RMD after rollover

[ombskid]

Plan started termination in 2015. Owner and spouse. Could not/did not finish rollovers until well into 2016. The 2016 RMD was not taken before plan assets were finally distributed.

Can a distribution of the RMD amount that should have come out of the plan in 2016 be taken from IRA accounts to makeup the amount that should have come out of plan assets?

[RatherBeGolfing]

FWIW

I have been told no on this before as the RMD is not just an obligation of the participant but also a qualification issue for the plan. On a practical level, I know that people do it this way and hope for the best. In the few instances where I have had this come up, I have been able to get the RMD amount reversed and paid from the plan so that we could show that the mistake was corrected. I have never had it come up on audit so I can't speak to how an auditor would look at it.

[Belgarath]

I seem to recall that if the funds representing the RMD were rolled over to an IRA,

the distributing plan is treated as having made an RMD. (see 1.401(a)(9)-7, Q&A-1)

However, this RMD amount is not an eligible rollover distribution, so the IRA will have an invalid rollover amount. I'm not, off the top of my head, certain about the mechanics, but presumably the distributing plan should then report two separate amounts - one as the proper rollover amount, and the other as a taxable distribution. But you'd want to confirm that.

[Bird]

I seem to recall that if the funds representing the RMD were rolled over to an IRA,

the distributing plan is treated as having made an RMD. (see 1.401(a)(9)-7, Q&A-1)

However, this RMD amount is not an eligible rollover distribution, so the IRA will have an invalid rollover amount. I'm not, off the top of my head, certain about the mechanics, but presumably the distributing plan should then report two separate amounts - one as the proper rollover amount, and the other as a taxable distribution. But you'd want to confirm that.

I agree. The plan's job is to get the RMD money out, and if it happened to be rolled over, well, at least it got out. It is in fact an ineligible rollover and should be reported as indicated...the participant should get the ineligible part out as an "overcontribution." Important so the IRA custodian doesn't report it as taxable income (again).

[Lou S.]

The way Belgarath describes it is the correct way.

The way RatherBeGolfing describes it what usually happens in practice.