Two RMDs

Submitted by Ray Hoctor on Sun, 2016-09-25 14:29

I have a 401k that is being managed by a major brokerage company. They sent me a letter in April stating the amount I needed to withdraw for this year’s RMD. I submitted the proper paperwork and a week later checked my bank account and the proper funds were deposited. I then checked my 401K account and it showed two distributions, one day apart. I called and they said there was a mistake; two distributions had been made. The next day the second RMD was deposited in my bank account.
Question: What are my options? Can I take the second distribution and roll it over into an IRA within 60 days and avoid paying taxes this year. They said I could not because it was coded as a RMD distribution and they cannot be rolled over.



Submitted by David Mertz on Sun, 2016-09-25 15:23

  • The second distribution is *not* an RMD.  Whatever “coding” there is on the distribution is an internal coding of the plan, not anything that is reported to the IRS or anything that can turn an eligible rollover distribution into an RMD.  The entire gross amount of the second distribution is therefore eligible for rollover to an IRA.  The Form 1099-R that you and the IRS receive from the plan for these distributions does not distinguish between RMD distributions and eligible rollover distributions, so the amounts will be lumped together on a single Form 1099-R.
  • If the second distribution from the 401(k) was made less than 60 days ago, this would be a normal rollover.
  • If it has been more than 60 days since the distribution, you can self-certify that you qualify for a waiver of the 60-day deadline.  See Revenue Procedure 2016-47 (https://www.irs.gov/pub/irs-drop/rp-16-47.pdf) for a model letter to provide to the IRA custodian to allow the custodian to accept the late rollover.  The reason for missing the 60-day deadline would be that the financial institution mistakenly made an unrequested distribution in excess of your RMD that you only recently discovered. 


Submitted by Ray Hoctor on Sun, 2016-09-25 20:03

Thanks for the advice.  I will plan to roll it over.



Submitted by David Mertz on Sun, 2016-09-25 23:44

One other thought:  I assume that this is not a case of 2015 being your first RMD year with the first distribution being your 2015 RMD (permitted to be delayed to as late as April 1, 2016) while the second distribution was your 2016 RMD; from your description I assume that the second distribution was simply a mistaken duplication of the first distribution.  If it was simply a mistaken duplication of the first distribution, both distributions would be expected to have been of the same amount.



Submitted by Ray Hoctor on Mon, 2016-09-26 02:41

Correct.  I took my first one in 2015.  And, for this distribution, both were exactly the same amount.  It was a mistake on their part.  As long as I can roll it over within 60 days (this happened last week) I’m okay with it.



Submitted by Alan - IRA critic on Mon, 2016-09-26 03:25

Maybe you should consider rolling the entire 401k over to an IRA via direct rollover. There are always positives and negatives to that decision, but in most cases the IRA give you more control.



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