Jump to content

401k Rollover Requested (RMD Reqired)


Recommended Posts

We have a participant in the plan who just turned 70 1/2 earlier this month, so he's required to take an RMD for 2015 year (by April 1st, 2016). However, he requested to rollover the entire account balance to an IRA. My thinking is that we must issue an RMD and then rollover the remainder into the IRA. However, would it be possible to rollover the entire amount and have the Rollover Institution do a distribution? We could send them the balance as of 12/31/2014 to calculate the RMD. What do you think? Is that allowed?

Link to comment
Share on other sites

If you include the RMD in the amount rolled over, and you know it, you should issue 2 1099-Rs, one for the legit rollover and one (Code 7) for the amount not eligible for rollover. Then the participant will have to request a withdrawal of an ineligible rollover. It might seem easy to "just" let it all be rolled but it turns into a PITA for everyone. Best to do the RMD before the R/O.

Ed Snyder

Link to comment
Share on other sites

I don't think sending the funds to the rollover institution is even allowed. If you read the regulations on this the 1st dollars distributed from the plan in the year an RMD is due is the RMD. Those dollars are (edit) not (edit) allowed to be rolled over.

Link to comment
Share on other sites

I don't think sending the funds to the rollover institution is even allowed. If you read the regulations on this the 1st dollars distributed from the plan in the year an RMD is due is the RMD. Those dollars are (edit) not (edit) allowed to be rolled over.

I agree...but it happens, and it's not fatal. (It's not an original thought but...) if you have distributed the money from the plan, you have done your job to satisfy the required minimum distribution. If it happened to get rolled over, well, coding it as not eligible for rollover takes care of the plan's responsibilities (of course I would notify the participant and explain it so they know to take the money out as an overcontribution, not as a regular distribution, which would result in double reporting on the taxable amount).

Ed Snyder

Link to comment
Share on other sites

I think it is one thing for the money to end up in an IRA because the person rolls it all or more common the person take some kind of in-service distribution and then terminate and it so happens to be the year they are 70.5.

It is another thing to make the plan be send 100% of the money to the IRA and let the IRA worry about the RMD. That is a plan risking disqualification on the actions of the IRA company.

I agree a mistake will most likely not end up being fatal. A bad plan that seems to purposefully ignore the rules strikes me as playing with fire needlessly.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...