In service IRA rollover after 70 1/2

Submitted by Bill Edwards on Tue, 2018-12-04 12:52

I have a client who has 1 million in a 401K. She is 73 and still working and has not taken an RMD. She just did an in service rollover to a new IRA. The amount was $500,000 and done on Sept 25, 2018. The balance of the new IRA was 0 on Dec 31 of 2017. Does she have to take an RMD for the rollover for 2018 if so what value is used to calculate the RMD? Or, does the RMD begin in 2019? Keep in mind that she does not want 2 RMDs in the same tax year so we want them to come out in during the calendar year in which they are required. I am just not sure if that is 2018 or 2019.

I have reposted this from 10/3/18. The answer I originally got was that the first RMD needed to be taken by Dec 31, 2019. The client’s other advisor said that is incorrect. According to the IRS IRA required minimum distribution worksheet any Rollover needed to be included on the 12/31/17 value.

Does anyone have anything to back up the original answer. I just want to make sure I get the client the correct information and I can’t find anything helpful on the IRS website. If anyone or the person who answered this question originally could give me any reference to back up the answer it would be much appreciated.



Submitted by David Mertz on Tue, 2018-12-04 13:37

  • The client’s other advisor is confused as to what rollovers must be included in the 12/31/2017 IRA balance.  The only rollovers required to be added to the 2017 year-end balance are those that result from a distribution in late *2017* that are not deposited as a rollover contribution until early 2018, called an “outstanding rollover.”  In your client’s case, the distribution from the 401(k) occurred in 2018, not in 2018, so there is no outstanding rollover to add; no money was temporarily outside of a retirement account on 12/31/2017.
  • See 2017 IRS Pub 590-B page 7, “Outstanding rollovers and recharacterizations.”
  • If there had been an RMD required of any of the money in the 401(k) for 2018, that RMD would have been required to have been satisfied from the 401(k) before rolling over any other amount from the 401(k) to the IRA.  That means that there is no way to transfer from the 401(k) to the IRA any requirement to take an RMD.  Since the client will be employed with the employer throughout 2018, there is no RMD required from the 401(k) and no 2017 year-end balance in the IRA, there is no RMD to satisfy from either of these accounts for 2018 before or after doing the rollover to the IRA.

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