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  1. #1
    Join Date
    Nov 2013
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    Default Just Checkintg on Rmd

    I will be 70 1/2 in 2020 and I talked to my account about the RMD. From previous posts I understood that in the year you reached 70 1/2 you had to take an RMD by April 1st.

    My account now says that the law is that you don't have to do that until you reach the age of 72.

    Just checking to make sure.

  2. #2
    Join Date
    Oct 2006
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    16,445

    Default Re: Just Checkintg on Rmd

    Quote Quoting budwad
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    I will be 70 1/2 in 2020 and I talked to my account about the RMD. From previous posts I understood that in the year you reached 70 1/2 you had to take an RMD by April 1st.

    My account now says that the law is that you don't have to do that until you reach the age of 72.

    Just checking to make sure.
    Yes, that is part of the SECURE Act which passed just two or three weeks ago. However, anyone that turned 70 1/2 in 2019 still has to go by the old rules. It only applies to people who turned 70 1/2 in 2020 or later.

  3. #3
    Join Date
    Jun 2006
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    Massachusetts
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    Default Re: Just Checkintg on Rmd

    And, your specific plan needs to adapt the new rules.

  4. #4
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    Default Re: Just Checkintg on Rmd

    Quote Quoting cbg
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    And, your specific plan needs to adapt the new rules.
    Huh? Where in the SECURE Act does it give the option for a plan to decided to adapt or not adapt to the SECURE Act?

  5. #5
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    Massachusetts
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    Default Re: Just Checkintg on Rmd

    Employer sponsored plans have the right to require RMD's to begin earlier than the tax code does.

  6. #6
    Join Date
    Oct 2014
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    8,238

    Default Re: Just Checkintg on Rmd

    Quote Quoting llworking
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    Huh? Where in the SECURE Act does it give the option for a plan to decided to adapt or not adapt to the SECURE Act?
    This has nothing to do with the SECURE Act changes. Internal Revenue Code (IRC) 401(a)(9)(A) provides the general rule that the plan must provide for distributions to be distributed over the life of the employee (as computed per Treasury regulations) starting "not later than the required beginning date". This was the rule before the SECURE Act and remains the rule today. Since the language is that the trust must provide for distributions to begin "not later than" the RMD date the trust has always had the option to mandate that distributions start earlier than age 70 (and now age 72 for employees turning 70 in 2020 or after). It's just that trust couldn't start it later than the RMD. Of course, nearly every employer used the RMD both for simplicity and to give their employees/retirees more flexibility. But some do provide for distributions earlier than the RMD. And depending on how the trust has the plan written it may be that the trust will need to amend the plan to take advantage of the SECURE Act change.

  7. #7
    Join Date
    Oct 2006
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    16,445

    Default Re: Just Checkintg on Rmd

    Quote Quoting Taxing Matters
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    This has nothing to do with the SECURE Act changes. Internal Revenue Code (IRC) 401(a)(9)(A) provides the general rule that the plan must provide for distributions to be distributed over the life of the employee (as computed per Treasury regulations) starting "not later than the required beginning date". This was the rule before the SECURE Act and remains the rule today. Since the language is that the trust must provide for distributions to begin "not later than" the RMD date the trust has always had the option to mandate that distributions start earlier than age 70 (and now age 72 for employees turning 70 in 2020 or after). It's just that trust couldn't start it later than the RMD. Of course, nearly every employer used the RMD both for simplicity and to give their employees/retirees more flexibility. But some do provide for distributions earlier than the RMD. And depending on how the trust has the plan written it may be that the trust will need to amend the plan to take advantage of the SECURE Act change.
    I really did not know that. It has simply never come up in any of my continuing ed and I have never had a client in that circumstance either. How do retirees know that their employer's or former employer's plan requires distributions earlier than the RMD? Are there tax ramifications if the employer plan requires earlier distributions and they don't take them because they don't know or forgot?

  8. #8
    Join Date
    Jun 2006
    Location
    Massachusetts
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    Default Re: Just Checkintg on Rmd

    I can't speak for all employers or all plan administrators, but ours takes the simple solution of telling them. Our retirees etc. get letters reminding them when a RMD is due.

  9. #9
    Join Date
    Oct 2006
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    Default Re: Just Checkintg on Rmd

    Quote Quoting cbg
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    I can't speak for all employers or all plan administrators, but ours takes the simple solution of telling them. Our retirees etc. get letters reminding them when a RMD is due.
    Not all plans do that. I run into clients all the time who didn't take RMDs because they didn't realize they needed to do so and didn't get notification letters. Its good that your retirees get them.

  10. #10
    Join Date
    Nov 2013
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    7,052

    Default Re: Just Checkintg on Rmd

    Thank you.

    I assume that the same timeline applies, that in the year you reach 72 you take the value of the retirement accounts on December 31, of the year before and take the money out by April 1st in the year you reach 72?

    All my retirement accounts are self-directed.

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