Rollover 401k to another 401k before taking RMD
Client moved money from an old 401k to his current employer 401k this year before taking his RMD. What does he need to do, to correct this situation?
Client moved money from an old 401k to his current employer 401k this year before taking his RMD. What does he need to do, to correct this situation?
Permalink Submitted by Alan - IRA critic on Fri, 2019-04-12 23:12
The old 401k should have distributed the RMD and not included it in the rollover. The problem caused by this is that the old 401k RMD must be treated as distributed, reported as taxable income, and the new plan must be told that they accepted rollover (in the amount of that RMD) that was not eligible. They must then distribute it back out out with any earnings. Only the earnings should be taxable since the RMD amount is reported as taxable in the year of the old 401k rollover.