Required Minimum Distributions (RMD) – April 1 Deadline
March 19, 2007

Is your plan complying with the RMD rules (under IRC Section 401(a)(9))? You can find a general description of the RMD requirements in our ESOP planning section. In addition, here is a link to a blog post discussing RMD resources and calculators.

Generally, all participants must receive their first RMD by the April 1 of the year following the year they meet both of the following requirements: attain age 70½ and terminate employment. This date is referred to as the participant’s required beginning date.

Here is an example of a participant that met both requirements in 2006:

• Required Beginning Date – Since the participant met both requirements in 2006, the required beginning date is April 1, 2007.
• RMD #1 - The participant must receive their first RMD by April 1, 2007. This RMD is the participant’s 2006 RMD and is calculated using the 2005 balance.
• RMD #2 - The participant must receive their second RMD by December 31, 2007. This RMD is the participant’s 2007 RMD and is calculated using the 2006 balance.
• Each subsequent RMD - Each subsequent RMD will be due on each subsequent December 31 (calculated using the prior year’s balance).

Some plans provide eligible participants with the option to take their first RMD in the year they satisfy both requirements. Using the example, the participant would take their first RMD in 2006.

Another option is for the participant to take both their first and second RMDs before April 1 of the year the RMDs are due. Using the example, the first two RMDs would be taken in 2007 by April 1, 2007.