[Ucrea] 2024 Required Minimum Distribution (RMD) Requirements for RSP and UCRP Plans

[Cristina L Otegui]

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November 19, 2024
To:
UCR Emeriti & Retirees

From:
UCR Retirement Center on behalf of UCR Central HR Benefits Office

Re:
2024 Required Minimum Distribution (RMD) Requirements for RSP and UCRP Plans


The IRS mandates that required minimum distributions (RMDs) be taken yearly from the Retirement Savings Program (RSP) 403(b), 457(b) and DC Plans and the UC Retirement Plan (pension) to ensure taxes are collected. Please take note of some important reminders about RMD (also known as MRD) rules and penalty information for the UCRP and RSP Plans.

RMDs for the Retirement Savings Program 403(b), 457(b) and DC Plans

*         A participant's first RMD must be withdrawn by April 1 of the year following the year they turn age 73 or leave UC employment (whichever is later). If a retiree or emeriti becomes rehired in the same year and continues to work through the end of the year, this will delay the initial RMD requirement. (Once a member meets the age requirements and is identified as separated during Fidelity's annual RMD process, they will continue to have their RMDs issued annually regardless of whether they return to work or not.)

*         All subsequent RMDs must be received by December 31 of each year.

*         Fidelity will process this year's RMD transaction on December 4, 2024.

*         RMD requirements apply to each of UC's Retirement Savings Program accounts [DCP, 403(b) and 457(b)] separately.

*         Roth accounts in employer retirement plan accounts (such as UC's new Roth option) are excluded from RMD withdrawals.

RMDs for the UC Retirement Plan
RMD rules apply to the UC Retirement Plan (UCRP) as well, depending on the member's status.
Active UCRP members do not need to receive an RMD until they separate. If an active member separates and elects a monthly benefit, the RMD requirement is satisfied for the UCRP.

RMD Implications for Lump Sum Payments and Capital Accumulations
If a member has a Capital Accumulations Payment (CAP) and/or elects a lump sum cashout for their UCRP benefit, a portion of the payment is subject to the RMD and must be distributed as a taxable distribution, even if the member elects a full rollover or returns to work as a part-time rehired retiree.

Depending on their separation date, members may be expected to receive two RMDs. For example, if a member has a separation date in December and the lump sum is paid in January, RMD would apply to both calendar years.

Inactive Member RMD Requirements and Default Distribution Procedures
Additional rules apply to inactive members who have not taken a distribution of their UCRP benefits by their RMD age. Communications to inactive members are typically sent out in September of each year, followed by several reminder letters. Inactive vested members are required to elect their UCRP retirement no later than March 1 of the year following the calendar year in which they reach their RMD age, or they separate from UC employment, if later. If no action is taken, a default retirement with the basic retirement income option will be issued. Non-vested inactive members must take a refund of their UCRP accumulations and/or CAP. If no action is taken, a default distribution will be issued.

Inactive UCRP members who may be working in a non-UCRP eligible position at UC, or who may have established reciprocity with CalPERS or concurrent retirement with CalSTRS, must contact the RASC to inform them of their working status in order to avoid the default RMD distribution or retirement.

RMD Penalties
Failure to take an RMD from the RSP or UCRP can result in a penalty. If no distributions are taken, or if the distributions are not large enough, the IRS may impose a 25% excise tax on the amount not distributed. (This was reduced from 50% with the passing of SECURE 2.0. which can be reviewed at: https://www.fidelity.com/learning-center/personal-finance/secure-act-2)

RMD Education and Communication Resources for the UC RSP
The November 2024 issue of New Dimensions features an article about RMDs at: https://ucnet.universityofcalifornia.edu/wp-content/uploads/2024/10/HRND_Nov2024_F2-web.pdf.

Fidelity will notify participants of the UC RSP plans during their first year of eligibility. In addition, the plan's RMD requirements are covered in the following articles on myUCretirement.com, as well as a quarterly email newsletter.

*         Making Sense of RMDs (https://myucretirement.com/resources/articles/0041)

*         Options for Taking Your First Required Minimum Distribution (https://myucretirement.com/resources/articles/0043)

*         Secure 2.0: Rethinking Retirement Savings (https://www.fidelity.com/learning-center/personal-finance/secure-act-2)

For more information about RSP RMDs, participants can read the RMD Fact Sheet (https://fwc.widen.net/s/7kf25zcw27/uc-rmd-fact-sheet).












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