rollover in the year turning 70 1/2

[Guest mopar]

Must a retired 401k Plan participant (Single-K Plan) who turns age 70 1/2 in 2010 first satisfy their Required Minimum Distribution (RMD) before rolling over the entire Plan balance to their IRA?

They could of course delay taking distribution in this, the first year they must calculate their RMD, until April 2011; however, that would mean they would have to take two taxable distrbutions in 2011. For these purposes, they plan to satisfy their RMD from all sources in 2010.

There are different schools of thought on this. I believe they must first satisfy the RMD, but I am the minority in that opinion around here. Help!

[ACox]

We have had this same argument at our office and we have arrive at the conclusion that if the participant is still working they are allowed to take the rollover distribution since they could defer the payments to a later date.

If the participant is terminated, we are requiring them to take the RMD first before rolling the money into an IRA. While they can defer receipt of the RMD until April 1, 2011, the calculation is still based on the 12/31/09 account balance. If the money was rolled over into an IRA, the 12/31/09 account balance for the IRA would have been zero.

Not sure this is right or wrong, but this is the way that we handle these situations.

[Tom Poje]

I'd go by what is found in 1.401(a)(9)-7 Q & A 1

If an amount is distributed by one plan and rolled to another plan, is the RMD under the distribution plan affected by the rollover?

No.........

please note this reg references 1.402©-2 Q and A 2 which then defines plan as being a qualified plan or "an individual retirement account or annuity."

so if you are in the minority ask them how to interpret these reg cites.

[austin3515]

We also do the RMD before paying someone out. We try not to be ridiculous about it, for example, if the distribution is $1,200 we wouldn't bother... But the RMD is definitely required.

If I'm not mistaken, even if they terminated in February 2010, and they don't turn 70 1/2 until June of that year, I'm pretty sure that they still need to take their RMD even if they close their account in March 2010.

[mbozek]

We also do the RMD before paying someone out. We try not to be ridiculous about it, for example, if the distribution is $1,200 we wouldn't bother... But the RMD is definitely required.

If I'm not mistaken, even if they terminated in February 2010, and they don't turn 70 1/2 until June of that year, I'm pretty sure that they still need to take their RMD even if they close their account in March 2010.

The MRD is required for any distribution received in the calendar year in which an individual attains 70 1/2, not just for distributions received after the date in the year that the individual attains 70 1/2.

[GMK]

We try not to be ridiculous about it, for example, if the distribution is $1,200 we wouldn't bother...

With what wouldn't you bother if the distribution is $1200?

Sorry if I'm a little slow on the uptake after a long, hot, lazy weekend.