After tax contributions and RMDs

Submitted by mae liu on Tue, 2023-08-15 21:58

I recently consolidated my retirement accounts. During the phone discussion with my 403B administrator, I was told that my pre-tax contributions and any gains would rollover to my IRA. After tax contributions would be sent to my personal bank account. I had assumed that I would take my RMD for this year after the rollover and before the end of this year.
After these transactions were executed, my current IRA custodian, mentioned that it was customary to take the RMD before the rollover. In a follow up conversation with the 403B administrator, I was told that the after tax money was considered my RMD.

The question I would like answered/discussed is whether this is in compliance with the RMD requirement or will I have to take another distribution this year. Another aspect is whether, I should have been offered the option to do this? Could I have put the after tax money into my Roth IRA? Another wrinkle is my calculated RMD based on YE 2022 balance is less than the actual money I received which in turn is less than what my records say is sum of my after tax contributions for the years I was employed.

I appreciate any input and feedback.



Submitted by Alan - IRA critic on Tue, 2023-08-15 23:00

  • If this is an RMD distribution year for your 403b, the first distribution from the plan is allocated to your RMD. Most likely the pre tax amount and the after tax balance were distributed on the same day. But if not, the first distribution would apply to your RMD, and if that was the pre tax balance that was directly rolled over, you would have to report treat the RMD amount as an excess contribution to your TIRA and remove it. The after tax amount would then be available for a 60 day rollover to your Roth IRA tax free. Therefore, determining which distribution was done first determines whether you will owe taxes on your RMD or not, but your RMD has been satisfied. 
  • It’s not clear if you had anticipated these RMD rules and preferred that the pre tax and after tax distributions were done in a certain order, that the plan would have complied with your request. I suspect that most plans would not have taken the time to present you with these options before acting. 
  • If you find that these distributions were made at the same time, there is no reason that you could not treat the one you wanted as your RMD, but if that was the pre tax amount you would have an excess IRA contribution to correct. Another option if the after tax contribution was first and therefore included your tax free RMD, you could use those funds to pay the tax on an incremental conversion from your TIRA to Roth and end up with the same outcome. You would have to complete your IRA RMDs before converting however. 
  • If your RMD is less than the amount distributed, any excess of your RMD can be rolled over. I assume that the earnings on your after tax contributions over the years were included in the pre tax direct rollover.

Submitted by mae liu on Wed, 2023-08-16 15:01

Thank you.  I feel more at ease about having satisfied my RMD for this year.  It is a case of poor/lack of communication by the 403b administrator at the time of and subsequent to the requested rollover regarding the status and options for the RMD that precipitated my concerns.  

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