In Service Rollover after age 70 1/2

Submitted by Eric Fuhrman on Mon, 2015-11-30 19:21

If an individual over age 70 1/2 performs and in-service rollover of their 401K to an IRA, but continues to work for the remainder of the year is an RMD required in that year? If so, and the plan administrator did not payout the RMD prior to rollover I assume this means the RMD is an excess contribution. Does this require the RMD to be calculated using the prior year’s Dec. 31 401(K) value and removed with attributable earnings? Can you reference specific IRS code? Thanks!



Submitted by Alan - IRA critic on Mon, 2015-11-30 19:55

  • There is no plan RMD unless individual is a 5% owner OR if the plan requires ALL employees to take RMDs starting at 70.5. There are few of these plans around but if RMDs are required of all employees, they are plan RMDs and not statutory RMDs, and can therefore be rolled over to an IRA. But if there were NO plan RMD due to the “still working” exception, the in service rollover is OK. The balance rolled over was not an RMD and would only result in an increased IRA RMD in the following year.
  • The usual case where an in service rollover becomes an excess IRA contribution with respect to the amount of the RMD is when the employee first does the rollover and then retires by year end. The retirement creates an RMD distribution year for the plan, the rollover satisfies the plan RMD, but the plan RMD was not eligible for rollover and becomes an excess IRA contribution corrected as you indicated. There is likely no excess contribution in this particular case since employee did not retire. But this could happen in a future year when he finally DOES retire if he does annual in service rollovers.

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