RMD Issue When a Participant Age 75 Rolls Over Entire Account and Later in Year Retires.

[DTH]

A 401(k) plan permits age 59-1/2 withdrawals from all sources of money. A full-time actively employed non-5% owner age 75 directly rolls over his entire account balance of $50,000 to an IRA on 6/30/13. He continues to contribute to the plan. On 11/15/2013 he decides to retire on 12/15/2013. At the time of the rollover, the employee had not decided to retire. His account balance on 12/15/2013 is $250.00.

His 12/31/2012 account balance was $48,000 and his 2013 RMD would be $1,965.07.

Does the plan distribute the $250.00 as his 2013 RMD and tax report it as such? OR Does the plan need to report $1,965.07 as the RMD, adjust the tax reporting (i.e., $1,965.07 Code 7 and $48,284.93 as the direct rollover) and inform the IRA and participant that $1,715.07 ($1,965.07 - $250) was not eligible for rollover. My gut says to adjust the tax reporting..

Thanks!!

[GMK]

Because he retired in 2013, this participant must take an RMD for 2013, and the RMD amount for 2013 is the full $1,965.07.

If the participant had waited until 2014 to retire, there would be no RMD for 2013, and the entire $50k rollover in June 2013 would have retained its status as eligible for rollover.

[masteff]

Extensive prior discussion, note that it's a thread w/ older posts and then got restarted earlier this year: http://benefitslink.com/boards/index.php?/topic/47337-rmd-and-in-service-distribution/