my 401(k) plan. What is my required beginning date? April 1, 2019 My name is Cindy, I was born in June 1948. My financial organization said that I have to start taking an RMD from my Traditional IRA. What is my required beginning date? April 1, 2019 7
Account Owner Responsibility Timely Missed RMD Calculation method 8
Traditional IRA Plan Agreement 9
Traditional IRA Plan Agreement 10
Calculating an RMD 11
December 31 balance from prior year + + Outstanding rollovers and transfers Surviving spouse rollovers and transfers QLAC premium costs = Account balance 12
+ Outstanding Rollovers and Transfers 2018 2019 Distribution Rollover or transfer deposit 60 days (if rolled over) 13
+ Surviving Spouse Rollovers and Transfers (IRAs only) 2018 2019 IRA owner died Inherited IRA distribution Transfer deposit 60 days if rolled over 14
Plans Not Valued on Last Day of Year Valuation Date Add contributions or forfeitures January 1 2018 Subtract distributions December 31 15
My IRA balance on December 31, 2017, was $93,218.43. On January 12, 2018, I rolled over $16,000 that I received on December 12, 2017, from my Traditional IRA at another company. What balance is used to calculate my 2018 RMD? $109,218.43 (93,218.43 + $16,000) 16
My employer operated a quarterly-valued fiscal year 401(k) plan ending on October 31. The balance of my 401(k) plan on October 31, 2017, was $164,734. I received an additional $12,000 in contributions from October 31 until December 31, 2017. What balance is used to calculate my RMD? $176,734 (164,734 + $12,000) 17
Calculating RMDs After an Account Balance Adjustment 1. Does our system calculate the RMD based on an adjusted account balance or from the actual December 31 balance? 2. If our system uses an adjusted account balance, how are the adjustments coded and entered into the system? 3. If our system uses the actual December 31 balance, what process is in place to ensure that adjustments are made and that the RMD is calculated properly? 18
Applicable Distribution Period x y Not a choice Divisor to calculate RMD Attained Age = Current Year Birth Year 19
Uniform Lifetime Table Attained age Distribution Period Attained age Distribution Period Attained age Distribution Period 70 27.4 85 14.8 100 6.3 71 26.5 86 14.1 101 5.9 72 25.6 87 13.4 102 5.5 73 24.7 88 12.7 103 5.2 74 23.8 89 12.0 104 4.9 75 22.9 90 11.4 105 4.5 76 22.0 91 10.8 106 4.2 77 21.2 92 10.2 107 3.9 78 20.3 93 9.6 108 3.7 79 19.5 94 9.1 109 3.4 80 18.7 95 8.6 110 3.1 81 17.9 96 8.1 111 2.9 82 17.1 97 7.6 112 2.6 83 16.3 98 7.1 113 2.4 84 15.5 99 6.7 114 2.1 115+ 1.9 20
Joint Life Expectancy Table Sole primary beneficiary for entire calendar year Is more than 10 years younger than account owner Spouse Use account owner s and beneficiary s attained ages each year 21
Joint Life Expectancy Table Ages 69 70 71 72 73 74 75 76 77 78 79 69 22.6 22.2 21.8 21.4 21.1 20.8 20.5 20.2 19.9 19.7 19.5 70 22.2 21.8 21.3 20.9 20.6 20.2 19.9 19.6 19.4 19.1 18.9 71 21.8 21.3 20.9 20.5 20.1 19.7 19.4 19.1 18.8 18.5 18.3 72 21.4 20.9 20.5 20.0 19.6 19.3 18.9 18.6 18.3 18.0 17.7 73 21.1 20.6 20.1 19.6 19.2 18.8 18.4 18.1 17.8 17.5 17.2 74 20.8 20.2 19.7 19.3 18.8 18.4 18.0 17.6 17.3 17.0 16.7 75 20.5 19.9 19.4 18.9 18.4 18.0 17.6 17.2 16.8 16.5 16.2 76 20.2 19.6 19.1 18.6 18.1 17.6 17.2 16.8 16.4 16.0 15.7 77 19.9 19.4 18.8 18.3 17.8 17.3 16.8 16.4 16.0 15.6 15.3 78 19.7 19.1 18.5 18.0 17.5 17.0 16.5 16.0 15.6 15.2 14.9 79 19.5 18.9 18.3 17.7 17.2 16.7 16.2 15.7 15.3 14.9 14.5 80 19.3 18.7 18.1 17.5 16.9 16.4 15.9 15.4 15.0 14.5 14.1 81 19.1 18.5 17.9 17.3 16.7 16.2 15.6 15.1 14.7 14.2 13.8 82 19.0 18.3 17.7 17.1 16.5 15.9 15.4 14.9 14.4 13.9 13.5 83 18.8 18.2 17.5 16.9 16.3 15.7 15.2 14.7 14.2 13.7 13.2 84 18.7 18.0 17.4 16.7 16.1 15.5 15.0 14.4 13.9 13.4 13.0 85 18.6 17.9 17.3 16.6 16.0 15.4 14.8 14.3 13.7 13.2 12.8 22
