Rollovers
In Ed’s teleconference yesterday he mentioned that when someone over age 70-1/2 does a rollover, the first dollars out are considered RMD’s. Just to clarify, this applies to a 401k to IRA rollover, or a 60-day rollover, not a trustee-to-trustee transfer. Is that correct?
Permalink Submitted by Alan Spross on Fri, 2008-02-29 17:50
Right. This is most clearly explained in the summary explanation to the 2002 RMD requirements, copied as follows:
>>>> >>>>>>>>>>
In addition to retaining the
special rules for IRAs provided in the
2001 proposed regulations, these final
regulations provide a special rule for
trustee-to-trustee transfers between IRAs
to coordinate with the rule that allows
aggregation of IRA distributions.
Although the IRA to IRA transfer is not
treated as a distribution for purposes of
section 401(a)(9), in light of the fact that
the required minimum distribution with
respect to the transferor IRA can be
taken from any IRA, the transferor IRA
will be able to transfer the entire
balance and will not be required to
retain the amount of the required
minimum distribution for the year.
>>>>>> >>>>>>>>>
Permalink Submitted by Denise Appleby on Fri, 2008-02-29 22:55
So Alan, here’s what I am finding out…an increasing number of individuals – including seminar instructors- use [url=http://www.retirementdictionary.com/Transfer.htm%5D‘trustee-to-trustee’ transfer[/url] when referencing [url=http://www.retirementdictionary.com/Direct-rollover.htm%5Ddirect rollover[/url]. It’s causing much confusion with discussions between custodians/banks and these individuals. The IRS does not help the matter, as they too use ‘trustee-to-trustee transfer’ when referring to some reportable transactions.
So, just to be sure…
If the transaction is a direct rollover, then the response is correct. But as Alan said, if it is truly a non-reportable ‘trustee-to-trustee transfer between two IRAs, then there is no RMD issue, as long as the RMD is taken from the receiving IRA by the applicable deadline.