403(b) In-Service Distribution to an IRA
Hello,
We have a customer who is 72, still employed and has a 403(b) with her current employer. We realize that while she is still working , she does not have to take an RMD from her 403(b). However, she recently processed a [b]Partial[/b] In-Service Distribution from her 403(b) and established a Rollover IRA account(rollover processed in 2012). Does this customer have to take a 2012 RMD for this Rollover IRA account, since it did not exist as of 12/31/2011?
If she does have to- how would this RMD value be calculated, considering she only took a partial withdrawal?
Permalink Submitted by Alan Spross on Wed, 2012-06-20 23:42
She would not have to take a 2012 RMD unless she retires before the end of 2012. Her IRA RMD will be due for 2013 before the end of 2013 based on the 12/31/2012 IRA balance. There is no 2012 IRA RMD, but if she retires before year end, then the partial rollover will be deemed to include her 2012 403b RMD and will be treated as an excess contribution to the IRA to the extent of her 403b plan RMD based on the plan 12/31/2011 balance. As you can see, things are more complex IF she retires before the end of 2012.
In addition, if she had a 403b plan balance on 12/31/1986, the RMDs for that balance would have started at 75 even if she retired now, but the partial rollover is deemed to come from that pre 1987 balance if she had one in this plan. This rule eliminates the ability to roll the post 1986 403b balance to an IRA and keep the pre 87 balance in the 403b such that RMDs would not have to start until 75 even if she retired now.