RBDs, MRDs and QRPs, Oh My! Calculating Required Beginning Dates for Distributions from Multiple Retirement Plans

When must a participant in a qualified retirement plan (QRP) begin taking mandatory required distributions (MRDs)?  The rules governing retirement plans and mandatory distributions can be tricky.  Assuming the plan participant is not an owner of 5% or more of the company maintaining the plan, the required beginning date (RBD) is April 1 of the calendar year following the later of (1) the calendar year the participant attains age 70.5, or (2) the calendar year in which the participant retires from employment with the employer maintaining the plan.  The rules of the individual plan should be consulted because not all employer-sponsored plans are required to recognize the latter of the two rules, and may choose to require all employees to begin distributions by April 1 of the calendar year the participant attains age 70.5.  If the participant is an owner of 5% or more of the company maintaining the plan, then the RDB is April 1 of the calendar year in which the participant attains age 70.5.

Are the rules for the RBD the same for IRAs?  No.  The RBD for a distribution from a traditional IRA is April 1 of the calendar year following the calendar year in which the participant attains age 70.5.  For a Roth IRA, there are no RBDs because there are no MRDs for the participant.

What if the plan participant has two different employer sponsored plans, one from an existing employer and one from a former employer?  If the participant is still working at the time he or she attains the age of 70.5, he or she could potentially have two different start dates.  If the plan permits, the RBD for the current employer’s plan could be delayed until April 1 of the year following the year of retirement.  The RBD for the former employer’s plan would be April 1 of the calendar year following the calendar year the participant attains the age of 70.5.

If a participant has two different employer sponsored plans as described above, can the participant roll the proceeds from the former employer’s plan into the current employer’s plan to delay required distributions until retirement?  Maybe.  First, the current employer’s plan would have to permit such a rollover.  Second, it could depend on the age of the participant at the time of the rollover.  If the participant attains the age of 70.5 in the year the rollover is contemplated, the participant would still be required to take the first distribution from the former employer’s plan for that year (even though technically the first distribution could be delayed until April 1 of the following year).  Any distribution received from the plan in the year the participant attains age 70.5 would be considered a minimum distribution for that year and cannot be rolled over.  The balance of the account in excess of the minimum distribution may then be rolled over.  Again, the plan participant should consult with the individual plan to confirm that the plan would permit such a rollover.