Inservice Distribution & RMD
Trying to ensure we are not missing anything on this one…74 years old, still working. If they do inservice distribution to IRA this year, is that distributed amount subject to RMDs this year? Not sure since due to age the RMD needs to come out first before the rollover?
Thank you!
Permalink Submitted by Alan - IRA critic on Fri, 2024-04-05 17:31
If this is a qualified plan and the person is not a >5% owner, most plans will not require RMDs while still employed. An IRA rollover could therefore be completed with no 2024 RMDs from the plan or on the balance rolled to the IRA. However, if the person retires prior to the end of 2024, that will retroactively trigger a plan RMD for 2024, and the portion of the rollover equal to the RMD will be taxable and not eligible for rollover. It would also create an excess IRA contribution equal to the RMD that was rolled over. Therefore, the person should be quite sure that they will work till Jan, 2025 before doing the in service rollover.