401k RMD following sale of a business | Ed Slott and Company, LLC

401k RMD following sale of a business

Dear Alan et al,

I have a client who was a >5% owner in a company until April 2019. He and his partners sold the company to a larger corporation in April.

Does he need to take a 2019 RMD since he is no longer a >5% owner? He is still working and plans to work until April 2020. He is 71 years old and took a 401k RMD in 2018 but has not yet taken his 2019 RMD.

The 401k plan is no longer receiving monthly contributions from employees following the sale and most employees have migrated over to the new plan.

My understanding is that he would need to take a RMD but wanted to check with you.

Many thanks,

Chris

Once he was determined to be a >5% owner, RMDs must continue from that plan, so he needs to take a 2019 RMD. However, if he rolls the plan balance over to the new plan for which he will not be a 5% owner, he would not be subject to RMDs for 2020 or until the year he retires unless the new plan requires ALL employees to start RMDs at 70.5.

 

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