Plan Now for Minimum Required Distributions

December 31 is fast approaching. Have you taken your minimum required distribution (MRD) from your retirement account? Not taking it by December 31 can be a costly mistake, one that may result in significant tax penalties.

That’s because beginning when you turn 70½, IRS regulations generally require you to withdraw a minimum amount of money each year from your tax-deferred retirement accounts, like traditional IRAs and 403(b) and 457(b) plans, or pay penalties of up to 50% of your MRD1.

It’s important to understand how MRDs work and the timing of distributions.

Who has to take MRD payments?

The IRS requires you to take MRDs when you reach age 70½ or are no longer working, whichever is later. At UC, you are considered to be no longer working if you are not in a regular ongoing UC-paid appointment.

If you have never received an MRD and have a regular ongoing UC-paid appointment, you may defer MRD payments until the later of the year your current appointment ends or by the following April 1. Note that unpaid appointments do not qualify for this deferral.

If you previously received MRDs and then return to work, you still must continue to receive your MRDs.

Which accounts are affected by MRD rules?

MRD requirements apply to each of your UC Retirement Savings Program (UCRSP) accounts—403(b), 457(b), and DC Plan—separately. That means if you have money in an account, you must receive an MRD from it. For example, if you have a balance in the 403(b) Plan and in the DC Plan and meet the requirements, you must take an MRD from each of those accounts.

If you have more than one account in the UCRSP, you might consider consolidating your multiple accounts into one to streamline the number of distributions you must take.

When do I have to take MRD payments?

If you have already begun taking MRDs, you must receive your 2016 MRDs no later than the end of 2016. If desired, you can take your MRD payments as a regular systematic withdrawal by choosing a specific date to receive them each year.


If this is the first year you are required to receive MRDs, the deadline is April 1, 2017, to have your 2016 MRD processed from your accounts.

If you defer your 2016 MRD until April 2017, you will receive two MRD payments in 2017. Your 2016 MRD will be paid by April 1, 2017, and your 2017 MRD will be paid in December 2017. As a result, you will need to include two MRDs in your 2017 income when you file your taxes. Note that taking two MRDs in one year could affect your income tax bracket or Medicare eligibility.

For all subsequent years, distributions must be made annually by December 31. Remember to allow time for any trades to settle if you are selling investments to take your MRD.

If you are over 70½ and still working, you can generally delay your MRDs from your UCRSP accounts—403(b), 457(b), and DC Plan—until you retire.


You can choose the funds from which the MRD is withdrawn, the time of year you receive it, whether to have the payment deposited directly to your chosen bank account, and the amount of taxes withheld from the distribution. There are processing and regulatory deadlines for these types of requests, so please contact Fidelity directly for important details.


Failure to withdraw the MRD annually by the applicable deadline may result in substantial tax penalties, as much as 50% of the amount not distributed. All withdrawals of earnings and pretax contributions are taxed as ordinary income.


1 Minimum required distribution rules do not apply to Roth accounts during the lifetime of the original owner or to participants in workplace retirement plans who are less than 5% owners until they retire. MRDs are also required from 403(b) and 457(b) plans, as well as SEP IRAs, SARSEPs, and SIMPLE IRA plans. 

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