Required Minimum Distributions From Employer Plans: The Administrator's Guide

10/2/2026

Most RMD content is written for the account owner: how much to take out of an IRA and when. This guide is for the people on the other side of the transaction, the plan administrators, HR and benefits staff, and payroll teams who have to identify who owes a required minimum distribution from an employer plan, get it paid on time, withhold correctly and report it.

The plan's role is not optional. Code section 401(a)(9) is a qualification requirement. A plan that fails to make a required distribution has an operational failure to correct, and the participant faces an excise tax on the shortfall. The rules changed twice in four years, first under the SECURE Act and then under SECURE 2.0, and the IRS published final regulations in July 2024 (T.D. 10001) that apply for distribution calendar years beginning on or after January 1, 2025. If your procedures were written before 2020, they are out of date.

The Applicable Age, by Birth Year

SECURE 2.0 raised the age at which required distributions start. The current schedule depends on the participant's year of birth:

Participant's birth year	Applicable age
1950 or earlier	Already in pay status under earlier rules (70½ or 72)
1951 through 1959	73
1960 or later	75

 

The 1959 row needs a note. As enacted, SECURE 2.0 described people born in 1959 in both the age-73 and age-75 provisions. The final regulations reserved the point, and proposed regulations issued alongside them in July 2024 state that the applicable age for someone born in 1959 is 73, consistent with a 2023 letter from the congressional tax-writing committees confirming that intent. Until a technical correction or final rule settles it, administer 1959 births at 73: it is the conservative answer, because distributing early cannot cause the failure that distributing late does.

The Required Beginning Date

The required beginning date (RBD) is the deadline for the first RMD. For an employer plan it is April 1 of the calendar year following the later of:

• the calendar year the participant reaches the applicable age, or
• the calendar year the participant retires from the employer maintaining the plan.

That second prong is the still-working exception, and it is the main way employer plans differ from IRAs, where the RBD is fixed to the applicable age regardless of employment.

The Still-Working Exception

A participant still employed by the plan sponsor after reaching the applicable age may defer RMDs until April 1 of the year after retirement. Three limits apply.

It does not apply to 5% owners. A participant who is a 5% owner of the employer, as defined in Code section 416, has an RBD of April 1 following the year they reach the applicable age, whether or not they are still working. Ownership is tested for the plan year ending in the calendar year the participant reaches the applicable age, and constructive ownership rules apply, so a child or spouse of an owner can be a 5% owner by attribution. Once a participant is a 5% owner for this purpose, RMDs must continue even if the ownership later drops.

It applies only to the employer's own plan. Working for the plan sponsor defers RMDs from that sponsor's plan. It does not defer RMDs from a former employer's plan or from an IRA.

The plan document can override it. A plan may require distributions to begin by April 1 following the year the participant reaches the applicable age even if the participant is still employed. Read the document before telling a participant they can wait.

The exception also has a data dependency that is easy to miss: the plan has to know when the participant retired. Terminations reported late to the recordkeeper, rehires of retirees, and participants who move to part-time status all create gaps. Decide in writing what "retires" means under your plan and make sure HR and payroll report terminations promptly.

The First-Year Trap

The first RMD is for the first distribution calendar year: the year the participant reaches the applicable age, or retires if later. The participant can delay that first distribution until the April 1 RBD, but the RMD for the following year is still due by December 31 of that year. Delaying produces two taxable distributions in the same calendar year, which can push a participant into a higher bracket. Administrators do not have to advise on the tax consequences, but the distribution notice should make the double-distribution year clear.

Calculating the RMD From a Defined Contribution Plan

For a 401(k), 403(b) or profit-sharing account, the annual RMD is the account balance as of the last valuation date in the prior calendar year, adjusted for certain contributions and distributions after that date, divided by a distribution period from the IRS life expectancy tables.

The Uniform Lifetime Table is used for most participants. The tables in effect for distribution calendar years beginning on or after January 1, 2022 produce, for example, a distribution period of 26.5 at age 73, 25.5 at 74 and 24.6 at 75. A participant aged 73 with a prior year-end balance of $530,000 would have an RMD of $20,000.

The Joint and Last Survivor Table applies instead when the participant's sole beneficiary for the entire year is a spouse who is more than 10 years younger. It produces a longer distribution period and a smaller RMD. Marital status for this purpose is generally determined as of January 1, so a later divorce or death does not change that year's calculation.

