RMD
401k participant, age 75, using “still working” exception takes an in-service distribution & rolls his/her total account balance into a T-IRA in early 2023. Later in the same year he/she retires from the employer sponsoring the 401k plan.
I believe the participant was required to take a 401(k) minimum distribution prior to the in-service distribution/IRA rollover…Correct? Now the assets (including the RMD amount that should have but wasn’t taken from the 401k) is in the IRA. Since RMDs can’t be rollover over – I would think he has an excess IRA contribution?
Does this sound correct?
Thank you in advance.
Permalink Submitted by Alan - IRA critic on Tue, 2023-12-19 20:02
Yes, there is an excess IRA contribution to the extent that participant has not made an eligible contribution to a TIRA or Roth IRA. The plan RMD has been satisfied and must be reported as a taxable amount on line 5 of Form 1040. This will not sync up with the 1099R if only a single G coded 1099R is issued for the full amount. The amount of the excess contribution to the TIRA must be treated as an excess regular contribution and withdrawn with allocated earnings. SInce the amount of the RMD would have been taxable anyway, this is more a matter of reporting hassles including the distribution of the IRA excess.