RMD in Plan with ROTH and non-ROTH

[Lou S.]

Leaving aside the issue of rolling out the ROTH piece to a ROTH-IRA to avoid the RMD altogether on that portion, we are working on that for future years ,the question I have is this -

Lets say the ROTH-401(k) piece has a RMD of $5,000 and the "rest" of the traditional non-ROTH assets has an additional RMD of $20,000.

Assuming the Plan's administrative policy allows, can the participant chose which sources to take the full plan RMD of $25,000 from or does the RMD have to be prorated between ROTH/non-ROTH?

I was under the impression participant could chose since it is a "PLAN RMD" and not a "SOURCE RMD" but I've been unable to find definitive support that clearly allows it. I also assume the Plan should have procedures in place for how it treats RMDs where participant is non-responsive as to how the RMD will be allocated but that's not really an issue for this particular RMD.

 

[Mike Preston]

It is, indeed, a PLAN RMD.

[Luke Bailey]

On ‎11‎/‎21‎/‎2018 at 11:40 AM, Lou S. said:

I also assume the Plan should have procedures in place for how it treats RMDs where participant is non-responsive as to how the RMD will be allocated but that's not really an issue for this particular RMD.

Lou S, agree with you and Mike completely on above, but my guess is that your assumption quoted above may not always be correct. A lot of plans are only just starting to confront what their language and procedures should be where a participant has both Roth and non-Roth accumulations and is taking a distribution of < 100% of account. Most or all recordkeepers will apply pro rata unless employer tells them otherwise. If you want to do something other than pro rata, you probably want to think through all of the types of distributions where this would come up, e.g. in-service, hardship, RMD, ad hoc, ADP corrections, etc., and put that in a "policy" separate from your plan, assuming your plan language is consistent with that course of action. All the fallbacks I have seen where this has not been done, or where it has been done but participant does not express preference, are pro rata.