Qualified Plan RMD Question
Good Morning
The facts:
401k plan requires all participants reaching age 70.5 (including non 5% owners) to take RMDs.
Does the plan participant have the option to rollover over the RMD? I am aware RMD’s are not rollover eligible. In this case the plan, not the IRS is requiring the RMD,
Any guidance is appreciated.
Thank you
Permalink Submitted by Alan Spross on Wed, 2012-02-01 19:04
Yes, the plan RMD can be rolled over to an IRA because it is a PLAN RMD only, not a statutory RMD under IRS RMD Regs.
There are still a few plans out there that require all employees to start RMDs at 70.5, even when still working.
Permalink Submitted by ShipsnGiggles on Thu, 2012-02-02 13:35
Alan, I appreciate the prompt response.
Are you able to reference a code section permitting the RMD rollover? Thank you
Permalink Submitted by Alan Spross on Thu, 2012-02-02 17:31
There is no code section expressly permitting the rollover. The path to this intrepretation follows the definition of an eligible rollover distribution in Sec 402(c)(4)(B). This clause shows as an item that is EXCLUDED from being eligible for rollover:
“Any distribution to the extent required under Sec 401(a)(9)”.
Accordingly, a plan RMD is NOT specified under 401(a)(9), which indicates that the employee’s required beginning date (other than 5% owners) is 4/1 following the year of retirement if over 70.5. Since IRS code (statutory) RMDs do not include such plan mandated RMDs, they are not excluded from being rollover eligible and therefore ARE rollover eligible.
In addition, noted IRA authority Natalie Choate makes reference to this in the following article:
http://www.ataxplan.com/choatesNotes/CNotesV9N1.pdf