inherited IRA rmd’s

Submitted by JEFFREY MACK on Tue, 2017-07-11 19:31

Decedent died at age 90 early in 2016 without taking any RMD’s for the year. Daughter was beneficiary of decedent’s 401k and IRA accounts. Daughter took lump sum distribution of the full balance of the IRA account in 2016. She made trustee to trustee transfer of 401k balance to newly established inherited IRA. She took no RMD in 2016 from that account. The lump sum distribution amount was sufficient to cover the 2016 RMD’s from both of the inherited accounts. Has the daughter met her RMD requirements for 2016?



Submitted by Alan - IRA critic on Tue, 2017-07-11 20:49

IRA distributions do not satisfy 401k RMDs.  The 401k plan was required to distribute the year of death RMD to the daughter and NOT include that amount in any rollover to an inherited IRA. If the plan did not do that, they are in violation of the plan’s RMD requirements. Even if decedent had lived, he could not have done a rollover without the RMD first being distributed. Are you sure the plan did not a some point in 2016 distribute the RMD to either the decedent or the daughter?

Submitted by JEFFREY MACK on Tue, 2017-07-11 21:27

Thank you for the reply, Alan.  The mother died early February.  I received no 1099R for 2016 for the account which had been with MetLife.  I have received no IRS correspondence regarding omission of the 1099R.  Yes, my understanding was that the 401k account would have to make the RMD prior to rolling to the IRA.  Is it possibile that MetLife would make that oversight? 

Submitted by Alan - IRA critic on Tue, 2017-07-11 21:43

Yes, it is possible but rare for a large firm like Metlife. Was the direct rollover to the inherited IRA done this year? That would be a separate 1099R from that of an RMD distribution. 

Submitted by JEFFREY MACK on Wed, 2017-07-12 00:37

The direct rollover was done in June 2016.  I did not see any 1099R for that transaction either.  The only thing that I have seen at this point was a statement from new trustee showing the receipt of the rollover. r. 

Submitted by Alan - IRA critic on Wed, 2017-07-12 00:57

Failing to issue a 1099R for a direct rollover is even more rare than the plan failing to distribute the RMD.  There is a good chance that something went wrong with the mailing address or related delivery. You should call the plan and inquire about the status of both the 1099R and RMD. Now since the plan balance was actually transferred to an inherited IRA, the RMD would be considered satisfied by a portion of that direct rollover and an excess contribution made in that amount to the inherited IRA that should be removed along with allocated earnings. This will not produce much in the way of extra taxes, but it is a reporting hassle and daughter’s 2016 return will likely need to be amended.

Submitted by JEFFREY MACK on Wed, 2017-07-12 12:25

Thank you again Alan.  I really have gotten myself into a rabbit hole.

Submitted by JEFFREY MACK on Wed, 2017-07-12 18:15

A couple of more questions- Does your analysis also apply if the account was a 403b rather than 401k?We haven’t contacted MetLife yet, but it seems pretty clear from the dollar amounts from various statements that no RMD was made from the mother’s account.  Since that is the case, I want to confirm that a portion of the transfer should be reported on the amended return as a distribution (satisfying the RMD requirement), and that same portion since it went into the inherited IRA should be treated as an excess contribution, correct? 

Submitted by Alan - IRA critic on Wed, 2017-07-12 18:43

  • A 403b is subject to the same criteria as a 401k, except that it is possible to aggregate 403b RMDs with other 403b accounts if participant has more than one. Executing this is rare since coordinating between the two plans is cumbersome and plans wish to avoid RMD pitfalls, so each 403b would usually distribute their own RMD.
  • With respect to the (unreported) direct rollover that occurred in 2016, the 2016 year of death RMD amount should be reported on line 16b as taxable and “rollover” is entered next to 16b to apply to the allowed rollover amount. A thorough explanatory statement should be included with the 1040X with respect to the missing 1099R and the inclusion of the RMD in the unreported rollover. However, perhaps the rollover was reported but beneficiary copy when astray, so this should be investigated before filing an amended return. A deeper hole will be dug if the amended return assumes something that did not happen, and it is unlikely that Metlife would mishandle this in multiple areas. Further, it will be a challenge to explain to the IRA custodian that they need to treat part of the rollover as an excess contribution and return it, so you do not want to go through that before knowing for sure that the RMD was rolled into the IRA.

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