Still Working Exception RMD Requirement in Year of Death

Submitted by Jonathan Sard on Tue, 2023-12-19 14:05

An 82-year-old client just passed away on December 10 with a 500k 401k balance and was still working for the company and was taking advantage of the still-working exception. His wife is 81 years old and has her own IRA.

If his RBD is April 1, 2024, and if the surviving spouse transfers his 401k balance to her IRA, when must/should his RMD be taken, and how is it calculated since he passed away so late in the year? Is the first RMD due in two weeks on December 31, 2023 since he passed away this year, even though it was just over a week ago?

I am not sure how to handle the timing of the transfer to his wife’s IRA and the timing and calculation of any RMDs.

Thank you for any guidance you can provide!



Submitted by David Mertz on Tue, 2023-12-19 14:29

  • There is no 2023 RMD from the 401(k) because the client died before his RBD for the plan because he died before separating from service.
  • If done in 2023, the entire 401(k) can be rolled over to his wife’s IRA and his wife’s December 31, 2023 IRA balance will be larger for the calculation of the wife’s 2024 IRA RMD.  If the rollover is delayed until 2024 there will be a 2024 beneficiary RMD to complete before rolling over the remainder.  The 2024 beneficiary RMD (if the 401(k) is not rolled over in 2023) would be larger than the increment in the 2024 IRA RMD (if  the 401(k) is rolled over in 2023) due to the use of different life-expectancy tables for the calculation of each RMD.  Whether that’s of concern depends on whether his wife intends to limit 2024 distributions to just RMDs.

Submitted by Jonathan Sard on Tue, 2023-12-19 14:39

Thank you! If the rollover is delayed until 2024, what is the formula/life expectancy factor for the RMD before the wife executes the rollover? 

Submitted by David Mertz on Tue, 2023-12-19 16:55

  • A beneficiary RMD is calculated using the Single Life Expectancy table, so the life-expectancy factor would be 9.9 for his wife reaching age 82 during 2024.
  • An owner RMD is calculated using the Uniform Lifetime table, so the life-expectancy factor would be 18.5 for his wife reaching age 82 during 2024.
  • The result is that nearly twice as much of the balance presently in the 401(k) would be required to be distributed in 2024 if the rollover is delayed until 2024.  Whether or not that is of concern depends on the total amount his wife intends to take out in 2024.

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