RMD Question

Submitted by William Hammond on Wed, 2018-12-12 17:50

Client had a 401-K plan at a hospital where he worked. He also has an IRA.
We calculated his total RMD based on values of both plan. We took the total amount from the 401-k plan.

Now we think he still has to take his RMD from the IRA which would result in withdrawing 2 X as much as he needs.
Question: Does the withdrawal from the 401-k count as his RMD?

If the answer is no does anyone have any suggestions on how to possible correct this situation?

Thank you
BH



Submitted by Alan - IRA critic on Wed, 2018-12-12 18:43

  • Ouch! 401k and IRA RMDs must be satisfied individually from the applicable accounts. Therefore, more than the RMD has been distributed from the 401k and none of this distribution counts toward the IRA RMD. If 60 days has not yet passed, the amount in excess of the 401k RMD can be rolled over to an IRA. You might check Rev Procedure 2016-47 to see if the client might qualify for rollover relief by extending the 60 day deadline, but would need to qualify for one of the limited reasons (eg serious illness) to get this relief.
  • Either way, client still needs to satisfy the IRA RMD by distributing the IRA RMD amount from the IRA. In this situation, the larger the IRA balance was compared to the 401k, the more costly this will be. But there will be some recovery in future years because the 401k RMD balance has been reduced by the excess distribution and future 401k RMDs will therefore be lower.
  • Note that the 401k distribution, being more than the RMD amount should have had 20% withholding taken on the amount in excess of the RMD.

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