ProTracker Advantage User Manual

RMD Account Audit

Required Minimum Distributions (RMDs) are required each year, unless Congress decides otherwise, e.g., the CARES Act of 2020, which waived all RMDs for 2020. The IRS assesses a penalty of 50% on the undistributed balance if an RMD is not fully distributed by the end of the year. This article provides methodologies to facilitate auditing RMD accounts so that RMDs are taken as prescribed by law.

Caution About Custodian-Provided RMD Lists

Some custodians provide RMD lists to the advisors who custody assets with them. These custodians may limit the depth of their RMD calculations to "Participant is alive." Some custodians do not calculate RMDs for Inherited IRAs.  Many custodians do not calculate RMDs for successor beneficiaries. In summary, custodian-provided RMD lists may be incomplete.

Outside Retirement Accounts

Even if your Firm is not managing certain outside retirement accounts, such as an IRA invested in a bank CD, the outside accounts should be documented in ProTracker Advantage. Outside accounts are a component of the Client's net worth. Clients sometimes forget about non-managed accounts. Further, Clients sometimes come to expect the advisor to provide informal counsel on outside accounts. To reduce Firm risk, list the outside retirement accounts in ProTracker and include them in the RMD Wizard so that they become part of the RMD account audit.

RMD Calculation Methods

RMD calculation methods used in ProTracker Advantage were considered to be accurate at the time this software was released.  The provisions of the SECURE Act of 2019 have been incorporated in the calculation methods.
The user is responsible for verifying the accuracy of each calculation based on input parameters relevant to the Client situation. All situations should be reviewed by a professional skilled in RMD calculations.
Firm-Wide Master Account List

Develop a Master Account List

As an audit starting point, run a report from the Firm's Portfolio Management System, or the custodian's master list of accounts, that is filtered to show only tax-deferred or tax-free accounts. The list should show the associated Account Types, e.g., traditional IRA, Roth IRA, 401(k), 403(b), 457, SIMPLE IRA, Inherited IRA, etc. The resulting "Master Account List" is the standard against which the ProTracker Advantage accounts should be compared before running the RMD Wizard.

Inherited accounts are of particular interest because the Firm may have significant exposure for errors or omissions.

Print Master Account List

Print the Master Account List for later comparison with the RMD Wizard Account List.

Compare Master Account List against Custodian-Provided RMD Lists

Identify accounts that are on the Master Account List (printed from the Firm's Portfolio Management System) but were not included in the custodian-provided RMD lists. Mark up the Master Account List with the reasons, such as "Inherited IRA," "successor beneficiary," "wrong Account Type," etc. This audit step will ensure that the ProTracker RMD account inventory is the same as the Master Account List.
ProTracker Advantage RMD Account List

Limitations of Using Client Ages in RMD Reports

Using Client ages to create a list of RMD accounts in Advantage is unlikely to produce a complete RMD list. Inherited RMD accounts are becoming more common and require exceptional diligence as the beneficiary may be less than 72 years of age. Therefore, inherited retirement accounts will not show up on lists based solely on Client ages. For this reason, the use of the ProTracker Required Min. Distrib. Accct. checkbox is crucial.

Client Account Setup Example

RMD accounts are designated in Advantage by a Required Min. Distrib. Accct. checkbox.
To view this checkbox, select a Client who has a tax-deferred asset and is over 72 years of age.

Create RMD Account Checkbox Group

Compare the RMD Account Group list against the Master Account List created earlier. The RMD Account Checkbox Group list may be missing some Client accounts because the Required Min. Distrib. Accct. checkbox was not checked when the account was set up in ProTracker. Resolve all discrepancies by adding or adjusting the accounts in ProTracker.

Print RMD Wizard Account List

To create the RMD Wizard Account List:

RMD Audit Verification

Compare the printed Master Account List against the printed RMD Wizard Account list.
Resolve all discrepancies.

RMD Wizard Calculations

After auditing the account lists and resolving discrepancies, follow the RMD Wizard process to calculate the year's RMDs.

Supplemental RMD Resources

Click on RMD Client Overview for an extensive list of RMD-related Help articles.