RMD for someone age 78 still working with money in a 401k only

Submitted by Russel Hodgson on Mon, 2020-03-09 14:52

I assume that since RMDs are based on the prior 12/31 balance that a client will not be subject to a distribution in the year they quit if they do not have a IRA balance and the money is 1005 in a 401k
Any thoughts?



Submitted by William Tuttle on Mon, 2020-03-09 15:51

  • Yes, RMDs are based on the prior year 12/31 balance. A 0$ traditional IRA balance will have no RMD in a year a 401k -> traditional IRA rollover occurs.
  • However, the RMD still working exception for their 401k only applies to years they work the full year. In fact the consensus is that such an individual retiring on 12/31 does not qualify for the RMD still working exemption for that year. They must retire on or after 1/1 of the following year for the RMD still working exemption to apply for that year.
  • If the individual took an inservice withdrawal/rollover prior to retiring in a given year. The 401k plan would not have known to require an RMD before the withdrawal/rollover. Up to the RMD amount would be deemed an RMD. If it was rolled over, it would be an excess contribution and must be removed.

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