Does 50% Penalty RMD also apply to Roth 401k?
Hello –
There is a 50% penalty for not taking the RMD for [i]beneficiaries[/i] of a Roth IRA. Does this 50% penalty apply to the Roth 401k if the RMD is not taken at 70 1/2 (since it is under 401k rules) and or a Roth 401k that is inherited?
Thanks!
K
Permalink Submitted by Alan Spross on Thu, 2011-07-14 20:00
Yes, the 50% excess accumulation penalty applies to all RMD requirements that are not met. However, it is fairly likely the IRS would waive the penalty if any “reasonable cause” exists for missing the RMD deadline. Form 5329 must be filed to request the waiver, and the IRS has been generally lenient.
Once an employee is about to reach the year they turn 70.5, they should roll any Roth 401k over to a Roth IRA to avoid any RMDs. If they are still working, there is usually no RMD until they retire unless they are a 5% owner.