401k Move After 70 1/2
When a worker over age 70 ½ terminates employment to move to another employer, and in the process moves the 401k assets to the new employer’s 401k, does this trigger a required minimum distribution?
When a worker over age 70 ½ terminates employment to move to another employer, and in the process moves the 401k assets to the new employer’s 401k, does this trigger a required minimum distribution?
Permalink Submitted by Alan - IRA critic on Wed, 2017-04-12 21:14
Yes, but only for the year of retirement if the rollover is also done that year. The worker has “retired” with respect to the first employer and that makes the year of retirement the first RMD distribution year for that plan. While the RBD is the following 4/1, a direct rollover to the new plan just like a direct rollover to an IRA would result in the direct rollover including the RMD money. But the first employer should not include the RMD amount in the rollover and should distribute it to the worker. Therefore, an RMD is required for that year but the rollover into the new plan will shield the remaining balance from future RMDs for as long as the worker continues to be employed by the new employer. If instead the first plan was rolled to an IRA, there would also be an RMD due for the year of rollover, but the remaining balance in the IRA would also be subject to RMDs starting the following year.