RMD Deferral
An individual DOB 1/25/48, turning 70 in 2018, wishes to move his IRA into his company 401K plan to defer taking RMDs when he turns 70 1/2. He is still working and is not a 5% shareholder. The company plan allows for an IRA roll in. Does any attention need to be paid specifically to the timing as to when he would need to roll in his IRA into his employer’s 401K plan?
Permalink Submitted by Alan - IRA critic on Tue, 2017-09-19 16:33
Definitely. Since the individual reaches 70.5 in 2018, the IRA rollover must be completed before 12/31/2017 to avoid an IRA RMD for 2018. Note that IRA to IRA transfers can be done with no imputed RMD, but not IRA to qualified plans direct rollovers. If the IRA to 401k rollover is done after 2017 without the IRA RMD being distributed first, then the amount of the RMD for that particular IRA account must be reported as taxable income and becomes an excess contribution to the 401k. That will obviously result in a messy problem including taxable income and 1099R mismatch with your tax return that must be explained to the IRS, as well as explaining the error to the 401k plan.