I was born August 8, 1937, and named my wife Cindy as the sole primary beneficiary of my 401(k) plan. What is my attained age in 2018? 81 (2018 1937) 23
I was born June 19, 1948, and named my husband Jon as the sole primary beneficiary of my IRA. What is my attained age in 2018? 70 (2018 1948) 24
Do you need my wife Cindy s attained age to calculate my RMD? Why or why not? Yes, Cindy is Jon s spouse and is the sole primary beneficiary of his 401(k) plan. Because Cindy is also more than 10 years younger than Jon, his RMD is calculated using the Joint Life Expectancy Table. 25
Do you need my husband Jon s attained age to calculate my RMD? Why or why not? No, Cindy is younger than Jon, so her RMD is calculated using the Uniform Lifetime Table. 26
What is my distribution period for 2018? 18.5 27
What is my distribution period for 2018? 27.4 28
Look Through Trust Qualified Trust Joint Life Expectancy Only primary beneficiary Spouse is sole beneficiary of the trust Spouse more than 10 years younger 29
Qualified Trust Requirements Valid under state law Irrevocable Identifiable beneficiaries 30
Effect of Beneficiary Change on RMD Table Before Change Table After Change Change from a Younger Spouse Beneficiary* to Any Other Beneficiary Year Table Changes Effect on RMD in Year Table Changes Not due to death or divorce JLE ULT Same Year Due to death JLE ULT Year After Due to divorce (beneficiary change made in the same year) JLE ULT Same Year Due to divorce (beneficiary not JLE ULT Year After changed in divorce year) Change from Any Beneficiary to a Younger Spouse Beneficiary* Any reason ULT JLE Year After * A younger spouse beneficiary is a spouse beneficiary that has an attained age more than 10 years younger than the attained age of the account owner. 31
Reporting RMDs To the IRA Owner RMD Statement RMD is required Deadline Reported to IRS Estimated RMD amount OR RMD amount will be provided upon request January 32
Reporting RMDs To the IRS IRS Form 5498 RMD is required May 33
34
Transferring RMDs Traditional IRA RMD Traditional IRA SIMPLE IRA SIMPLE IRA 35
Rollover in 70½ Year or Later Qualified Retirement Plan Traditional IRA Remaining Amount Qualified Retirement Plan Traditional IRA SIMPLE IRA SIMPLE IRA RMD RMD The first dollars out go toward satisfying the RMD and are not eligible to be rolled over. 36
I am moving my IRA to Valley Financial. I have not taken my 2018 RMD ($4,028.16). I am withdrawing my IRA balance ($38,670.31) today. What would be the best way to handle this transaction? Either provide two separate checks to Frank (one for his RMD and the other for the remainder), or provide one check to Frank indicating his 2018 RMD amount. Frank would then be able to roll over the difference. 37
Taking RMD From Another IRA Get Written Direction 38
Missed RMD Missed RMD 50% excess accumulation penalty tax Account owner may request waiver Plan may submit through VCP 39
Missed RMDs On January 5, 2019, I realized that I missed my RMD. What option is available to me to avoid the 50% penalty tax? Take Bonnie s RMD today, and then Bonnie can request a waiver with the IRS when she files her tax return. 40
Satisfying the Year-of-Death RMD 1/1 Scheduled 12/31 RMD X Account owner dies Must be paid to beneficiaries 2018 41
My brother, Frank, passed away before taking his 2018 RMD. I have elected to take life expectancy payments. What needs to happen with his RMD? The RMD must be disbursed to Arthur. 42
Questions?
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