1st Required Minimum Distribution
Good Afternoon
I am looking for help with the following scenario
FACTS:
401(k) plan participant reached 70.5 in 2011 (dob 6/15/1941)
401(k) participant retired in April 2011
401(k) participant rolled her assets into an IRA (July 2011)
My understanding is since the participant reached 70.5 in 2011her RBD was April 1 2012 (yesterday). She had til April 1 2012 to take her 2011 RMD. I am confused about the cacluation due to the rollover
Questions:
Was she required to take her 1st RMD from her 401(k) account (based on 12/31/2010 value) prior to rolling into an IRA?
As of now she hasn’t taken an RMD. I can’t see how she could take her 1st RMD for 2011 from the IRA since her 12/31/2010 IRA value was $0.00
Her 2nd RMD (for 2012) seems straightforward; 12/31/2011 account balance divided her factor using Uniform Life Table
Any insight is appreciated.
Permalink Submitted by Alan Spross on Mon, 2012-04-02 21:26
Yes, the 2011 401k RMD should not have been included in the IRA rollover. It should have been distributed at the time or held by the plan and paid out no later than 12/31/2011.
If the full balance was rolled to an IRA, the RMD is considered satisfied anyway, but the IRA now has an excess contribution since the RMD amount is not eligible for rollover. None of this changes the RMD requirements for the IRA itself considering all owned TIRAs. If she does not have any until the rollover, there is no regular IRA RMD due until 12/31/2012 using the 12/31/2011 account balance that included the excess contribution.
The 2011 plan RMD should be reported in 2011 taxable income on line 16 of Form 1040. In other words, 16a would be the gross amount actually distributed, and 16b would show the RMD amount as taxable, and “rollover” added next to 16b for the difference that was rolled over. The corrective IRA distribution should be made ASAP by advising the IRA custodian the amount of the plan RMD that was an excess contribution that must be distributed with allocated earnings. The earnings that come out with it are also taxable in 2011 since that was the year the excess contribution was made.
The IRA custodian should report this corrective distribution on a separate 1099R next January coded to show the earnings taxable in 2011. The amount of the actual excess is not taxable when distributed since it was already included in 2011 taxable income. This distribution might delay her 2011 return, so she either needs to rush the corrective distribution now or file an extension.