Required Minimum Distribution

[LMD1]

Non Owner Participant dob 6/28/46, terminated from company in 2015. Wants to roll over his entire balance to new employer plan before attaining age 70.5 to avoid RMD. Is entire balance eligible for rollover since he will turn 70.5 in 2016 but after the distribution? Or do we have to process an RMD and rollover the balance? Thanks in advance for any direction.

[My 2 cents]

I may be mistaken, but I think the rule is that there would be an RMD for 2016 (even if the distribution is made in 2016 and the required beginning date is April 1, 2017).

I don't think that it matters whether the distribution takes place before or after attainment of age 70 1/2. 2016 is the year of attainment of age 70 1/2 and the participant had separated from service, so there must be an RMD for 2016. It would be my understanding of the rules (imperfect as that may be) that you have to process an RMD and only allow the balance after that to be rolled over.

[duckthing]

I may be mistaken, but I think the rule is that there would be an RMD for 2016 (even if the distribution is made in 2016 and the required beginning date is April 1, 2017).

I don't think that it matters whether the distribution takes place before or after attainment of age 70 1/2. 2016 is the year of attainment of age 70 1/2 and the participant had separated from service, so there must be an RMD for 2016. It would be my understanding of the rules (imperfect as that may be) that you have to process an RMD and only allow the balance after that to be rolled over.

Agreed. He's not employed and reaches age 70-1/2 by 12/31/2016 (barely!) so he has to take a 2016 RMD. The RMD amount is calculated based on the balance in the plan as of 12/31/2015, and a rollover subsequent to that can't satisfy the RMD requirement. The recordkeeper may or may not be willing to process the rollover without taking an RMD first on the grounds that he can choose to receive it by April 30, 2017 -- my guess is they will object. In either case he cannot avoid the tax liability just by moving the money out to another qualified plan before the end of the year.