In a recent general information letter the IRS reiterated several RMD rules and the Required Beginning Date (“RBD”) for taking RMDs:

IRAs: The requirement to take RMDs begins on April 1st of the year following the calendar year in which the taxpayer reaches age 70 ½.

EXAMPLE: Taxpayer reaches age 70 ½ in 2016. S/he must take an RMD for 2016 but may wait until April 1, 2017, to take it as that’s his/her official RBD.

EMPLOYER-SPONSORED PLANS: For a 401(k), 403(b) or other defined contribution and pension plan the requirement to take RMDs begins on April 1st following the later of the calendar year in which (1) the taxpayer reaches age 70 ½ or (2) retires.

EXAMPLE: Taxpayer is 74 years of age and still working at ABC, Inc. S/he doesn’t need to take an RMD until retirement. If s/he had retired at age 65 then his/her RBD would have been April 1st of the year following the year s/he reached 70 ½.

5% OWNER: If a qualified plan participant owns more than a 5% interest in the company that sponsors the plan the RBD is April 1st of the year following the year the owner turns age 70 ½ even if the taxpayer is still working. Note the term “separation from service” is not defined by the IRS so the terms of the retirement plan will govern whether an employee who’s reached aged 70 ½ and still employed on a part-time basis is required to begin to receive their RMDs.

EXAMPLE: Taxpayer is 70 years of age, works at ABC, Inc. and owns 15% of the company. Because s/he owns 5% or more of the company his/her RBD from the ABC, Inc. qualified plan is April 1st of the year following the year s/he turns age 70 ½ even if s/he’s still working at ABC, Inc.