Postponing an RMD
1. We have a client who is an employee of a university and participates in their 403Bplan. He also has schedule C income from publishing and speaking and has a SEP. He will be 70.5 next year. Since he continue to work at both jobs and has high income he would prefer to postpone RMDs from the SEP. Can he postpone RMD by transferring the SEP assets to the University plan? If yes, will 403b plans accept transfers from SEPs? If no, what do you suggest he do to postpone RMD from the SEP?
2. We have a client who owns more than 5 % of a business in which he is an employee and has a multi-million dollar balance in his 401K plan. He will continue to work and would like to postpone RMD after 70.5. In addition to maintaining his employment with his primary employee, could he take a part-time position with a company in which he owns less than 5%, transfer his 401K balance to their plan and postpone RMD? If yes, are there any specific requirements that would apply to the part-time job such as number of hours worked, earnings, etc. that would disqualify him from postponing RMD? Would it be a problem if the ownership of the company providing part-time employment was a family member? If yes, what family relationships would be too close to postpone RMD? Would the fact that the retirement benefits were earned with another company before being transferred to the new employer present a problem?
3. Are there any other questions regarding these situations which I should have asked or other ways to postpone RMD?
Permalink Submitted by Alan Spross on Wed, 2011-04-20 18:20
1) Transfer of the SEP to the 403b is the only way to temporarily eliminate the SEP RMD. The 403b plan may or may not allow rollovers from IRA accounts, so he needs to check with the plan administrator.
2) This can work, but the receiving plan can set it’s own definition of how many hours are required to participate in the plan and/or being qualified for the “still working” exception. And yes, family members do count for purposes of determining the 5% ownership calculation. I will post a link to the relationship types that count in a couple hours. The fact that plan assets were rolled in does not matter, but if his ownership is considered more than 5% due to family members, the rollover will not do any good.
Edited 4/22/11: A couple hours turned into a couple days. This is copied from Sec 318a by refererence from Sec 416 from 401(a)9:
>>>>>>>>>>>>>>
Sec. 318. Constructive ownership of stock
(a) General rule
For purposes of those provisions of this subchapter to which the
rules contained in this section are expressly made applicable –
(1) Members of family
(A) In general
An individual shall be considered as owning the stock owned,
directly or indirectly, by or for –
(i) his spouse (other than a spouse who is legally
separated from the individual under a decree of divorce or
separate maintenance), and
(ii) his children, grandchildren, and parents.
(B) Effect of adoption
For purposes of subparagraph (A)(ii), a legally adopted child
of an individual shall be treated as a child of such individual
by blood.
>>>>>>>>>>>>>>>>>>>>>>>>>