Permalink Submitted by Alan Spross on Tue, 2011-11-08 19:12
Only if the 401k plan makes an error and does not hold out the plan RMD. The plan is supposed to withhold the RMD from the rollover.
Note that a direct rollover is treated as a two part transaction, ie a distribution and a rollover. Since an RMD is not eligible to be rolled over, it must be distributed to the employee to keep it out of the rollover transaction.
Sometimes a plan will make an error and roll over the RMD. If that happens, the RMD is still considered to be satisfied, but the disallowed rollover creates an excess IRA contribution that must be corrected like any other excess IRA contribution.
Permalink Submitted by Michael Eischen on Tue, 2011-11-08 19:27
If another IRA exists and has an RMD requirment for 2011. Can the 2011 IRA RMD be satisfied by withdrawing from the newly created rollover IRA from the 401k?
Permalink Submitted by Toby Hartley on Tue, 2013-11-05 00:03
Old post revised. If a client has two IRA’s that they really do not want to touch. Can they rollover funds from a 401k to a new IRA, understanding RMD from said rollover going toward 401k RMD, and then take distribution from the new IRA to cover RMD for the two IRA’s they don’t want to access? If so, is there a timeline, or minimum time it has to be in the IRA before taking the distribution for RMD?
Permalink Submitted by Alan - IRA critic on Tue, 2013-11-05 00:20
Yes, the new rollover IRA could distribute the IRA RMD for the other IRAs even though the new rollover IRA was not included in the prior year end balance. For example, taxpayer in an RMD distribution year first takes the 401k RMD, then rolls over the balance to a rollover IRA. The other two IRAs have an RMD based on the prior year end balance, and this RMD can be satisfied in any combination from the 3 IRA accounts that now exist, including having the entire IRA RMD distributed from the new rollover IRA. There is no holding period for the new IRA to meet before distributions can be taken.
Permalink Submitted by Alan Spross on Tue, 2011-11-08 19:12
Only if the 401k plan makes an error and does not hold out the plan RMD. The plan is supposed to withhold the RMD from the rollover.
Note that a direct rollover is treated as a two part transaction, ie a distribution and a rollover. Since an RMD is not eligible to be rolled over, it must be distributed to the employee to keep it out of the rollover transaction.
Sometimes a plan will make an error and roll over the RMD. If that happens, the RMD is still considered to be satisfied, but the disallowed rollover creates an excess IRA contribution that must be corrected like any other excess IRA contribution.
Permalink Submitted by Michael Eischen on Tue, 2011-11-08 19:27
If another IRA exists and has an RMD requirment for 2011. Can the 2011 IRA RMD be satisfied by withdrawing from the newly created rollover IRA from the 401k?
Permalink Submitted by Alan Spross on Tue, 2011-11-08 20:20
Yes.
Permalink Submitted by Toby Hartley on Tue, 2013-11-05 00:03
Old post revised. If a client has two IRA’s that they really do not want to touch. Can they rollover funds from a 401k to a new IRA, understanding RMD from said rollover going toward 401k RMD, and then take distribution from the new IRA to cover RMD for the two IRA’s they don’t want to access? If so, is there a timeline, or minimum time it has to be in the IRA before taking the distribution for RMD?
Permalink Submitted by Alan - IRA critic on Tue, 2013-11-05 00:20
Yes, the new rollover IRA could distribute the IRA RMD for the other IRAs even though the new rollover IRA was not included in the prior year end balance. For example, taxpayer in an RMD distribution year first takes the 401k RMD, then rolls over the balance to a rollover IRA. The other two IRAs have an RMD based on the prior year end balance, and this RMD can be satisfied in any combination from the 3 IRA accounts that now exist, including having the entire IRA RMD distributed from the new rollover IRA. There is no holding period for the new IRA to meet before distributions can be taken.