68 year old client is still working and intends to keep working for some years. He has an IRA and wants to roll it into a 401K so he can avoid RMDs until he retires. Do we have to take RMDs from the amount of the IRA we rolled into the 401K? Can we even roll the IRA into the 401K?
Please provide me with some reference sources. I would like to roll my Traditional IRA into my 401k but my IRA company says it cannot be done.
Thanks!
Jim,
Alan-oniras has provided you the best source for information about your 401k plan, that is the SPD (Summary Plan Description) for your 401k.
This document is available to each 401k participant. The SPD describes how the fund works, how to make contributions, and how to get your money out of the plan.
An SPD is unique to a specific 401k plan. If you do not have a copy and the SPD is not available on line, ask the 401k plan administrator to give you a copy of your 401k Summary Plan Description.
Refer them to the 1099R Inst attached.
P 12 shows the Code G that they would use for a direct rollover to an accepting employer plan.
P 6 show this can be done in the Box 1 Gross Dist instructions.
This is not new, either. It can be done since 2002 for any IRA, but before that for rollover IRAs as well. This must be a small institution or else you have not been talking to the right people there. The problem is usually with the 401k plan who does not want these, but the IRA custodian has no legitimate reason to deny the distribution if the plan will accept it.
Permalink Submitted by Alan Spross on Fri, 2009-01-23 23:45
You will have to check with the 401k plan administrator or plan SPD to see if it will accept incoming IRA rollovers. This is optional and not a requirement. In addition, some plans will still only accept conduit IRA accounts from prior employer plans and avoid contributary IRA accounts. The reason for this is the need to avoid taking on non deductible or after tax amounts, which cannot be rolled over from an IRA.
If the plan will accept his IRA, there is no RMD due yet because the client has not yet reached the year he turns 70.5.
The client should also make sure that his 401k plan does not require RMDs at 70.5. While most of them do not, there are some that require RMDs to start at 70.5 even when the employee is less than a 5% owner.
But if the pieces fall together, this is a good way to avoid IRA RMDs until after client retires.