RMD Rules: Year-End Rules of the "Game" | Ed Slott and Company, LLC

RMD Rules: Year-End Rules of the "Game"

By Beverly DeVeny, IRA Technical Expert

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@BevIRAEdSlott

The end of the year is rapidly approaching. It is time to make sure that all required distributions are taken from retirement accounts.

Who must take a required distribution?

  • IRA owners who turn age 70 ½ this year or earlier – including individuals with SEP and SIMPLE IRAs who are still working for those employers
  • Plan participants who turn age 70 ½ this year or earlier – unless the employer plan allows them to defer distributions to the year they retire (not available for 5% or more owners of the business)
  • Beneficiaries of all retirement plans, including Roth IRAs, of individuals who died in 2011 or earlier
  • Individuals with 72(t) (SEPP, SOSEP, early distribution payment plans) must be sure they have taken all of their annual distribution amount to avoid the 10% early distribution penalty recapture provisions

Just a reminder – IRA distributions can be taken from any IRA,  but employer plan distributions must be taken from each plan. Of course there is an exception – it is for 403(b) plans. A 403(b) distribution can be taken from any 403(b) plan.

Required distributions are based on the prior year-end account balance. IRA account balances must be adjusted to add back in any rollovers or transfers that are outstanding at the end of the year and any prior year Roth conversion amounts that are recharacterized in the current year.

A final reminder – the qualified charitable distribution (QCD) option is not yet available for this year (2012). It expired at the end of 2011 and has not yet been extended by Congress. This is the provision that allowed IRA owners to transfer amounts directly from their IRA to a qualifying charity and not include the amount (up to $100,000) in their income for the year.

Article Highlights

  • Who must take a required distribution?
  • Aggregating required distributions
  • Adjusting year-end account balances
  • No qualified charitable distribution (QCD) for 2012...yet

 

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