QCD

Submitted by ShipsnGiggles on Mon, 2022-11-14 23:16

401k participant, 75, >5% owner has a $60,000 RMD in 2022
CPA is instructing her to make an in-service distribution to a rollover IRA and take the QCD that equals the RMD amount

My understanding is although this (rollover) can be done participant still would need to take her RMD ($60,00) which would be subject to taxation. This is due to RMDs not being allowed to be rolled over. Participant would be take a total distribution of $120,000 with $60k representing the RMD (subject to taxation) and the remaining amount being rollover over. Essentially accomplishing nothing. Am I analyzing this correctly?

Also, is there an to strategy to avoid a 401k RMD by doing a QCD? The only idea that I can think of is doing a complete lump sum rollover (from the 401(k) in 2022 and begin taking QCDs from the rollover IRA in 2023

Thank you in advance.



Submitted by David Mertz on Tue, 2022-11-15 00:12

  • You are correct.  The 401(k) RMD for 2022 must be satisfied before any other amounts can be rolled over form the 401(k) to an IRA in 2022.  A QCD could then be made from the IRA in 2022, but as you said, this would be a distribution in addition to the taxable 401(k) distribution.
  • Also as you said, if after taking the taxable $60,000 distribution from the 401(k) the entire remaining balance of the 401(k) is rolled over to the IRA, leaving a $0 year-end balance in the 401(k), that would mean that there would be no 401(k) RMD for 2023.  The 2023 RMD for the IRA could be satisfied with a QCD.  Any additional amount contributed to the 401(k) in 2023 could be rolled over to the IRA in 2023, again leaving a $0 balance in the 401(k) and no 401(k) RMD for 2024.


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