Client age 72 did IRA rollover from 403(b) with no RMD

Submitted by Mike Zaidlin on Wed, 2018-08-29 06:06

My client, born 1945, worked for many years for a non profit before retiring in March 2018. In April 2018 she rolled the entire 403(b) balance amount to a rollover IRA. Iswas she obligated to take an RMD from the plan for the 2017 tax year before rolling over the plan in April 2018, even though she was employed all through 2017 by the non-profit? To the best of my knowledge, the plan did not distribute an RMD to the client before doing a direct trustee-trustee transfer.

Thank you!



Submitted by Alan - IRA critic on Wed, 2018-08-29 16:48

  • The plan should have distributed the 2018 RMD before or with the rollover. There is no 2017 RMD under the still working exception.  That said, some 403b plans are not very vigilant because 403b RMDs can be aggregated. That means the client could have had another 403b from which they  satisfied the entire RMD for both, and plans often do not even ask about that.
  • Including the RMD in the rollover assuming that the above additional 403b situation does not apply creates an excess IRA contribution in the amount of the RMD. The IRA custodian should be asked to treat that amount as an excess IRA contribution and return it with earnings. The earnings will be taxable for 2018.  Form 1040 should only report a rollover for the allowed amount despite the amount on the 1099R from the 403b. The RMD amount will be taxable.

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