401k – still working, RMD in year of death?

Submitted by Robert Vashko on Tue, 2022-10-11 13:41

I know that if you are still participating in a 401k after age 72, and are not a 5% owner or greater in the business, you are exempt from RMDs until you retire.

But is death while still working the same thing as retirement?

Suppose participant was 75 and still working when they passed in 2022, leaving 401k to surviving spouse.

Is there an RMD due no later than April 1, 2023, for the account? If so, SS should take that RMD out (since it’s not an eligible rollover amount) before moving the money into an IRA in her own name, correct?



Submitted by Alan - IRA critic on Tue, 2022-10-11 14:55

  • Death and retirement are treated differently. Retirement after 72 creates an RMD distribution year in the year of retirement. However, if an employee passes at 72 or after while still working and is not a >5% owner, because they passed prior to RBD, there will be no RMD due for the year of death. The surviving spouse can do the spousal rollover of the entire balance in the year of death. After that year. there would be a beneficiary RMD due for the spouse before rolling to an IRA because deceased spouse would be over 72.
  • LIkewise, with an IRA, death prior to RBD will result in no RMD due for that year and the entire balance can be rolled over to spouse’s own IRA.
  • There are a few qualified plans that require RMDs to start for all employees at 72. These are plan RMDs, not statutory RMDs. Therefore, the plan would distribute the plan RMD to the surviving spouse in the situation you posted, but because this is not a statutory RMD (required per IRS rules), the surviving spouse can still roll it over to an IRA but may have to replace any withholding taken out to complete the rollover.

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