IRS regulations require employees to begin required minimum distributions from IRAs by April 1st following the year they reach age 70 1/2. This also applies to retired employees who are in a qualified retirement plan. However, some qualified retirement plans may allow employees that are still working past age 70 1/2 to defer required minimum distributions until they retire. (This exception is not available to employees who are a more-than-5 percent owner of the business. Such employees must start taking distributions
by April 1 following the year they attain age 70 1/2, regardless of whether the employee is still working.)
Required minimum distributions are calculated by dividing the prior year-end fair market value of the retirement account by the applicable life expectancy of the employee, or the joint life expectancy of the employee and their beneficiary. The IRS provides the life expectancy tables used in the calculation of required minimum distributions.
For a summary of federal tax rules that apply to retirement plan payments, refer to Ohio National's Special Tax Notice Regarding Plan Payments (Form 6659). It is recommended that employees talk with their tax advisers before making any decisions regarding distributions from their retirement plans.
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