RMD 70 1/2 Start Date or Year

[PainPA]

Is the RMD determined by the when 70 1/2 is obtained or the year it is obtained.

Participant DOB 3/1/2016 so will turn 70 1/2 on 9//1/2016.

Participant does a rollover before on 8/1/2016. Is a RMD required before the rollover?

[ETA Consulting LLC]

Yes, the first part of the distribution will be considered an RMD. I am assuming the person is terminated. If still employed, then the RMD would not be due (and they could rollover the entire amount).

Obviously, if the person is a 5% owner (or the plan continues to us the old RMD rules), then the first part of the distribution would be considered an RMD.

One distinction to this "RMD comes out first" is if the participant dies. In such event, the death distribution rules would apply since he would've died before his RBD.

Good Luck!

[PainPA]

So her retirement date is 1/12/2016 so she did not need to take one.

Additionally does the plan year being fiscal start 7/1/2016 add any other issues.

thank you for you help.

[ETA Consulting LLC]

You should read the document as you'll likely encounter this many times again. You have a 2016 RMD because 2016 is the year she terminated and reached the age of 70-1/2. With that said, any distribution taken would first be used to satisfy the RMD.

RMDs are calendar year requirements, so the plan's year end is not relevant.

Now, it would've been an interesting twist had she not terminated employment until 9/1/2016, but took a distribution in August 1st. In that instance, you can argue that she was still employed and not subject to RMD. Hence, the first amounts from that distribution would not be considered RMD. In your case (however), she was already terminated (and there is nothing you could do to prevent 9/1/2016 from coming); so an RMD requirement for the year is a certainty. Even then, this is merely an argument to suggest a series of events where a distribution would not be first treated as satisfying the RMD (and may, therefore, be rolled over).

In your case, I think it's a slam-dunk. The RMD should come out before the rollover

Good Luck!

[401_noob]

+1 for what ETA said. This is what the EOB says regarding this:

All amounts distributed during year are ineligible for rollover until minimum

distribution is satisfied. Any distributions in a year in which the participant is required

to receive a minimum distribution (i.e., a distribution calendar year) are treated first

as satisfying the required minimum distribution for that year. See Treas. Reg. §1.402

©-2, Q&A-7. This is true for distributions made in the first distribution calendar year,

even though such distributions are not required to be paid until the RBD. Treas. Reg.

§1.408-8, Q&A-4, provides that the same rule applies to distributions made from

IRAs within a distribution calendar year.

[chc93]

You should read the document as you'll likely encounter this many times again. You have a 2016 RMD because 2016 is the year she terminated and reached the age of 70-1/2. With that said, any distribution taken would first be used to satisfy the RMD.

RMDs are calendar year requirements, so the plan's year end is not relevant.

Now, it would've been an interesting twist had she not terminated employment until 9/1/2016, but took a distribution in August 1st. In that instance, you can argue that she was still employed and not subject to RMD. Hence, the first amounts from that distribution would not be considered RMD. In your case (however), she was already terminated (and there is nothing you could do to prevent 9/1/2016 from coming); so an RMD requirement for the year is a certainty. Even then, this is merely an argument to suggest a series of events where a distribution would not be first treated as satisfying the RMD (and may, therefore, be rolled over).

In your case, I think it's a slam-dunk. The RMD should come out before the rollover

Good Luck!

For your "twist", I thought that if she attains 70-1/2 in 2016, was still employed on 08/01/16 when she took her full distribution as a rollover to an IRA, and subsequently terminated on 09/01/16, then her 2016 RMD piece is ineligible to stay in the IRA, and has to be "removed".

[401_noob]

good point. This is what the EOB says regarding that:

When an amount is distributed from a plan in a rollover transaction, that amount is

still treated as a distribution in determining whether the distributing plan

has satisfied its minimum distribution requirements. See §1.401(a)(9)-7, Q&A-1,

of the 2002 and 2001 Regulations and §1.401(a)(9)-1, Q&A G-1, of the 1987 Regulations.

However, if the amount rolled over includes all or a portion of the minimum distribution from

the distributing plan, the recipient plan will have received an invalid rollover amount. IRC

§402©(4)(B) precludes the rollover of amounts that are required to be distributed under the

minimum distribution rules.

[ETA Consulting LLC]

For your "twist", I thought that if she attains 70-1/2 in 2016, was still employed on 08/01/16 when she took her full distribution as a rollover to an IRA, and subsequently terminated on 09/01/16, then her 2016 RMD piece is ineligible to stay in the IRA, and has to be "removed".

When it's a full distribution, then I agree with you. The twist I was imagining in my mind was where this individual received a partial distribution and rolled it over prior to termination. In such instance, there would be an interesting argument to merely satisfy the RMD by a subsequent distribution from the plan.

Of course, if you take a full distribution and then terminate, you must remove the RMD from your IRA. I would argue, however, that if the distribution was a partial distribution, then there wouldn't be a need to go to the IRA when you can simply satisfy the RMD with a subsequent distribution from the plan. It's basically a 6 in one hand - a half dozen in the other. I agree with you, I was merely imagining a partial distribution prior to termination.

Good Luck!