RMD with ROTH

[Brenda Wren]

Given: RMD's apply to Roth monies inside qualified plans, but not to Roth IRA's.

Obviously, RMD rules are in place to ensure that taxes are ultimately paid on tax-deferred monies.

But is there a rule that states that when an RMD is taken, that the participant cannot choose to have the withdrawal made from his Roth account?

I have searched everywhere and asked everyone I can think of. I can only conclude that there is no answer and that the IRS didn't think through these rules very well when they decided to require the inclusion of Roth monies in the calculation of the RMD for qualified plans.

In my situation, the plan does not allow for in-service withdrawals, yet anyway. The business owner converted about $500K of pre-tax monies to Roth monies in 2010 (had a huge NOL in 2010 so no taxes were due). His RMD is about $40K. I would like to be able to give him the choice of taking $40K in income in 2011, OR taking the $40K from his after-tax Roth account, thus only having to pay taxes on the earnings portion of the Roth.

Any input would be much appreciated. I cannot find the answer in Sal's Book although I've been told that it says the participant can choose the money source.

[PensionPro]

Yes to the question in the title. See §§1.401(a)(9)-5 Q&A9 and 1.401(a)(9)-8 Q&A2.

[masteff]

Double check your document to make sure it doesn't specify a source heirarchy that differs from what you're wanting.