In-Service Rollover from 401(k) After 72
We have a client who is 72, still working full-time, participating in the 401(k) plan, not an owner of the company, and plans on working in to 2022. If he does a partial in-service rollover from his 401(k) to a rollover IRA, would he be subject to a RMD this year (2021) due to the rollover. If he is subject to a RMD, would it be based on the full year-end balance even though he’s only doing a partial distribution?
The form to request the rollover states that only if the plan participant is at RMD age, is more than a 5% owner, AND requesting a 100% rollover will the RMD be required but I don’t want to put any weight in this that a RMD would not be required.
Permalink Submitted by Alan - IRA critic on Mon, 2021-02-15 18:21
Since client is still working, 2021 is not an RMD distribution year, and the partial rollover should not trigger an RMD. However, if he retires before the end of 2021, the 2021 will become an RMD distribution year, and the amount of the partial rollover attributed to the RMD would be taxable, and would also result in an excess IRA contribution of the RMD amount since an RMD is not eligible for rollover. But as long as he is still working on 1/1/2022 there is no RMD or taxable distribution for 2021. Of course, the amount rolled over will trigger IRA RMDs starting in 2022.