401(k) Loan Question
This is an outside the box question of which I’m pretty sure I know the answer but thought I would ask anyway.
Question:
I have a client that has just retired and is RMD age (72). He has and outstanding 401(k) loan that is about equal to his RMD. Could he “default” on the loan and have that count towards his RMD for 2021?
Permalink Submitted by Alan - IRA critic on Fri, 2021-04-16 23:06
Probably. While a deemed distribution due to underpayment while still active would not be credited against the annual RMD, a post retirement default would probably generate an “offset distribution” 1099R which is treated as an actual plan distribution and which would qualify as the RMD. There are some timing issues here effected by his retirement and the plan’s loan provisions, so this question should be addressed to the plan administrator.