RMD Rollover Timing

A participant in a 401(k) is taking RMDs.  The participant would like to start using her RMD for a Qualified Charitable Donation, so she sets up a direct rollover of the 401(k) account to a new IRA so a portion of her 2025 RMD can be a QCD.  (The 2024 RMD was taken before the rollover was processed.)

The recordkeeper will only process rollovers as paper checks.  The distribution was processed from the 401(k) but the recordkeeper said it is likely that the participant will not receive the check until after the end of the year.

If that happens, the 401(k) will have a $0 balance on December 31, 2024 and so will the IRA.  Is the date of the check from the 401(k) distribution sufficient to use that balance as the 12/31/2024 balance for the new IRA so the 2025 RMD can be processed from the IRA?

Thank you.

So 2024 401(k) RMD done, then rest distributed via R/O check by 12/31/2024. Will this be the only IRA once established or are there others? If the IRA did not or could not include the in-transit R/O as part of 1/1 balance and there are no other IRAs, then would that not create a situation where no 2025 RMD was due? Is that something IRS would let fly? If that were the case, then everyone would say close my  401(k) account the last week of the year and then mail me a check, or someone could simply hold their R/O check for nearly 60 days to establish IRA in the next tax year. And maybe that's ok. In this case, the well-meaning philanthropist could possibly delay RMDs until 2026. If she has other IRA money then it doesn't matter. Anyway, interesting tax year anomaly and one I think should be posed to her accountant.

I can't imagine the IRS is ever going to get this far into the weeds but since you asked....

I think there is an IRA balance as of 12/31/2024. 

In tax law there is this rule known as "Constructive Receipt".   it says when a person/entity has receipt of the money they own it.  

Simple example:  If the plan wrote the check on 12/31/2024 mailed the check on that day the 1099-R would be a 2014 1099-R and the person would have to report the income.  That is because being in the mail is constructive receipt of the check for the person. 

I think in this case the IRA has constructive receipt of the money even if it isn't invested anyplace.   There is a check made payable to the IRA so it is an asset of the IRA.  

I used to be an IRS agent and if I ran into this and though the money was worth debating over that would be my argument to say an RMD was due for 2025 from the IRA. 

Do what you want with that.  

Thanks.  I didn't think the RMD could be avoided in this strange scenario, just wanted to be certain that it would be reasonable to assume the 2025 RMD could be taken from the IRA (the only one she will have) so she could do her QCD in 2025.  I believe it was her tax advisor that originally told her the RMD could come from the 401(k) plan which is why she waited so late in the year otherwise she probably would have made the rollover with time to spare.  Happy Holidays and thanks for the responses on a Friday afternoon.

Having a minimum-distribution requirement is not a condition to a qualified charitable distribution.

If other conditions are met, an IRA holder whose § 401(a)(9) applicable age is 73 or 75 might make a QCD as soon as she “has attained age 70½.”

Internal Revenue Code (26 U.S.C.) § 408(d)(8)(B) http://uscode.house.gov/view.xhtml?req=(title:26 section:408 edition:prelim) OR (granuleid:USC-prelim-title26-section408)&f=treesort&edition=prelim&num=0&jumpTo=true

This is not advice to anyone.

Recent article that may (or may not) provide useful info for this specific situation:

https://irahelp.com/slottreport/the-qcd-dance/

On 12/20/2024 at 1:02 PM, Gilmore said:

A participant in a 401(k) is taking RMDs.  The participant would like to start using her RMD for a Qualified Charitable Donation, so she sets up a direct rollover of the 401(k) account to a new IRA so a portion of her 2025 RMD can be a QCD.  (The 2024 RMD was taken before the rollover was processed.)

The recordkeeper will only process rollovers as paper checks.  The distribution was processed from the 401(k) but the recordkeeper said it is likely that the participant will not receive the check until after the end of the year.

If that happens, the 401(k) will have a $0 balance on December 31, 2024 and so will the IRA.  Is the date of the check from the 401(k) distribution sufficient to use that balance as the 12/31/2024 balance for the new IRA so the 2025 RMD can be processed from the IRA?

Thank you.

The IRA 12/31/24  balance must be increased by the rollover amount. whoever does the RMD calculation must increase the 12/31/24 fair market value by any such rollover that is not in the IRA by 12/31/24

On 12/23/2024 at 5:14 PM, Appleby said:

The IRA 12/31/24  balance must be increased by the rollover amount. whoever does the RMD calculation must increase the 12/31/24 fair market value by any such rollover that is not in the IRA by 12/31/24

Thank you.  That was the purpose of the question.  To be certain that it was reasonable to apply the 12/31/2024 rollover amount to the IRA and not the 401(k) so that the 2025 RMD using the 12/31/2024 would be considered as coming from the IRA.