Presently, all qualified defined contribution plans, as well as
traditional IRAs, 403(a) or 403(b) annuity plans, and 457(b) government
plans, must satisfy a minimum distribution requirement in which
distribution of an employee's interest in the plan must begin by April
1st of the calendar year following the later of (1) the calendar year in
which the participant attains age 70 1/2 or (2) the calendar year in
which the employee retires.
This is a reasonable plan for normal situations.
However, for retirement plans that have accumulated very large amounts
of retirement assets, including the value of pension benefits, I think it is unreasonable, and even borders on
being obscene, from a tax advantage standpoint. It is another case of "Tax Deferrals Gone Wild", where the US Congress continues to legislate only for the wealthy, thereby further expanding the economic gap between the wealthy and everyone else.
And particularly when the country has a US Debt in excess of $16
trillion, with large continuing annual US Deficits projected here on
end, it is particularly unreasonable to permit very large retirement
assets to continue to grow tax free and not have any distributed for an
unreasonable additional period of time.
Thus, below here are my recommendations related to this issue.
For all retirement plans where the fair market value of the
participant's interest in all plans, including the value of pension benefits, exceed $50 mil on December 31 of the
year the participant attains age 64 1/2, the minimum distribution
requirement must start by April 1st in the calendar year the participant
attains the age of 65 1/2.
For all retirement plans where the fair market value of the
participant's interest in all plans, including the value of pension benefits, exceed $10 mil on December 31 of the
year the participant attains age 65 1/2, but did not exceed $50 mil on
December 31 of the year the participant attained age 64 1/2, the
minimum
distribution requirement must start by April 1st in the calendar year
the participant attains the age of 66 1/2.
For all retirement plans where the fair market value of the
participant's interest in all plans, including the value of pension benefits, exceed $5 mil, but are less than $10
mil, on December 31 of the year the participant attains age 65 1/2, the
minimum
distribution requirement must start by April 1st in the calendar year
the participant attains the age of 67 1/2.
For all retirement plans where the fair market value of the
participant's interest in all plans, including the value of pension benefits, exceed $3 mil, but are less than $5
mil, on December 31 of the year the participant attains age 65 1/2, the
minimum
distribution requirement must start on April 1st in the calendar year
the participant attains the age of 68 1/2.
For all retirement plans where the fair market value of the
participant's interest in all plans, including the value of pension benefits, exceed $2 mil, but are less than $3
mil, on December 31 of the year the participant attains age 65 1/2, the
minimum
distribution requirement must start on April 1st in the calendar year
the participant attains the age of 69 1/2.
And for all of the above situations, and also for all situations where
the total assets in the qualified retirement plans, including the value of pension benefits, exceed $1 mil on
December 31 of the year that the participant attains the age 65 1/2, my
recommendation is to eliminate the second option, which permits the
deferral of the minimum distribution requirement date due to the
participant not being retired yet.
The economic harm to elderly US citizens of all of the above
recommendations is substantially softened, since what is happening, for
the most part, is simply paying US federal income taxes a bit earlier on
income already earned, not paying more US federal income taxes in
total.
All of the money raised here by the US Government as scored by the CBO
over the next 10 years will be very substantial. And the amount raised
over the second 10 years will be substantially higher. And thereafter,
the money raised will continue to grow by leaps and bounds. All of this
money raised should be used to reduce the US Debt.
