RMD and Rollovers

[Guest Pete Joachim]

A deferred vested EE who attains age 70.5 in 2004 (RBD = 4/1/05) requests a rollover distribution to a new IRA to occur in March 2004.

Question 1? Since the 2004 RMD is technically not required to be taken until 2005, the plan can rollover the full benefit amount - not required to pay the RMD portion in cash?

Question? The Plan must still calculate the RMD for 2004 since it is based on Plan account balance as of 12/31/03 and communicate this to EE - so EE knows how much must be distributed from IRA in 2005 for 2004 (in addition to the EE's 2005 RMD).

Am I thinking correctly?

Thanks

[Blinky the 3-eyed Fish]

1. No, the RMD must be taken first

2. N/A due to the answer of the first question.

3. No, you are not.

[WDIK]

Does it make a difference if the participant turns 70-1/2 after the rollover date? In this case, what if the participant turns 70-1/2 after March 2004?

[Appleby]

Good question WDIK---we get this one quite often from customers- answer is no, because the RMD is due for the year in which the individuals reached age 70 ½, not at the time the individual reaches age 70 1/2

[Guest Pete Joachim]

Thanks for the responses. To clarify, are you relying on 1.402©-2 Q&A #7?

Once you reach the year the EE attains age 70.5, a RMD is due for THAT calendar year (ie. as of 1/1 of THAT year), regardless of when its actually paid or due to be paid. And if a RMD is due for THAT calendar year, then any amounts paid during that calendar year are deemed to consist first of the RMD amount which, of course, cannot be rolled over.

This would appear to be correct since this reg goes on to say any payments made PRIOR to the calendar year the EE attains age 70.5 are not RMDs and therefore are eligible rollover distributions (if the distribution otherwise qualifies).

[Appleby]

Yes.

You are right