RMD if age 75 and still working…
I have a gentleman that came to me and said that he is 75 years old, still working for a large company and definitely not an owner by any means. He told me that he did an in-service distribution from his 401k (that he is still contributing to since he is still working) a couple of years ago and rolled his money into an IRA in January, 2011. He has not taken any RMDs from his IRA account yet. He just recently received a notice saying that he needed to take a RMD from his one (and only) IRA account that had a balance in it at 12/31//2011. I have not discussed this with him yet, but It looks like to me that since he is still working and is an employee and not an owner, he can defer taking his RMD until he quits working. My other side tells me he should take 2 RMDs for Y2012 because the IRA was not funded until Y2011. Right now I feel like if I read into his situation a little further, I can come up with a third possible solution. Any assistance that you might offer will be appreciated..
Permalink Submitted by Alan Spross on Wed, 2012-10-10 19:21
Unless his plan provisions state otherwise, he has no plan RMDs due since he is still working.
But rolling the in service distribution to an IRA will trigger IRA RMDs. He had no IRA RMD for 2011 because he had no IRA balance on 12/31/2010. But for 2012, he must take an IRA RMD because he had an IRA balance on 12/31/2011.
The deferral of the first IRA RMD is only an option for the year the taxpayer reaches 70.5. Therefore, there is no option to defer his IRA RMD for 2012 to 4/1/2013.
His first 401k RMD will be due for the year he retires unless plan provisions state otherwise. A few plans require all employees to start at 70.5, but if that were the case here, he probably would have been notified at that time.
If his plan will accept rollovers from IRA accounts, he could take his 2012 IRA RMD and then roll the IRA balance back into the plan. That would eliminate future IRA RMDs until he had a balance again, presumably after he retired. In other words, if his plan accepts IRA rollovers he could limit the rollover error to one year of IRA RMDs and there would be no more until he retires.