After your starting year (the year you retire or reach age 70 ½, whichever applies for purposes of your required starting date) you must have received at least the minimum required distribution for that year by December 31. For your starting year, the deadline is April 1 of the following year, so the following year you would have to receive two minimum distributions, one by April 1 for the prior year which was your starting year (if it was not made by December 31 of your starting year), and another by December 31, that corresponds to the current year.
Distributions After Employee’s Death
If an employee dies while receiving periodic distributions, any balance remaining at the date of death must continue to be distributed to the employee’s designated beneficiary at least as rapidly as the distributions were being made to the employee.
If the employee dies before the required beginning date, there are two rules that apply in determining the distribution required in order to avoid the additional tax. The terms of the retirement plan determine which rule applies. The plan may allow the employee or beneficiary to choose which rule will apply. In this case, the choice must be made by the earliest date a distribution would be required (generally December 31 of the year following the year of the employee’s death).
If the plan does not specify a rule, does not allow a choice, or if a choice is not made, rule 2 would apply if the employee has a designated beneficiary. If not, rule 1 would apply.
Rule 1: Distributions must be completed by December 31 of the fifth year following the year of the employee’s death.
Rule 2: The distribution must be made in annual amounts over the life or life expectancy of the designated beneficiary. If the beneficiary is a surviving spouse, the distributions do not have to begin until December 31 of the year following the year in which the employee would have reached age 70 ½.
Types of Installments
Distributions, for purposes of avoiding the additional tax, are defined in annual amounts. The actual distributions can be made in monthly or quarterly installments, and as long as the total distributions for the year are more than the required minimum amount, and have been made by the required date, the additional tax can be avoided.
Distributions for More than the Minimum
You can receive more than the minimum amount required in any year, but the excess you receive in one year cannot be carried forward to be used to meet the minimum required distribution in any future year.
Combining Accounts to Meet the Minimum
If you have more than one pension fund, the minimum required distribution is calculated on each account separately. You must meet the minimum distribution requirements of each plan individually.