Heads-up: Minimum Required Distributions

The year when you reach age 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 Minimum Required Distribution, or MRD (also known as a Required Minimum Distribution or RMD).1 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 comes later. At UC, if you are no longer in a regular, ongoing UC-paid appointment, then you are normally considered to be no longer working.

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

If you are currently receiving MRDs, then you must continue receiving MRDs each year, regardless if you later return to work at UC.

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 you meet the MRD 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 (if you are eligible) 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 2017 MRDs no later than the end of 2017. If desired, you can take your MRD payments as a regular systematic withdrawal by choosing a specific date to receive them each year.

WHAT DO I NEED TO KNOW ABOUT TAKING MY FIRST MRD?

If this is the first year you are required to receive MRDs, the deadline is April 1, 2018, to have your 2017 MRD processed from your accounts.

  • If you defer your 2017 MRD until April 2018, you will receive two MRD payments in 2018. Your 2017 MRD will be paid by April 1, 2018, and your 2018 MRD must be paid by December 2018.
  • As a result, you will need to include two MRDs in your 2018 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. If you are selling investments to take your MRD, remember to allow enough time for any trades to settle.

If you are age 70½ or older, still working, and being paid by UC, you can generally delay your MRDs from your UCRSP accounts—403(b), 457(b), and DC Plan—until you are no longer working and/or retire.

WHAT ARE MY OPTIONS?

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 and requirements for these types of requests, so please contact Fidelity® Retirement Services directly for important details.

TAX PENALTIES

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.

GET THE FACTS

Need help with your MRD? Read the MRD Fact Sheet or call Fidelity® Retirement Services at 1-866-682-7787.

1Minimum 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.

The University of California intends to continue the benefits described here indefinitely; however, the benefits of all employees, retirees, and plan beneficiaries are subject to change or termination at the time of contract renewal or at any other time by the University or other governing authorities. If you belong to an exclusively represented bargaining unit, some of your benefits may differ from the ones described here.

Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.

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