RMD if employment ended in 2021
I have a client who left his employer in February of 2021. He has no ownership in the business, and is 76 years old. After leaving employment, he rolled his 401(k) to his IRA. Will he need to take an RMD based on the value of his 401(k) on 12/31/20, or will he be able to defer until 2022 because he was employed and the 401(k) was with his employer as of 12/31/2020?
Permalink Submitted by Alan - IRA critic on Tue, 2021-11-02 21:44
SInce 2021 is his first RMD distribution year for the plan, the plan should have held out the RMD from the direct rollover and just rolled over the balance. If this was not done, the RMD is still treated as completed by the distribution, and RMD amount is now an excess regular IRA contribution that must be removed like any other excess contribution. So instead of dealing with the RMD which has now been completed, he will have advise the IRA custodian the amount of the RMD that needs to be treated as an excess TIRA contribution and removed with allocated earnings.