Is a Roth 401(k) subject to an RMD?

Submitted by Steven Finkelstein on Thu, 2019-04-11 12:56

Greetings,

1. Is a Roth 401(k) subject to an RMD in the event the employee is still working for the employer in which the Roth 401(k) is held?

2. Is a Roth 401(k) subject to an RMD if one is no longer working?

I realize prior to the recent “Tax Cuts and Jobs Act” that Roth 401(k)’s were subject to an RMD. However, I am asking if, as part of the Tax Cuts and Jobs Act, this changed and made the Roth 401(k) RMD requirement to mirror the Roth IRA rules where an RMD is not required.

Thank you,

Steve



Submitted by Alan - IRA critic on Thu, 2019-04-11 15:17

  1. Usually not, unless the employee is a >5% owner, although a plan is allowed to require all employees to take RMDs at 70.5 even if still working. Note that RMD aggregation between the Roth and pre tax accounts is allowed under IRS rules, although a few plans may not allow aggregation. Aggregation in this case means that the RMD for the Roth portion and pre tax portions can be taken in any combination from the two accounts instead of pro rata.
  2.  Yes.
  3. The TCJA had no effect on these RMD rules.
  4. To avoid a Roth 401k RMD, the account must be rolled to a Roth IRA prior to the year the employee reaches 70.5. Otherwise, once the employee separates in the 70.5 year or later, the year of separation becomes an RMD distribution year.

Submitted by Gerri Fehst on Fri, 2019-04-12 11:37

I am 701/2 and required to start taking RMDs from my TSP.  However I just started a new job, part time, and set up a new Roth 401k with the new employer.  I will be taking RMDs from my TSP as required.  However, Questions:  1) do I also have to take RMDs from my new Roth 401k while I am still employed?  2) OR do my RMDs from the NEW Roth 401k only begin on the year I quit the job?  3) Finally, can I avoid required RMDs altogether from the Roth 401k if I roll the Roth 401k into my Roth IRA?  4) If I rollover the Roth 401k, do I have to wait until I leave the job to be able to do it, or can  I roll it over before job termination?  5) Since I will be well past 70 1/2 when I leave the job, will I be required to take an RMD from the Roth 401k in the year of termination and THEN roll it over into a Roth IRA?  Thank you.

Submitted by Alan - IRA critic on Fri, 2019-04-12 15:35

  1. Assuming that you own less than 5% of the new employer you will not have to take RMDs from any portion of the new plan until you separate from service. But for a very few plans, the plan requires everyone to start RMDs at 70.5 even when still working.
  2. That is correct.
  3. Whenever a Roth 401k balance is rolled over to a Roth IRA, RMDs stop effective in the year after the rollover to the Roth IRA. 
  4. That depends on the terms of your plan. The IRS allows it, but the plan may not.
  5. Yes, that is correct. 

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