First RMD after age 70 1/2

[Vlad401k]

Let's say a participant is 75. He's not an owner so he didn't have to start taking RMDs at any point in time. Then, let's say he gets terminated in the middle of 2017. The first RMD is now due to be paid by April 1, 2018. 

What happens if the participant decides to rollover the entire balance to another plan or IRA? Can he do that or would he have to take the first RMD before rolling anything over into another plan?

 

Thanks.

[BG5150]

The RMD piece is taken first.  The rest of the proceeds may be rolled over.

[Tom Poje]

and there is no reason it can not be paid before 12/31/2017. the 4/1 date is simply the latest date.

so when the distribution is actually taken will be taxed in either 2017 or 2018

[My 2 cents]

As noted by BG5150, the rolled amount must be reduced by the 2017 minimum distribution.

[Mike Preston]

Let's be clear, please.  If there is a distribution in 2016 then the amount that can't be rolled from that distribution is the 2016 RMD.  If there is a distribution in 2017 then the amount that can't be rolled from that distribution is the sum of (a) the 2016 RMD (reduced by the 2016 RMD satisfied by a distribution, if any, that took place in 2016); and, (b) the 2017 RMD. 

[My 2 cents]

To clarify the above post:  The original post said that the participant is terminated in 2017.  There would be no 2016 RMD.  His distribution (if in 2017) would have to exclude the 2017 RMD from the rollover.  If his distribution is in 2018 (on or before 4/1), then the 2017 RMD and the 2018 RMD would both have to be excluded from the amount rolled over to another plan or an IRA.

[Mike Preston]

Yes, I should have used 2017 and 2018, not 2016 and 2017.

[Scuba 401]

now i am confused. i have a case similar to the OP's. the terminated participants RMD is due april 1, 2018. if he takes a distribution this year in 2017 can he rollover everything in his account except the RMD and take that next year in 2018 or if he decides to do a rollover in 2017 must the RMD be first?

[Mike Preston]

You are confused because the steps you outline are illogical.  Put some numbers in, you'll see what I mean.

[My 2 cents]

The RMD due for 2017 (which must be received by April 1, 2018) cannot be rolled over.  It is my understanding that the participant cannot just calculate the 2017 RMD, subtract it from the current account balance, roll over the rest (leaving the 2017 RMD in the account) and then take the 2017 RMD in 2018.  So if the participant wants to roll over the largest possible amount, they can take a full distribution in 2017, rolling over all but the 2017 RMD, they can (if permitted) take a partial distribution in 2017 (rolling over the amount of that distribution minus the 2017 RMD) and the rest in 2018 (with the 2018 RMD not being eligible for rollover), or they can take a full distribution in 2018, rolling over all but the 2017 RMD and the 2018 RMD. 

Note that anything rolled over in 2017 will create an RMD for 2018 from the other plan or IRA.  If there is a partial distribution in 2017 from this plan, there will thus be two RMDs for 2018 (one based on the 12/31/17 balance in this plan to be excluded from any potential rollover in 2018 or otherwise paid from this plan and the other based on the 12/31/17 balance in the other plan, to be paid from the other plan).  At least that is what I think (soooo glad I don't get involved in providing advice to be followed concerning RMDs!).

[Scuba 401]

in short, first money out has to be the RMD if the RMD is required for that calendar year (even though it can be taken by April 1 of the next year).

[ESOP Guy]

1 hour ago, Scuba 401 said:

now i am confused. i have a case similar to the OP's. the terminated participants RMD is due april 1, 2018. if he takes a distribution this year in 2017 can he rollover everything in his account except the RMD and take that next year in 2018 or if he decides to do a rollover in 2017 must the RMD be first?

Your verbiage is a bit confusing but if I understand what you are say the answer is "no".  The reason is the regulations are very clear on this the FIRST dollars to come out of the plan in 2017 are the RMD. 

Your timeline suggest the last dollars in the plan are going to be the 2017 RMD. 

I would add it a rare plan that allows a partial termination payments.  So does the document support the two payment idea?