RMD while working on Rollover IRA
Here is a unique situation and question:
An indivdual is in his mid 70s and still working.
He has a 401K going at work right now. IRS says that as long as he is still working and doesn’t own at least 5% of the company, there is no RMD distribution requirement for him (so long as he keeps working – can go on indefinitely).
However, even though still working currently (yes, as of the day of this posting even), this fella rolled out the majority of this 401K into his own IRA in August of 2010.
So 2/3 of the year the $ was in 401K and 1/3 of 2010 was in an IRA.
How do RMDs work for him in this situation? Is there an RMD for 2010? There was no IRA as of 12/31/2009 as all was in the 401K.
Thanks.
Permalink Submitted by Alan Spross on Tue, 2011-03-08 00:33
There is no RMD required for 2010 for the reason you stated, however he will have one due for 2011 based on the 12/31/2010 IRA balance.
Perhaps he should check into rolling the IRA back to the employer plan if they will accept it. That would eliminate IRA RMDs after 2011. Of course, he had a reason for doing the IRA rollover in the first place, and you did not indicate why this was done.
Also, under IRS rules, the “still working exception” does apply after age 70.5 to less than 5% owners, however any specific plan is free to require that RMDs for all employees begin at 70.5. Not too many do, but that is a possible reason for his rollover and also a possible reason NOT to bother rolling the IRA back to the plan.