401(k) to IRA Rollover year of retirement
I am dealing with an all to common scenario.
401(k) participant, > 70.5 retired in 2014. The 401(k) plan did not take his RMD out prior to rolling the assets into an IRA. Now he has an excess contribution in the IRA representing the amount of the RMD – which shouldn’t have been rolled over.
Question(s)
The 401(k) recordkeeper has repeatedly stated an RMD was not required because of “pension simplification” Has anyone heard of this? What is pension simplification? How does it effect the scenario describer here?
Thank you
Permalink Submitted by Alan - IRA critic on Thu, 2015-02-19 02:58
Someone different needs to be contacted. The RMD should have been held out of the rollover unless the participant did the rollover while still working in which case the RMD was not required at the time, but became required only after he retired. Other than that I have no idea what the recordkeeper was talking about. Of course, there is nothing the plan could do now even if they admitted an error. The participant would have to request an excess contribution correction from the IRA custodian in the amount of the RMD. And the RMD portion of the direct rollover would have to be reported as a taxable distribution. This is not so much costly as it is a reporting hassle because the 1099R and his tax return will not match up and he will need to add an explanatory statement why he is not reporting the full amount rolled over as non taxable.
Permalink Submitted by ShipsnGiggles on Thu, 2015-02-19 14:28
appreciated
Permalink Submitted by Ben Meyer on Thu, 2015-02-19 18:27
I have also heard of the opposite of this: A custodian for a TIRA who refused to make a direct trustee-to-trustee rollover without first distributing the RMD. The custodian had no idea of the total value of all TIRA accounts of the individual, but insisted, incorrectly, that they were required to distribute the RMD calculated for that one account before making any direct rollover to another custodian.