A few points administrators get wrong:

• Each plan computes its own RMD. Unlike IRAs, where an owner can aggregate several accounts and take the total from one, an employer plan must distribute the RMD from that plan. A participant with two 401(k) accounts from two employers needs an RMD from each.
• Distributions in a year count first toward that year's RMD. An amount paid early in the year to a participant who owes an RMD is treated as the RMD up to the required amount, so it cannot be rolled over.
• Designated Roth accounts are excluded during life. Starting in 2024, SECURE 2.0 eliminated pre-death RMDs from designated Roth accounts in employer plans, matching the Roth IRA rule. Roth money still counts after the participant's death.
• Employer contributions continue. Receiving RMDs does not end participation. A working participant still gets deferrals and employer contributions; see current contribution limits, including catch-up rules.

Defined Benefit Plans

In a defined benefit or cash balance plan, RMDs are generally satisfied by annuity payments that begin by the RBD and meet the regulatory requirements for annuity distributions. The administrative task there is making sure benefits commence on time for participants who have separated and reached the applicable age, including deferred vested participants who left years ago and may not have applied. That is the same population a plan reports on Form 8955-SSA, and it is where most defined benefit RMD failures happen.

Death Before and After the Required Beginning Date

Post-death rules apply to employees who die after 2019 and depend on who the beneficiary is.

Eligible designated beneficiaries may generally stretch distributions over life expectancy. They are the surviving spouse, the employee's minor child (until age 21 under the final regulations), a disabled or chronically ill individual, and anyone not more than 10 years younger than the employee.

Other designated beneficiaries are subject to the 10-year rule: the entire account must be distributed by the end of the calendar year containing the tenth anniversary of the employee's death. The final regulations add a requirement that surprised the industry: if the employee died on or after the RBD, the beneficiary must also take annual RMDs in years one through nine, with the balance cleared in year ten. If the employee died before the RBD, no annual distributions are needed during the 10 years.

The IRS waived the excise tax for missed annual distributions of this kind for 2021, 2022, 2023 and 2024 in Notices 2022-53, 2023-54 and 2024-35. Notice 2024-35 confirmed that the final regulations govern RMDs for calendar years beginning on or after January 1, 2025, so the annual-distribution requirement is now being enforced.

Surviving spouses have additional options. Under SECURE 2.0, a surviving spouse who is the sole beneficiary can elect to be treated as the employee, which can delay distributions until the date the deceased employee would have reached the applicable age. The plan needs to know which method applies and whether its document provides an election or a default.

Beneficiaries also include non-individuals, such as estates and certain trusts, each with its own payout period. A death claim involving a trust usually needs the recordkeeper or counsel, not a payroll determination.

Withholding on RMDs

The withholding rules are the part most likely to be misapplied by someone used to processing rollovers.

An RMD is not an eligible rollover distribution. It cannot be rolled over to an IRA or another plan, so the mandatory 20% withholding that applies to eligible rollover distributions does not apply to the RMD portion. Instead, federal income tax withholding follows the rules for the type of payment:

• Nonperiodic payments, such as a single annual RMD check, are subject to a default 10% withholding rate. The participant can choose a different rate, including zero, on Form W-4R, subject to limits for payments delivered outside the United States.
• Periodic payments, such as monthly installments or annuity payments, are withheld as if they were wages, based on the participant's Form W-4P.

Watch mixed distributions. If a participant takes more than the RMD in the year, the excess may be an eligible rollover distribution. The RMD portion follows the nonperiodic or periodic rules, and the excess is subject to 20% mandatory withholding unless it is directly rolled over. Systems that apply one rate to the whole check get this wrong.

State withholding on retirement distributions varies widely. Some states require it, some allow an opt-out and some have no income tax. Check the rules for the participant's state of residence.

Federal income tax withheld from plan distributions is nonpayroll withholding. It is reported on Form 945, not Form 941, which is a reconciliation point for any employer that pays benefits through its own system rather than a trustee. See our federal payroll taxes guide for how the employment tax returns differ.

Reporting on Form 1099-R

RMDs are reported on Form 1099-R, not on Form W-2, even when the participant is still employed and receiving a paycheck. The 1099-R shows the gross distribution, the taxable amount, federal income tax withheld and a distribution code. For a living participant past age 59½, the code is typically 7 (normal distribution). Distributions to a beneficiary after death use code 4. Check the current Instructions for Forms 1099-R and 5498 for the full code table and combinations each year.

Payroll should confirm, at year end, that no plan distribution has been run through the payroll system and landed on a W-2. Our payroll year-end checklist covers the wider reconciliation.

The Excise Tax and Correcting a Missed RMD

The participant, not the plan, pays the excise tax on a missed RMD. Under SECURE 2.0 the rate is 25% of the shortfall, reduced to 10% if the failure is corrected within the correction window, which IRS guidance describes as generally within two years. The participant reports it on Form 5329 and can ask the IRS to waive it for reasonable cause where the shortfall resulted from error and is being corrected.

