This QOTW has been updated to reflect changes made by the SECURE Act, which was signed into law on December 20, 2019.
Participants who were born on or before July 1, 1949, are required to start taking their RMDs in the year they turn 70 ½. Those born after that date are subject to RMDs on reaching age 72.
One of the non-owner participants in our 401(k) plan will be turning 72 in April of 2021. The participant knows her first RMD is due no later than April 1, 2022, but she has asked whether she has to wait that long to actually withdraw the money.
Could she take her first RMD in 2020? What about sometime in 2021 but before she turns 72?
Before answering your question, let’s quickly review the general timing for required minimum distributions. The deadlines vary based on whether or not a participant owns more than 5% of company sponsoring the plan.
Now back to your question. Assuming she is retired, your participant will be happy to hear she doesn’t have to wait until April 1, 2022 to take her first RMD, but she also cannot take it during 2020. To be eligible to take an RMD, a participant must wait until his or her initial “Distribution Calendar Year.” This is defined as the year in which the participant turns age 72. Connecting the dots, your participant could take her distribution at any point during 2021 to satisfy the RMD.
There are a couple other considerations to keep in mind.
There are a lot of nuances to the RMD rules, so it’s always a good idea to double-check if you are unsure how to proceed…just like you did here. For more information on required minimum distributions and plan distributions in general, please visit our Knowledge Center here, here and here.