Michael A. Webb, Vice President, Retirement Practice, Cammack LaRhette Consulting, answers:
Maybe. For the benefit of those who may not be aware of the required minimum distribution, or RMD, rules, such rules require that at least a small actuarially determined portion of an account balance of individuals who are at least 70 1/2 years of age and are no longer employed by the plan sponsor be distributed each year. The initial distribution must take place by April 1 of the year following the later of employment termination or attainment of age 70 1/2, with subsequent distributions required to occur by December 31st of each year thereafter. (Some pre-1987 accruals are exempt from the RMD rules.)
However, the minimum distribution rules are designed so that, if a participant maintains multiple 403(b) plan account balances, he/she can satisfy the RMD by taking the entire required distribution from just one of his/her 403(b) plans (but NOT from an IRA or qualified plan, such as a 401(a) or 401(k)). If you have multiple individuals who have not taken the required distribution, it is unlikely that ALL of those individuals maintain other 403(b) account balances from which they are satisfying their RMD.
Since the penalties for failed RMDs can be severe (a tax penalty of as much as 50% of the required distribution amount to the participant, with possible consequences to the plan as well), best practice would be to work with your plan vendor to track down these individuals to determine if they are taking a distribution from another 403(b) plan to satisfy the requirement, or simply have failed to take the RMDs. (There is a process for the participant to request the penalty be waived on account of reasonable error, which is described in the instructions to IRS Form 5329.) You may also wish to work with your plan vendor to install more proactive procedures regarding RMDs going forward.
NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.