Plan-set RMD Age

Sponsored by Allianz Life Insurance Company of North America

PSCA’s recent national conference covered the SECURE 2.0’s provisions affecting plan sponsors in detail. One of those provisions is the Required Minimum Distribution (RMD) age – the legal age at which participants must begin plan distributions if they have not already done so. This age was 70 ½ years old and the SECURE Act of 2019 adjusted that to age 72 with SECURE 2.0 adjusting it further to age 73 starting this year and age 75 in 2033 (generally, it’s a bit more complicated). After the conference a member reached out stating that in one of the sessions it was mentioned that the plan can set a distribution limit lower than the required minimum, but they were having trouble finding information on that and they were looking to verify. Though legally a plan can set the distribution limit lower that the RMD age our sense was that most plans follow do use the legal RMD age.

To verify, we asked plans sponsors at what age their participants must begin to take plan distributions in this week’s QOTW. The overwhelming majority DO use the legal RMD age – 90 percent of respondents – but 10 percent of plans do set it at something else. For those that have it set lower than the current RMD age, half kept it at age 70 ½ while a third have it set at the plan’s “normal retirement age” and 17 percent use age 72. As one respondent commented, this decision is really about the company’s philosophy. See more comments below.

Plan age set lower than legal RMD age:

• If EE is still working and not a 5% owner, they can delay receiving payments.
• We only held the start to 70.5 for the pension plan, our 401k follows legally required.
• We want to avoid lost participants so we are not aligning our RBCD with RMD as the RMD ages are now bring pushed up ward

Plan age at the legal RMD age:

• As soon as our Record Keeper is administratively ready to launch the change.
• Because this is law, our RK will need to build this in time to remain in compliance.
• I hope that there aren't any delays.
• Not sure why a plan would do this?  The more control the EE has over the plan, the better for the EE usually.
• Our fiduciary committee has articulated a "through retirement" approach to our plans, in contrast to a "to retirement" approach.  This perspective informs the evaluation of investment menu, fees, and services.  An early mandatory distribution provision would be contrary to this approach.
• Our plan allows for participants to begin distributions as early as 55 and provides for in-service distributions as well. We do not see the need to adopt any plan-set mandatory distributions.
• Our Plan is already setup to incorporate these changes.
• rely on administrator
• The decision to set a date for mandatory distributions that is lower than the legal requirement is about the philosophy of the plan sponsor.
• We just need to amend the plan and work with the recordkeeper.
• We require mandatory full distribution at RMD age for terminated participants.
• Would be interested to know why a plan would set it to be lower.