RMD Requirements from multiple plans
A client of mine had 2 403b plans with TIAA. She turned 70.5 this year and pulled all of the RMD required by both plans from just one of them. In May she transferred all to a new IRA to consolidate. TIAA transferred the money, but withheld the RMD from the plan she did not take a distribution from and sent it to her, saying it is a forced RMD because the IRS says money must come out of all plans. This doesn’t seem to be true, since you calculate the total, but can distribute from one. And why would it have to come out before transferring? If she hadn’t taken any RMD this year, couldn’t she just take it later in the year?
Permalink Submitted by Alan - IRA critic on Fri, 2015-05-29 18:38
In an RMD year, the first distribution is deemed to include the RMD and cannot be rolled over. However, it is surprising that TIIA failed to recognize that 403b RMDs can be aggregated like IRAs. Since her RMD had already been satisfied, she can roll over the funds she received from TIIA within 60 days.
Permalink Submitted by Ben Meyer on Fri, 2015-05-29 18:44
The plan administrator is mistaken regarding the statement that money must come out of all plans. See TR 1.403(b)-6(e)(7) which describes the aggregation of RMD distirbutions for all 403(b) plans held by an individual. The exception is that 403(b) plans held as a beneficiary connot be included in the aggregation. However, when an RMD is due, the amount of the RMD must be taken before any 403(b) funds can be transferred to an IRA. When transferring from a 403(b) plan to an IRA, the amount transferred is considered to be a distribution, and is reportable via form 1099-R. Therefore, the RMD for that year must be satisfied first, but can be taken from any of the available 403(b) plans of the individual. The “extra” distribution can be rolled over to an IRA within 60 days of receipt if desired.
Permalink Submitted by Ben Meyer on Fri, 2015-05-29 18:54
Alan’s posting is correct, of course. I didn’t see his posting as I was typing when he posted. But I see a question regarding whether the one-rollover-per-year rule that applies to 60 day rollovers from IRA to IRA also applies to rollovers from 403(b) accounts to IRAs. Any ideas about this?