403(b) RMD rolled into IRA

Submitted by Joseph Kolb on Mon, 2019-02-25 22:31

I am wondering what are all the corrective steps that need to be taken if RMDs from a 403(b) were rolled into an IRA?

I read the following : “RMDs Cannot Be Rolled Over” from Sarah Brenner:

The consequences of rolling over an RMD are messy. You cannot just take the RMD amount from the retirement account to which the funds were rolled over. Instead, the RMD amount is considered to be an excess contribution in the receiving account. This will result in a 6% penalty if it is not timely corrected.”

The excess contribution is equal to the missed RMD, when you complete the removal of excess contribution and earnings, does that also satisfy the missed RMD or do you need to go back and take the same amount out from the 403(b) again?

Also, what corrective action can you take if the 403(b) account is closed?

Thank you in advance!



Submitted by Alan - IRA critic on Tue, 2019-02-26 00:43

  • You must tell the IRA custodian the amount of the RMD that was rolled over and the IRA custodian is to treat that as an excess IRA contribution, and return it with any allocated earnings. Note that the 403b RMD was considered completed, it was just not allowed to be rolled over, so the closure of the 403b account does not matter.
  • The messy part is that the tax return will not conform to the 1099R form which is coded G for a direct rollover. The RMD amount must be reported as a taxable distribution on the 1040, with only the rest of the distribution being reported as a rollover. But only the earnings will be taxable for the IRA corrective distribution, taxable in the year in which the RMD was rolled over. This should be explained in a statement added to the tax return so the IRS will know what happened.

Submitted by David Mertz on Tue, 2019-02-26 00:47

  • The RMD has already been satisfied by the distribution from the 403(b) that was rolled over to the IRA.  The problem is that that rollover deposit included an amount not eligible for rollover (the 403(k) RMD), so it became an excess contribution to the IRA.  The excess contribution to the IRA simply needs to be removed from the IRA by a return of excess contribution before the due date of your tax return.
  • If the entire distribution from the 403(b) was reported on a code-G Form 1099-R, the Form 1099-R is technically erroneous since it includes an amount not eligible for rollover.  This can present a problem for tax-return software if the 403(b) plan does not issue a corrected code G Form 1099-R showing only the amount eligible for rollover and the RMD portion on a separate, new code 7 Form 1099-R.

Submitted by Joseph Kolb on Tue, 2019-02-26 23:40

Thank you both for taking time to respond, it is greatly appreciated. 

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