In service withdrawal
I have another client who is 82 and is still working. He has a 401a/403B. He has never taken out any RMD’s because he doesn’t have to. However, this year he did an in-service withdrawal over to an IRA.
Now that he has completed the in-service withdrawal, does he need to take an RMD for that portion only?
Permalink Submitted by Alan - IRA critic on Tue, 2021-12-07 21:25
No. There will only be a 2021 RMD if he retires before 1/1/2022. Is he working two jobs, one with a 401k and the other a 403b? Two jobs seems unlikely at age 82.
Permalink Submitted by Robert Roselli on Wed, 2021-12-08 15:11
No, he only works one job. That seems strange. Some plans allow in-service withdrawals at 59.5. If a plan allows for an in-service at 59.5, and the person is still working there at 82? He never has to take out an RMD as long as he is working there?
Permalink Submitted by Alan - IRA critic on Wed, 2021-12-08 15:33
Whichever plan is from an employer for which he no longer works, then RMDs are due. If a distribution has been made for an RMD year, it is not eligible for rollover and creates an excess IRA contribution even though the distribution counts towards his RMD. If he was working for the other employer at age 70.5, which is the year the “Still working” RMD exception is determined as well as if he is a >5% owner or not, then there will be no RMDs as long as he still works there. Sounds like he might have been rolling over the RMD in certain years, which is not permitted. As for RMD rules, they are not affected by whether a participant can take an in service distribution or not.
Permalink Submitted by Robert Roselli on Wed, 2021-12-08 15:58
He has a 401a/403B from the same employer. His plan allowed him to do an in-service withdrawal. He is still working there, the employer just allowed him to move his 401a to an IRA as an in-service withdrawal. So it sounds like no RMD is due until the year he retires.
Permalink Submitted by Alan - IRA critic on Wed, 2021-12-08 16:20
We both have been interchanging the 401 plan between 401k and 401a. If this is the same employer, the 401 is probably a defined benefit plan with a lump sum option which falls under 401a and would frequently be offered along with a 403b. If he works until January, then there are no RMDs for 2021 allowing for a full rollover to the IRA.
Permalink Submitted by Robert Roselli on Wed, 2021-12-08 18:41
We have been interchanging the 401. It’s a 401a, not 401K. Thanks for clarifying that there is no RMD.