RMDs as a result of a QDRO?
Client age 60 received part of her ex-husband’s 401k plan through a QDRO. Ex husband turned age 72 this year on Oct 22nd.
He still has his 401k and will need to take out his RMD according to the custodian.
Question is does his ex wife , age 60 need to also take a RMD? She received a letter from the custodian, TransAmerica advising her that she may need to withdraw this RMD.
Does she have to take this RMD? Can she avoid future RMDs if she transfers her part into her own IRA?
Permalink Submitted by Alan - IRA critic on Thu, 2021-11-11 16:18
If the 401k was divided into separate accounts or shares by the plan, client must start RMDs no later than the RBD (4/1/2022) of the employee (ex), which gives her the option of taking her first RMD this year or taking the 2021 RMD by 4/1/2022 and the 2022 RMD by 12/31/2022. She can also split the 2021 RMD in any portion between 2021 and 2022 by 4/1. If client’s interest is not treated as a separate account by the plan, different rules apply, but this is unlikely.
Since the age difference is over 10 years, her RMDs may be calculated using Table II (Joint Life) where their ages intersect. This assumes that she was the sole beneficiary of the entire plan balance including the ex’s share, which is unlikely as ex likely named another beneficiary on his separate account prior to year end. If he did, the Uniform Table will apply. Client may have to ask the plan if the joint life table applies.
There will be additional complexities when either of them passes.
Since client has likely retired or separated from service, client should be eligible for distributions including direct rollovers to an IRA. If such direct rollover is done, the RMD for that year must be distributed and is not eligible to be included in the rollover. Subsequent years in the IRA would not be subject to RMDs until she reaches 72.
She should also check if her sub account includes appreciated employer shares eligible for NUA, if ex has not taken intervening distributions. Of course, that would further increase complexity, but is at least worth checking into as she could satisfy her first 2 RMDs by the lump sum distribution if NUA is viable.