New Required Minimum Distribution Guidelines Related to Missing Participants
The Required Minimum Distribution (RMD) standards of Internal Revenue Code Section 401(a)(9) state that qualified plans and 403(b) plans must begin distribution of a participant’s accrued benefit after the later of age 70 ½ or, if the participant is not a 5% owner of the plan sponsor, the participant’s retirement date. However, some plan sponsors have trouble complying with these rules because they cannot locate a participant who has terminated.
On October 19, 2017, the Internal Revenue Service issued a Memorandum to Employee Plans (EP) examiners that directed them not to challenge a qualified plan for its failure to commence or make an RMD to a missing participant or beneficiary if the plan has taken the steps below. A subsequent Memorandum was issued on February 23, 2018, to include 403(b) plans.
- Searched plan and related plan, sponsor, and publicly-available records or directories for alternative contact information;
- Used any of the following search methods:
- a commercial locator service,
- a credit reporting agency, or
- a proprietary internet search tool for locating individuals; and
- Attempted contact via U. S. Postal Service certified mail to the last known mailing address and through appropriate means for any address or contact information (including email addresses and telephone numbers).
If a plan hasn’t completed the steps above, EP examiners may challenge a qualified plan’s violation of the RMD standards for its failure to commence or make a distribution to a participant or beneficiary to whom a payment is due.
For more information about McKonly & Asbury’s Employee Benefit Plan services, or for questions regarding this article, please contact Stephanie Kramer, Supervisor with McKonly & Asbury, at skramer@macpas.com.
