Can RMD from IRA be avoided by rolling into 401(k)?

[Guest Pennysaver]

Participant in 401(k) plan will be age 70 1/2 this year. Not an owner, so no RMDs required until participant terminates/retires. But participant also has IRA from which RMDs must be made. Can the participant rollover the IRA into the 401(k) to avoid the RMD?

[J Simmons]

Participant in 401(k) plan will be age 70 1/2 this year. Not an owner, so no RMDs required until participant terminates/retires. But participant also has IRA from which RMDs must be made. Can the participant rollover the IRA into the 401(k) to avoid the RMD?

yes, if before the day P will be 70 1/2.

[Guest Sieve]

I don't think a distribution prior to actual age 70-1/2 is outside of the MRD rules if made in the first distribution calendar year (i.e., the year the individual reaches age 70-1/2). Rather, I believe that any distribution on or after 1/1 of the year the individual will attain age 70-1/2 is considered subject to the MRD rules and therefore cannot be rolled over. See Treas. Reg. Sections 1.408-8, Q&A-4 and 1.402©-2, Q&A-7 (esp. -7(b)).

[Guest Pennysaver]

I don't think a distribution prior to actual age 70-1/2 is outside of the MRD rules if made in the first distribution calendar year (i.e., the year the individual reaches age 70-1/2). Rather, I believe that any distribution on or after 1/1 of the year the individual will attain age 70-1/2 is considered subject to the MRD rules and therefore cannot be rolled over. See Treas. Reg. Sections 1.408-8, Q&A-4 and 1.402©-2, Q&A-7 (esp. -7(b)).

Thanks, Larry. Your cite to Treas. Reg. Sec. 1.402©-2, Q&A-7(b) was very helpful.

Now, assume for the sake of argument that the participant takes the RMD for this year, then subsequently rolls over the balance of the IRA to the 401(k) plan. Eligible rollover? I think so - does anyone disagree? Also, once the balance of the IRA (following this year's RMD) is rolled over to the 401(k), is it then not subject to the RMD rules until the participant terminates/retires?

[BG5150]

Is it a traditional IRA (as opposed to a conduit IRA)? If so, does the plan allow for rollovers in of traditional IRAs?

[Guest Pennysaver]

Is it a traditional IRA (as opposed to a conduit IRA)? If so, does the plan allow for rollovers in of traditional IRAs?

Yes and yes.

[Guest Sieve]

When in the qualified plan, the IRA rollover remains subject to the MRD rules, but the rules which apply are qualified plan account rules--i.e., if not a 5% owner, then distribution is not required until termination of employment.

Q&A-1 of Treas. Reg. Section 1.408-8 says that distributions from IRAs use the qualified plan rules, so I think the rollover and transfer rules of Treas. Reg. Section 1.401(a)(9)-7 would apply to an IRA rollover to a qualified plan.

[Guest Pennysaver]

When in the qualified plan, the IRA rollover remains subject to the MRD rules, but the rules which apply are qualified plan account rules--i.e., if not a 5% owner, then distribution is not required until termination of employment.

Q&A-1 of Treas. Reg. Section 1.408-8 says that distributions from IRAs use the qualified plan rules, so I think the rollover and transfer rules of Treas. Reg. Section 1.401(a)(9)-7 would apply to an IRA rollover to a qualified plan.

Thanks, Larry. So, just to clarify: Even if MRDs have commenced from the traditional IRA, if the traditional IRA is then rolled into a qualified plan, and the participant is not a 5% owner or otherwise required to take an MRD under the qualified plan rules, then the balance rolled over from the traditional IRA into the qualified plan, while still subject to the MRD rules, would not in fact be distributed to satisfy the MRD requirements until the participant is subject to the qualified plan's MRD requirements (i.e. participant terminates employment and is age 70 1/2 or older)?

[Guest Sieve]

I would agree with your statement.

[DTH]

Hi Sieve,

I had the same question come up.

I have a participant who is age 73 and still working (not a >5% owner). He rolled over his tradition IRA last year. His IRA RMD was paid to him before the rollover occurred. He wants proof that he does not need to take an RMD from his "IRA" rollover contribution.

I'm looking for some sort of IRS cite, published guidance that states that an IRA rollover contribution takes on the characteristics of the retirement plan and no RMD is due from the rollover account that houses the old IRA money.

Thanks!!

[Tom Poje]

you might want to check the following articles (of course, if it is on the internet we know its true!)

http://financialducksinarow.com/2707/rolli...k-to-avoid-rmd/

or

under the section 'longer tax deferral' found here:

http://money.usnews.com/money/articles/201...nown-401k-perks

[masteff]

You might refer to the PLR cited by mbozek in this thread: http://benefitslink.com/boards/index.php?showtopic=27680

Here's the PLR: http://www.unclefed.com/ForTaxProfs/irs-wd/2004/0453015.pdf

[mbozek]

You might refer to the PLR cited by mbozek in this thread: http://benefitslink.com/boards/index.php?showtopic=27680

Here's the PLR: http://www.unclefed.com/ForTaxProfs/irs-wd/2004/0453015.pdf

Thanks for finding this ruling. I have been unable to find it my files. TMI.

The ruling is based on a simple principle. The MRD for an IRA is based on the account balance of the IRA as of the end of prior tax year. reg 1.401(a)(9)-5 A-3. If the account balance in the IRA on 12/31 of the prior year is 0 then the MRD for the following year is 0.

Fact that account balance was rolled over to a Q plan before 12/31 is irrevelant to the requirement of taking an MRD from the IRA for that same year because the rolled over assets in the Q plan on 12/31 are subject to the MRD rules applicable to the Q plan. If Q plan does not require MRD to be taken by a non 5% owner who has attained 70 1/2, then the MRD from the Q plan is also 0.

[ajmplanner]

I would assume the same is true for "old" 401(k)s. IF you are working you are not required to take an RMD from your current employer 401(k) but are required do so for old 401(k)s that you still have. The question is , If I roll over the old 401(k)s to the current employer 401(k), do I avoid having to take the RMD from those old plans if I am still working and over 70 1/2?

[K2retire]

I would assume the same is true for "old" 401(k)s. IF you are working you are not required to take an RMD from your current employer 401(k) but are required do so for old 401(k)s that you still have. The question is , If I roll over the old 401(k)s to the current employer 401(k), do I avoid having to take the RMD from those old plans if I am still working and over 70 1/2?

That is correct.

[Kevin C]

I would assume the same is true for "old" 401(k)s. IF you are working you are not required to take an RMD from your current employer 401(k) but are required do so for old 401(k)s that you still have. The question is , If I roll over the old 401(k)s to the current employer 401(k), do I avoid having to take the RMD from those old plans if I am still working and over 70 1/2?

That is correct.

But, it's too late to avoid 2016 RMDs from those old 401(k)s. You would have had to rolled over in 2015 to avoid the 2016 RMDs.