401(k) MRD Issue

[bzorc]

Due to a merger Plan A is merging into Plan B before 12-31-15. Plan A offers brokerage accounts while plan B does not.

Plan A has a few employees who are over 70.5 and have been deferring their MRD's. The merger requires either the liquidation of the brokerage account or transferring it in-kind to an IRA, which is permissible under Plan A.

Question is do these folks have to take a 2015 MRD from the newly transferred IRA? They want to put this off to 2016 but Plan B wants Plan A merged before the close of 2015.

Any replies would be appreciated.

[Bird]

Question is do these folks have to take a 2015 MRD from the newly transferred IRA?

I say no. There is no triggering event (termination of employment) that would require an RMD. The question is really whether there is an RMD from the plan and that is, IMO, clearly no. The IRA had no assets on 12/31/14 so no balance on which to calculate an RMD, and therefore, absent an improper rollover, no RMD.

[Lou S.]

The problem you have is if one of them terminates employment between now and 12/31/15 as you would then have a RMD for 2015 based on the 12/31/14 balance due no later than 4/01/16 but may have a $0 balance in the plan with which to make the RMD.

[Bird]

The problem you have is if one of them terminates employment between now and 12/31/15 as you would then have a RMD for 2015 based on the 12/31/14 balance due no later than 4/01/16 but may have a $0 balance in the plan with which to make the RMD.

Agreed. But at that point, you would simply issue two 1099-Rs indicating that the RMD part of the distribution was "Normal" and part was rollover, instead of one (all rollover). The normal is not eligible for rollover and the recipient would request a distribution of an excess contribution.