IRA to 401K rollover
I have a client who has an IRA account that he rolled over from a 401K a few years ago with another advisor. He is age 71, currently working and contributing to a 401K plan. According to the little information I found on the IRS website, he can rollover the IRA to his 401K plan as long as the plan allows it. I was not able to find any information on what happens with the Required Minimum Distribution. My understanding is that there is no RMD from the 401K as long as he is NOT retired. If he rolls over the IRA to the 401K, what are the implications regarding the RMD on the IRA. He has not taken his RMD for this year yet.
I would greatly appreciate a confirmation of whether a 70+ year old can rollover the IRA to the 401K AND….what happens with the RMD.
Thank you in advance for any assistance.
Permalink Submitted by Alan - IRA critic on Thu, 2014-10-23 20:42
If the plan would accept the IRA rollover, it can be done. However, it should be first verified that the plan itself will not require RMDs. For example, the still working exception does not apply to 5% owners and a plan can require all employees to start RMDs at 70.5 if they wish, but few do. Once it is verified that there will be no 401k RMDs as long as client is still working, the rollover can be done. However, the IRA RMD for 2014 cannot be avoided and only the amount in excess of the 2014 IRA RMD can be rolled into the 401k.
Permalink Submitted by Brenda Lee on Thu, 2014-10-23 20:51
Thank you, Alan!!I figured he would have to take his 2014 RMD, but wanted to make sure. As you recommended, I will contact the administrator for the 401K to confirm.I appreciate the quick response.