Delaying 403b RMD

Submitted by Andrew Glassberg on Wed, 2014-12-24 04:38

I am 72 and will retire from my current employer in 2015. I will need to take RMD’s from accounts established through this employer for 2015. However, since this will be the first year of RMD’s, I can delay part of the RMD into early 2016 if I want to. I may wish to do so in order to keep my 2015 Adjusted Gross Income under one of the Medicare Part B premium cliffs.

However, I also have RMD’s from 403b plans from previous employers, which I have been taking since I turned 70 1/2. Obviously I’ll have to take these in 2015. Will the existence of these “old” 403b RMD’s interfere with my ability to delay a portion of the “new” RMD into 2016?

403b plans, unlike 401k’s, allow RMD’s to come from any mix of 403b plans and they don’t have to be taken on a plan by plan basis. Given that I may want to delay part of my “new” RMD, do I need to establish a clear paper trail that I actually taken all of my RMD for the “old” plans from the old plans. This would be so that I could clearly establish that any delayed RMD only came from the “new” plan.

I’d appreciate any advice you may have about this.

Thanks!



Submitted by Alan - IRA critic on Wed, 2014-12-24 17:57

The old 403b continuing RMDs are not related in any way to your RMD options for the current plan. You are correct about aggregation of 403b RMDs, so if you decide to use this option, just document what your RMD is for each plan and with respect to the current plan the amount you are deferring if you decide to do so. Then the amount of the 2015 RMD deferred to 2016 can still be withdrawn from any 403b plan you wish, but must be done prior to 4/1/2016. Even more documentation is required if you are using the age 75 RBD for your 403b balance on 12/31/1986. The 2015 deferral option of course is only a one year situation. Usually, 403b plan expense levels can be reduced by doing IRA rollovers as well, and if you do an IRA rollover, the entire remaining RMD for the year of the rollover should be withheld from the rollover and distributed to you. And because of the aggregation, the plan you roll over would need to know your total remaining (all plans) RMD for the year. I don’t know how they get that info other than by asking you.

Submitted by Andrew Glassberg on Thu, 2014-12-25 15:27

To follow up on your last point.  If I were to roll over one 403(b) plan into an IRA, I’d obviously have to take the RMD for that plan at the same time I did the rollover (if I hadn’t done so earlier.)  But are you saying that if I did a 403b to IRA rollover in one plan that I’d have to take the full RMD for all of my plans at the same time?  I didn’t think that was the case but your final couple of sentences might mean that you see this as a requirement.Could you clarify? Thanks!

Submitted by Alan - IRA critic on Thu, 2014-12-25 21:37

403b contracts are subject to the same general RMD requirements of IRA account. The ability to aggregate also triggers the rule that the first distributions in an RMD year are deemed to apply to the RMD. They go hand in hand, although the IRS does not really make the second part clear. Here is the aggregation part. The following is from the 2002 RMD Regs:

Q-4. Is the required minimum distribution from one section 403(b) contract of anemployee permitted to be distributed from another section 403(b) contract in order tosatisfy section 401(a)(9)?A-4. Yes, as provided in paragraph (b) of A-1 of this section, the distributionrules in section 401(a)(9) will be applied to section 403(b) contracts in accordance withthe provisions in§1.408-8. Thus, the required minimum distribution must be separatelydetermined for each section 403(b) contract of an employee. However, as provided inA-9 of§1.408-8 with respect to IRAs, such amounts may then be totaled and the totaldistribution taken from any one or more of the individual section 403(b) contracts. However, consistent with the rules in A-9 of§1.408-8, only amounts in section 403(b) contracts that an individual holds as an employee may be aggregated. Amounts in section 403(b) contracts that an individual holds as a beneficiary of the same decedent may be aggregated, but such amounts may not be aggregated with amounts held in section 403(b) contracts that the individual holds as the employee or as the beneficiary of another decedent. Distributions from section 403(b) contracts or accounts will not satisfy the minimum distribution requirements for IRAs, nor will distributions from IRAs satisfy the minimum distribution requirements for section 403(b) contracts or accounts. 

Submitted by Thomas Doncaster on Thu, 2016-04-21 11:59

Ed;I know that an employee of a company can continue to defer RMD’s on their 401k if they still continue to work beyond age 70 1/2.  Is this same rule applicable to an UNI-K (solo 401k) ? Tom

Submitted by Alan - IRA critic on Thu, 2016-04-21 16:41

No, because a solo K owner is obviously a more than 5% owner of the company. 5% or greater owners must begin RMDs at 70.5 even if they are still working.

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