From the plan's side, a missed RMD is an operational failure under its qualification rules, correctable under the IRS Employee Plans Compliance Resolution System (EPCRS). The general correction is to distribute the missed amounts, with earnings, to the affected participants. Under the voluntary correction program, a plan sponsor can also ask the IRS to waive the participant's excise tax as part of the submission, which is often worth doing when the failure was the plan's. The IRS's "Fixing common plan mistakes: failure to timely start minimum distributions" page walks through finding and fixing the problem.

A missed RMD paid in a later year is still treated as an RMD for the year it was missed. It is not eligible for rollover.

An Annual RMD Procedure

Most RMD failures are data failures. A plan that runs the same procedure each year rarely misses one.

1. Pull the population in January. Every participant with a balance who reaches the applicable age in the year or is already past it, including terminated vested participants and beneficiaries.
2. Flag 5% owners using the ownership records and attribution rules. Do not rely on job titles.
3. Confirm employment status for anyone using the still-working exception, using HR termination data rather than the recordkeeper's last-known status.
4. Confirm beneficiaries for participants over the applicable age, including spouse ages for the Joint and Last Survivor Table.
5. Calculate from the prior year-end balance, excluding designated Roth accounts for living participants.
6. Send notices early enough for participants to choose a payment date and withholding election.
7. Distribute by December 31, or by April 1 for first-year RMDs that participants have chosen to delay.
8. Search for missing participants before the deadline, and keep a record of every attempt. Uncashed checks and returned mail are not a reason to stop.
9. Reconcile the 1099-R data and Form 945 withholding to the distributions actually paid.

Payroll's contribution is usually steps 3 and 9: accurate termination data and a clean separation between wages and plan distributions. Our 401(k) plan administration handbook covers the other payroll-owned pieces of the plan.

For staff who own the RMD process, the Required Minimum Distributions Training and Certification Program is the specialist program on this subject. If your work also covers IRAs, IRA Fundamentals covers that side.

Frequently Asked Questions

At what age do RMDs start from a 401(k)?

The applicable age is 73 for participants born from 1951 through 1959 and 75 for those born in 1960 or later. Proposed regulations confirm that people born in 1959 use age 73, resolving a drafting conflict in SECURE 2.0. The first RMD is due by April 1 of the year after the participant reaches the applicable age or, for non-5% owners still working for the plan sponsor, the year after retirement if the plan allows it.

What is the still-working exception for RMDs?

It lets a participant who is still employed by the plan sponsor delay RMDs from that sponsor's plan until April 1 of the year after retirement. It does not apply to 5% owners, who must start at the applicable age regardless, and it does not apply to IRAs or to plans of former employers. A plan document can also choose not to offer it and require distributions at the applicable age even for active employees.

Do Roth 401(k) accounts have required minimum distributions?

Not during the participant's lifetime, starting in 2024. SECURE 2.0 removed pre-death RMDs for designated Roth accounts in employer plans, so they are excluded from the balance used to calculate a living participant's RMD. After the participant dies, the Roth account is subject to the post-death distribution rules, including the 10-year rule for most non-spouse beneficiaries.

Is an RMD subject to 20% mandatory withholding?

No. An RMD is not an eligible rollover distribution, so the 20% mandatory withholding does not apply to it. A single nonperiodic RMD payment is subject to 10% default federal withholding, which the participant can change on Form W-4R. Periodic RMD payments are withheld under Form W-4P. Any amount paid above the RMD may be an eligible rollover distribution subject to 20% withholding unless directly rolled over.

What is the penalty for missing an RMD from an employer plan?

The participant owes an excise tax of 25% of the shortfall, reduced to 10% if the shortfall is corrected within the correction window, and reports it on Form 5329. For the plan, a missed RMD is an operational failure that can be corrected under EPCRS by distributing the missed amounts with earnings. A voluntary correction program filing can include a request to waive the participant's excise tax.

How is an RMD reported?

On Form 1099-R, issued by the plan or its payer, not on Form W-2, even when the participant is still on payroll. The form shows the gross and taxable amounts, any federal tax withheld and a distribution code, usually code 7 for a living participant past 59½ and code 4 for a beneficiary after death. Federal tax withheld from plan distributions is reported on Form 945.

Going Deeper

RMD failures are almost always caught late and from the participant's side. The Required Minimum Distributions Training and Certification Program is the program for staff who run the annual process. For the wider plan, see the 401(k) Training and Certification Program.

RMD rules have changed repeatedly since 2019, and parts of the 2024 rules remain in proposed form. Confirm your plan document's provisions and the current IRS guidance before each distribution year.