What is a Required Minimum Distribution?
The Federal Government allows the deferral of taxes on both your contributions and their earnings as an incentive to help you save for retirement, but this is not intended to be a permanent tax shelter. To that end, the Federal Government established minimum distribution rules, or Required Minimum Distributions (RMD). As of January 1, 2023, the age for RMDs to begin was changed from age from 72 to 73, for anyone attaining age 72 after December 31, 2022. This change applies to participants in the DCP. If you turned age 72 in 2022, and you’re not employed by the City of Los Angeles, you must take your 2022 RMD by April 1, 2023. Keep in mind you will still need to take another RMD for 2023 by December 31, 2023, and by each December 31st thereafter.
DCP participants who turn 73 subsequent to December 31, 2022, and who are not employed by the City of Los Angeles, must take their first RMD by April 1st of the year following the year in which they turn 73. They will also need to take another RMD by December 31st of that year, and by each December 31st thereafter.
The amount of the distribution is calculated by the Internal Revenue Service (IRS) based on your account balance and life expectancy. If you don’t take an RMD within the appropriate time – or if you withdraw too little – you may be subject to an IRS penalty tax. The penalty tax is 25% of the amount you should have withdrawn during the year, so it’s important that you take your RMD on time!
How does the DCP help?
Each January, using the IRS calculations, the DCP calculates the RMD amount for each applicable participant. RMD reminders are sent in April and October. If you don’t take your RMD during the year, the DCP will automatically send you a check for your RMD amount in December to ensure you don’t face the IRS penalty. We encourage you to check with your tax advisor to confirm your RMD amount before December.
If you have added your bank information to your DCP account, you can also have your RMD withdrawal deposited directly into your checking or savings account. Learn more about how to establish online banking by clicking the button below.
How to add your Bank information
Personal Info > Banking Information > Add/Edit Banking info.
You will need both your bank’s routing number and your account number. It will take seven business days after you enter the required banking information to establish this feature for distributions or loan payments.
Why add your Banking Information?
When you add your banking information to your Personal Info, you can have DCP withdrawals and loans deposited directly into your checking or savings account. If you take out a retiree loan, this is also how your monthly loan payments will be paid.