Roth 401(k) – Required Minimum Distributions

Submitted by Arminta Stacy McKelvey on Tue, 2022-12-06 22:35

We were recently told that, for a 401(k) that has both tax-deferred and Roth balances in the plan, a participant can take the RMD and control which portion comes from Roth and which portion comes from tax-deferred to mitigate taxable income considerations while the participant is still earning income. Is this accurate or do you have to assign the taxable vs. Roth distribution proportionally?

NOTE: This was in the concept of a Solo 401(k) plan for a self-employed individual.

Thank you!



Submitted by Alan - IRA critic on Tue, 2022-12-06 23:59

  • Yes, this is correct and based on IRS Reg 1.401(a)(9)-8, QA #2, which allows aggregation of RMDs over various sub accounts.  Some specific plans may not allow aggregation, but a solo K would not likely include a provision not allowing aggregation.
  • Note that even if aggregation is allowed, it would be preferable to roll out the 401k balance to a Roth IRA before RMDs begin (prior to age 72) or before the end of each year after the RMD has been satisfied to reduce the Roth balance and therefore the following year RMD. Once the Roth balance has been rolled into a Roth IRA, there are no RMDs, which is preferable to the aggregation flexibility. 

Submitted by Arminta Stacy McKelvey on Wed, 2022-12-07 22:02

Thank you for the response; please clarify this one point for me: “Once the Roth balance has been rolled into a Roth IRA, there are no RMDs, which is preferable to the aggregation flexibility.” Is there not still an RMD requirement if the particiant has a balance in the pre-tax portion of the plan and is more than 5% owner of the business (as the case would be for a Solo plan)?

Submitted by Alan - IRA critic on Wed, 2022-12-07 23:13

Yes, there would still be an RMD based on the remaining pre tax balance, but that total RMD would be lower if the Roth dollars were rolled into a Roth IRA where there are no RMDs, and Roth assets could be preserved. The pre tax balance could also be reduced by a rollover but that would not lower RMDs, they would just come out of the rollover IRA instead. All plan RMDs must be completed for the year before any rollovers of additional amounts to an IRA are done.

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