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RMDs: Remember the Benefit Rules!

An April 9 session of the Enrolled Actuaries Meeting held by the Conference of Consulting Actuaries and the American Academy of Actuaries touched on the rules for required minimum distributions (RMDs) and what “required” entails in that context regarding benefits.

Anita Juneja, a Consulting Actuary with First Capital Benefit Advisors, Inc. and Richard Block, President of Block Consulting Actuaries, Inc., were the panelists in the session.

Benefit Elections

Provide benefit election forms listing all options the plan offers, Juneja and Block stressed, adding that they must show the relative values of each optional form of distribution. But remember that generally, once a benefit election is made, it cannot be changed. “That’s it,” warned Juneja, adding, “That’s where some people get into trouble.”

The panelists stressed the importance of participants making a benefit election — and what happens if they don’t. Why would a participant not make one? Juneja said that the most common reasons are a participant not returning a form or selecting an option without spousal consent. But “even with the lack of an election, RMDs must start,” Block reminded. The payments will likely be in the form of a life annuity for an unmarried participant who failed to make an election, he said, or a qualified joint and survivor (QJ&S) benefit for a married participant. The result of having to use a default payment option may be a benefit form the participant or beneficiary may not like, they said.

Block also observed there is one circumstance in which a benefit election can be changed. Married participants, he said, may change the form of benefit at the termination of a retirement plan.

Death Benefits

“It’s good practice to have death benefit built into the RMD,” said Juneja. Once benefits commence, the form of payment dictates the death benefit, they said. But there also can be an ancillary benefit — a plan may maintain a life insurance policy on participants older than age 70½.


When payments begin, Block and Juneja said, all benefit accruals through the first distribution calendar year must be recognized. Additional accruals, they said, must be recognized no later than the year following the year of accrual as an annualized basis. And if there is a failure to provide an actuarial increase, they noted, self-correction is possible to head off penalties from the IRS.