Final Year RMD

Submitted by Jay P. on Thu, 2015-09-17 19:39

I’m sure this question has come up many time already…

A husband (age 79) died in March 2015 and had not yet taken his 2015 RMD from his former employer’s 401(k). His spouse (age 77) rolled over the 401(k) to her own IRA in May 2015 and the husband’s final year RMD was not removed.

Can surviving spouse simply take the final year RMD out of her IRA or must corrective action be taken so that the final RMD does not roll into the surviving spouse IRA? What are the deadlines?

Thanks in advance.

Jay



Submitted by Alan - IRA critic on Thu, 2015-09-17 20:31

  • Jay, year of death RMD depends on when husband retired. Assuming he retired prior to 1/1/2014 or was a 5% owner, then he passed after his required beginning date. In that case, the plan should NOT have allowed his 2015 RMD amount to be rolled over by the surviving spouse. Since they included the RMD in the rollover, the solution becomes somewhat ackward for tax reporting, but not expensive for the surviving spouse. The RMD is considered met by the rollover and should be reported as a taxable distribution on line 16 of Form 1040. The amount of the RMD rolled over then becomes an excess IRA contribution to her IRA, and should be corrected as such, ie. withdrawn with allocated earnings or net of losses. This challenge regarding tax reporting is that the IRA custodian must be convinced that this is properly treated as an excess regular IRA contribution and coded as a corrective distribution on the 1099R so that the IRS would not expect the IRA distribution to also be taxable, just any earnings generated on the excess contribution.
  • This is all very different in the event husband retired after 2013 (and not a 5% owner) because then his required beginning date would have been 4/1/2015  (or 2016) and he passed prior to the RBD. In that case, there would be NO RMD requirement to be held out of the IRA rollover and all would be OK.

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