RMD from 401k
Would taking an RMD from a 401k as the first distribution post triggering event (retirement), require a full distribution in the same year to qualify as Lump Sum Distribution which would allow the NUA treatment? – m
Would taking an RMD from a 401k as the first distribution post triggering event (retirement), require a full distribution in the same year to qualify as Lump Sum Distribution which would allow the NUA treatment? – m
Permalink Submitted by Alan - IRA critic on Fri, 2015-03-20 20:39
Yes, otherwise the RMD becomes an intervening distribution. In this situation, it is best to delay the RMD for the retirement year until the following RBD year, then distribute the employer shares by 4/1 so that the cost basis/NUA can be used for two years of RMDs. The employer shares must be distributed first because the first dollars out are deemed to apply to the RMD. Then the rest of the LSD must be completed before year end of the RBD year. Note that usually if the taxpayer changes his mind about NUA, he has 60 days to roll over some or all of the shares, but when using this RMD/NUA strategy, the taxpayer could only roll over employer shares in excess of the 2 years worth of RMDs since the RMD is not eligible for rollover and the taxpayer distributed the employer shares first so that they would cover the RMD.
Permalink Submitted by [email protected] on Fri, 2015-03-20 22:34
perfect, thanks.