401k to IRA in 70 1/2 year
Client is turning 70 1/2 later this month. Normally have them take RMD during this year so to not double distribute next. Question is, its coming from a 401K where she is still employed and thus can delay RMD’s. Obviously once in an IRA will have RMD’s. If rollover is executed in 2015 will RMD’s be due since it was 401K on 12/31/14 of active employee?
Permalink Submitted by Alan - IRA critic on Wed, 2015-09-09 18:15
If client is still working at the end of 2015, this will not be an RMD distribution year for the 401k plan. Therefore, any amounts eligible for distribution from the 401k can be rolled over to the IRA without an RMD. If the rollover is done now and client retires before year end, then part of the rolled amount will be deemed to apply to the RMD and will have to be treated as an excess IRA contribution.
Permalink Submitted by Toby Hartley on Fri, 2015-09-11 20:19
Now they came back and said that this particular 401k they want to move to an IRA is from a previous employer. So, we cannot delay RMD for this account. Howvere, they want to know if they need to take RMD preior to the rollover or can they just have the recieving carrier issue for amount received less the RMD? Does it mattr?
Permalink Submitted by Alan - IRA critic on Fri, 2015-09-11 21:51
The 401k administrator cannot include the amount of the 2015 RMD in the IRA rollover. It needs to be separately distributed to the client and the balance would go to the IRA custodian as a direct rollover. There would be a separate 1099R for each amount.