Husband participated in a qualified retirement plan. He was not a 5% owner and continue working until his death at 76. His spouse took a total distribution and rolled it into an IRA in 2004, which is also the year of death. An RMD was not withheld at the time of rollover.

The spouse is also over 70 1/2.

When does the spouse have to begin to receive distributions? If you are over 70 1/2 when you open the account, do you have to commence distributions right away, or the year following?

Thanks!

Assuming the IRA had no other assets, and therefore no balance as 12/31/2003, there is no RMD for the IRA for 2004. RMD for the IRA begins for 2005.

The RMD for the QRP should have been satisfied before the balance was rolled to the IRA. Since this did not occur, the amount rolled over –technically- includes the RMD for the QRP and that amount is ineligible to be rolled over. The wife must correct by figuring the RMD amount for the QRP, and removing that amount from the IRA as a “ return of excess “ contribution. This must be removed by April 15 next year. If she files her tax return on time, she receives an automatic 6-months (up to October 15,2005) to remove the amount

The participant's required begining date was April 1st following the year of retirement. He died in August 2004, so his RBD was not met before he died. If participant dies before the RBD, the first distribution calendar year is the year that immediately follows the year of death (correct?) So if she had left the money in the QRP, she wouldn't have had a RMD due to her for the 2004 year, but would have one due for the 2005 year (based on the 2004 balance).

So, she rolled over the funds to an IRA and is in the same situation she would have been had she left he money in the QRP. Right?

Good question. Let’s see…it appears there are two separate issues here

1)Did he die before the RBD, which would determine beneficiary options or
2)Is an RMD required for the year of death?

An RMD is generally required for the year of death, if the year of death is the year the participant retires, and he/she is past age 70 ½, and the plan provides for a delayed RBD until April 1 following the year of retirement.

Let me know if you agree with the following logic.

First , let’s look at 1.401(a)(9)-5(b) , which defines Distribution calendar year.





The issue now becomes, when is the employee considered to have retired? Would you agree that “ retire” and "severance from employment" is interchangeable for this purpose? If, so, then the employee’s death is tantamount to the employee being retired…see Treas Reg § 1.410(a)-7(b)(2) (i), which defines Severance from service date as “The date on which an employee quits, retires, is discharged or dies”


If the employee is considered ‘retired’ in 2004, then an RMD is due for 2004 , even though the RBD would be April 1,2005. The RMD for 2004 must be satisfied by the beneficiary and is not rollover eligible.


Your thoughts?

I thought the requirement for the participant to take an initial MRD only applies if the ee is alive on April 1 of the year following the year for which the MRD must be taken. E.g. if IRA owner dies in year age 70 1/2 is attained no MRD is required on his behalf for that year. If the ee died in yr of retirement but before taking MRD then spouse should be able to rollover the entire acount balance. The requirement that a MRD be taken for year of ee's death only applies if ee has commenced MRD after passing the 4/1 date because under IRC 401(a)(9)© MRDs are not required prior to 4/1 of the year following the later of the year of retirement or age 70 1/2 is attained. (401(a)((9)(B) provides the distribution rules where the ee dies before the required beginning date.)

I've always interpreted it same way as Mbozek, so I think in your situation the spouse can roll the entire amount. No excess contribution to the IRA for the 2004 rollover.

I agree it does make sense…but see Q&A 7 of 1.402©-2 (a) and (b), no exception was provided if the IRA owner died before the RBD, but during the first RMD year. It appears then that the April 1 deadline is just an option to defer withdrawing what is already required for the age 70-½ year.

Appleby - I'd argue that the code sections/regs you are quoting don't apply. I believe your reasoning is correct IF a minimum distribution is required. In other words, you clearly can't roll over a minimum distribution required under 401(a)(9) because such a required distribution isn't an "eligible rollover distribution." No argument there.

However, the minimum distribution requirements in case of death occurring BEFORE the RBD (which clearly is the case here) are governed by 1.401(a)(9)-3.
If you read the Q&A's under this section, there's no required distribution to a surviving spouse beneficiary in the year of death in the situation described, so the entire amount may be rolled over. It then falls under the IRA RMD rules as the IRA owned by the surviving spouse starting in 2005.

At least that's how I see it.

Pub 590, P30 states that if an IRA owner dies after attaining age 70 1/2 but before April 1 of the following year no mrd is required because death occurred before the required beginning date.

My 2 cents...

MBozek is correct.

...and Belgarath and FundeK.

Good cite mbozek

and thanks for leading this discussing A.

Please help me with the following. It is kind of related to the above question, but a little different

Individual is age 80, still working. In early 2004 she rollovers a withdrawal from the plan to her IRA.
Individual decides to retire in December, so her RBD is April 1, 2005.
Does the rollover include her RMD being that it was the first distribution for the year ? or does she get a brake because she did not know she was going to retire?

Thanks and happy holidays to all

The rollover is not a distribution and is not considered part of an RMD. Since it occurred after 12/31/2003 and before the first RMD, the RMD is calculated as if the rollover had not occurred.

Example: Balance 12/31/03 $100,000. Rollover 5/1/2004 $60,000. Retirement in December 2004 makes first RMD due 4/1/2005. This is determined by dividing the 12/31/03 balance by the factor for her age in 2004. If she's 80 in 2004 that would be 18.7. The 2005 RMD is based on the 12/31/2004 balance and the factor for her age in 2005.

Jane, the answer to your question is that the person did indeed roll over her RMD. She needs to contact the IRA and have it distributed. Here are more details from a prior discussion.

http://benefitslink.com/boards/index.php?s...stribution&st=0