RMD Error or not?
Former employer funded his former 401k plan with a $2500 penalty that former employer had to pay for not depositing deferral dollars on time when client worked for them. These dollars were rolled into client’s IRA in March 2011. Client turned 70 1/2 in June 2011. Should the former employer have required an RMD from the 401k before the rollover? Thank you!
Permalink Submitted by Alan Spross on Tue, 2011-09-27 16:35
Yes, assuming the employee separated from service prior to March, 2011.
After separating, the year of separation becomes an RMD distribution year if the employee will be 70.5 any time in that calendar year. In an RMD distribution year, the RMD should not be rolled over but if it is rolled over in error it becomes an excess contribution to the IRA which needs to be corrected in the usual manner.