RMD's before tax and after tax

[Guest ragsplace]

Hi,

I have to start taking RMD's from my 401k this year. Does anyone know if I can count after tax money towards the RMD's? Thank you!

[masteff]

You'll really want to consult your plan to find out how they administer it.

One argument is that an MRD is based on a life expectancy and therefore is an annuity. As a consequence, after-tax money is distributed porportionately to other monies (if 10% of your account is aftertax money then 10% of your distribution is aftertax). Keep in mind that the aftertax money is then divided between nontaxable contribuitons and taxable earnings. The alternate is that it's not and therefore, if the plan provides for it, all your aftertax money can come out first.

[masteff]

Hi,

Thanks for your reply to my post. The 401k that I have is a beneficiary 401k. My brother started RMD's so I have to continue. I am rolling over the 401k to a beneficiary IRA. I would like to take the after tax money and only roll the before tax money. The plan administrator says that this is the way that it is usually done. To me the RMD allows me to take the minimum or more. I would just like to know what if any of the after tax money counts towards the required RMD for this year

From Notice 2007-07:

"Q-18. How is the required minimum distribution with respect to a nonspouse

beneficiary determined if the employee dies on or after his or her required beginning

date?

A-18. If an employee dies on or after his or her required beginning date, within

the meaning of § 401(a)(9)©, for the year of the employee’s death, the required

minimum distribution not eligible for rollover is the same as the amount that would have

applied if the employee were still alive and elected the direct rollover. For the year after

the year of the employee’s death and subsequent years, see Q&A-5 of § 1.401(a)(9)-5

to determine the applicable distribution period to use in calculating the required

minimum distribution. As in the case of death before the employee’s required beginning

date, the amount not eligible for rollover includes all undistributed required minimum

distributions for the year in which the direct rollover occurs and any prior year, including

years before the employee’s death."

What this means is... the plan administrator cannot let you rollover the MRD amount and since the rollover has to be done via a direct rollover, the plan administrator is responsible for making the determination of what is the MRD and what is the rollover. They should issue the checks and code the 1099-Rs accordingly.

As to the specific question of "can aftertax money satisfy your MRD?" The answer is yes, an MRD can be satisfied with aftertax money.

[Guest ragsplace]

Thank you for your replies!

[Guest forward978]

Yes very helpful.