Client is 71 turns 72 09/2021 can they move their IRA into their 401 before Sept to avoid RMD in 2021?
In addition, the client’s husband own’s more than 5% of the company that the 401k is related to which use to render this option void.
The question has to do with 1 – she isn’t quite 72 yet and 2-the ownership of the company I thought had to be less than 5%
Or there may be more you educate me on.
Permalink Submitted by Alan - IRA critic on Mon, 2021-01-11 23:04
Client turns 72 this year, therefore this is an IRA RMD distribution year. The 2021 RMD would have to be distributed before rolling any additional amount to the 401k. However, since client is also a >5% owner of the employer, this is also an RMD distribution year for client’s 401k. Therefore, such a rollover would not even defer RMDs for years after 2021. The only benefit of such a rollover might be creditor protection if their state does not provide decent IRA creditor protection.
That said, husband’s ownership % is determined in the year he reached 70.5 if he reached that age in 2019, or age 72 if he had not reached 70.5 in 2019. Changes in ownership after that one year do not matter. Therefore, to officially determine whether he is a >5% owner, you need to determine his ownership in the correct year, which may well not be THIS year. Finally, when you get the correct year, you must also factor in the family attribution rules for that year if certain other family members have ownership. This is the complex part. If he is already taking RMDs, the company should have completed this investigation.