Expert: Allen - 4/26/2010

Question
QUESTION: I have been told there is a federal law requiring a company to begin making pension payouts to employees at age 70-1/2 even if they are still working.  Our HR folks are a bit fuzzy on this subject.  I have been unable to verify this during an extensive Google search.  However, the Google search did bring me to the "allexperts" website.  I am a salaried employee (no union involved) and have a vested pension benefit from my company.  I plan to still be working when I turn 70-1/2.  Could you please clarify the federal law regarding this subject and, if possible, refer me to an authoritative source of the information?
Thanks,
Mike

ANSWER: Until recently the law required that minimum distributions be made to all plan participants when they reach age 70 1/2. The law was changed so that distributions only had to be made to participants who were no longer employed at the company or owned more than 5% of the company. However, some plans were not amended for this change. Therefore a minimum distribution may be required.

The site for the provision is Internal Revenue Code Section 401(a)(9)(C) You can probably pull it up by going to www.irs.gov.

---------- FOLLOW-UP ----------

QUESTION: Hi Allen,
Thank you for your prompt reply to my earlier question regarding required pension payouts at age 70-1/2.  Your answer pertained to distributions from a 401k plan for someone of age 70-1/2.  I do appreciate the answer you provided, however I apparently had not stated my question clearly.  

My question was not related to distributions from a 401k plan but rather from a conventional pension plan (a defined distribution type pension plan paid out like an annuity).  Could you please respond specifically to my question with regards to a defined distribution type pension plan?  I will be 70-1/2 soon and plan to be working at the same company I've been at for 45 years.  Do you know what federal law, if any, requires my company to begin paying off on my accrued pension benefits when I reach the age of 70-1/2 even though I am still actively employed and drawing a full salary?  I have had some people tell me that there is a federal law covering this subject, but I have yet to confirm it.
Thanks again,
Mike

Answer
My answer applied to defined benefit plans as well as 401k plans. To my knowledge there is no law requiring distribution (other than the required minimum referred to in my earlier question) at age 70 1/2. However, your plan may have been drafted to require benefit payments to begin at 70 1/2. Ask the HR department to contact the actuary for the plan for clarification.