avoid RMD on 401k account
Client ‘s employer was acquired .Employment ended on 11/30/2023. Client turned 73 in November 2023. He is working for the acquiring company and enrolled in their 401 k in Jan 2024.
Does he have to take an RMD on the 401 k of former employer for 2023 before making a direct transfer of assets to the new employers 401 k ?
Would he be exempt from the 401 k RMD in 2024 after the transfer since he s working for the new employer ?
Would he have to make an RMD on the prior plan balance for 2024 since it would not be transferred to the new plan until February 2024 ?
Thank you
Permalink Submitted by Alan - IRA critic on Mon, 2024-01-15 23:41
Maybe not. What official notification about this has been provided to affected staff? See the following article:
Termination rulesManagers also need to consider rules under Sec. 401(k) that prohibit the termination of a 401(k) plan after a merger if there is an “alternative defined contribution plan” sponsored by the acquiring or surviving company (Regs. Sec. 1.401(k)-1(d)). If both plans continue to exist after the merger, employee deferrals and any qualified nonelective contribution balances in the 401(k) plan that are targeted for termination must be merged with the “alternative defined contribution plan” of the surviving company.Any other contribution sources, such as matching or profit sharing contributions, can be distributed. This treatment is triggered in a merger and stock sale where both parties have plans and one of them is a defined contribution plan such as a 401(k) plan.Once the date of merger occurs, the seller’s 401(k) plan cannot be terminated without being merged into the acquiring company’s deferred compensation plan. When there are administrative issues regarding the acquiring company’s plan or a general desire to terminate the 401(k) plan — or that portion of the 401(k) plan in the case of a spinoff — these concerns should be communicated to the seller so the plan is terminated before the transaction date.Plan assets do not need to be distributed before the transaction. Cessation of benefit accruals, however, must be terminated by a board resolution. Participants must be provided with a notice of termination at least 60 days, but no more than 90 days, before the termination date.
Permalink Submitted by Charles Abboud on Sun, 2024-01-21 19:33
Alan,thank you for your response. In this case the sellers plan continues. It was a stock sale of a wholly owned subsidiary.No plan termination .The plan sponsor did not provide any notification about the impact to participants.Thanks