ira rollover from 401k plan
My client DOB is 12-3-1948. He is a participant in a 401k plan. He made a recent distribution thinking that he had a make a RMD. After consulting with me, it was determined that the RMD was not required. Is he able to roll this distribution over into his existing IRA? If so, how would that effect his RMD this year from the IRA? The distribution he made from his 401k was not coded as as RMD distribution, it was coded as a general distribution.
Permalink Submitted by Alan - IRA critic on Wed, 2021-07-14 17:05
Client probably has not had to take 401k RMDs due to the “still working exception”. His recent distribution can be rolled over to an IRA within 60 days since it is not an RMD, providing that he is still working for the employer on 1/1/2022. If he retires before the end of this year, the distribution he took would have to be treated as an RMD and the rollover to the IRA would be an excess IRA contribution to the extent of the 401k RMD.
But if he is still working into next January, there is no 401k RMD for 2021. The amount he rolled into the IRA would not result in an increased IRA RMD for 2021, but would increase his 12/31/2021 IRA balance and generate an RMD on the increased IRA amount in 2022.
Note that there is no different code on his 401k 1099R for a distribution that is an RMD or is not an RMD. However, the withholding rules are different. Since the distribution he took may have had withholding taken out, if he wants to have a complete rollover he will have to replace the amount withheld from other funds he has available.