Once you reach age 73¹ you're required to withdraw a certain amount of money from your retirement plans, such as your UC 403(b), 457(b), and DC Plan, each year. That amount is called a required minimum distribution, or RMD.

Here are some answers to frequently asked questions to help you get started.

WHAT IS A REQUIRED MINIMUM DISTRIBUTION (RMD)?

A Required Minimum Distribution (RMD) is a yearly mandatory withdrawal from tax-deferred retirement accounts that starts in the year the account owner reaches the age of 73.

WHAT TYPES OF RETIREMENT ACCOUNTS HAVE RMDS?

After reaching age 73, RMDs must be taken from these types of tax-deferred retirement accounts:

• Most 403(b) and 401(k) and plans, including all of UC’s Retirement Savings Program, which includes the 403(b)², 457(b), and DC Plan.
• Traditional, rollover, SIMPLE, and SEP IRAs.
• Most small-business accounts (self-employed 401(k), profit sharing plan, money purchase plan).

WHAT'S THE DEADLINE FOR TAKING AN RMD?

After reaching age 73, the deadline for taking your RMD is December 31 each year. However, if this is your first RMD you have the option to delay it until April 1 of the year following the year you reach age 73.

If you do not take your RMD by the annual deadline, it could result in an IRS penalty equal to 50% of the amount not taken on time.

DO I HAVE TO TAKE RMDS FROM EACH OF MY UC PLANS?

Yes, RMDs apply to all of UC's plans—including the 403(b)², 457(b), and DC Plan—and you must satisfy the requirements for each plan separately. For example, if you have a balance in the 403(b) Plan² and in the DC Plan, and you meet the RMD requirements, you must take an RMD from each of those accounts.

Note: Starting January 1, 2024, 403(b) accounts will not take into account Roth contributions when calculating annual Required Minimum Distributions.²

If you have more than one account in the UC Retirement Savings Program, you might consider consolidating your multiple accounts into one (if you are eligible) to streamline the number of distributions you must take.

Any distribution from your UC accounts will count toward that year's RMD. Note that if you withdraw more than the RMD amount for that year, you can’t use the excess to reduce RMD amounts in future years.

Distributions from an IRA or any non-UC plans do not satisfy the requirements for the UC plans.

DO I HAVE TO TAKE RMDS FROM AN IRA OR NON-UC RETIREMENT SAVINGS PLAN?

Yes, you will have to take RMDs from these accounts if you have them.

Note that you are not required to take RMDs from a Roth IRA and cannot satisfy an RMD requirement with a withdrawal from a Roth IRA.

CAN I ROLL OVER MY RMD?

No, RMDs are not eligible for rollover to other tax-deferred accounts.

DO I HAVE TO TAKE MY RMD IF I AM STILL WORKING?

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

You will have to take RMDs from any IRAs or non-UC workplace retirement savings plan accounts you may have.

HOW DO I CALCULATE MY RMD?

You can calculate your own RMD by using the RMD Calculator. 

Here’s how it works:

• Your RMD is generally determined by dividing your tax-deferred retirement account balance as of December 31 of the preceding year by a life expectancy factor. Your life expectancy factor corresponds with your age in the IRS Uniform Lifetime Table. 
• However, if your spouse is your sole beneficiary and is more than 10 years younger than you, you will use the IRS Joint Life and Last Survivor Expectancy Table. 

HOW ARE RMDS TAXED?

When taking a required minimum distribution (RMD), the money is taxed as ordinary income and as a result it may be subject to both federal and state taxes.

WHAT HAPPENS IF I DON’T TAKE MY RMD?

SECURE 2.0 reduces the penalty for failing to take an RMD from 50% to 25%. If an individual misses all or part of their RMD, they can request the penalty be reduced to 10% if timely corrected within two years of the correction window by (a) taking their missed amount and (b) filing a corrected tax return within the applicable period. Individuals should consult with a tax advisor if they believe that you may owe an excise tax on a missed required minimum distribution.

TAKING AN RMD WILL INCREASE MY TAXABLE INCOME. IS THERE ANYTHING I CAN DO TO REDUCE MY TAXABLE INCOME OR REDUCE THE AMOUNT OF MY RMD?

If you are looking for ways to lower your taxable income from your UC 403(b), 457(b) or DC Plan accounts, you may want to consider UC’s Deferred Lifetime Income option. Deferred Lifetime Income is a type of deferred income annuity called a Qualified Longevity Annuity Contract (“QLAC”) that allows you to defer paying taxes on your income.³  

You purchase Deferred Lifetime Income from your UC Retirement Savings plan account. The amount you use to purchase Deferred Lifetime Income is excluded from the RMD calculation for these accounts, which effectively reduces your RMD and may reduce your taxable income. However, you will have to pay taxes on those assets when you start receiving your monthly Deferred Lifetime Income payments at age 78.

Note that you may only purchase Deferred Lifetime Income during an annual window. UC will notify you if you are eligible. In addition, QLAC purchases are subject to a specific limit set by the IRS. Please consult a qualified tax advisor.