RMD from 401k as spouse
I posted on some basics of my question in a past post but now have more specifics after speaking with plan.
401k registration has been updated in name of widow(in 2024). 2024 RMD was paid to widow, husband’s amount. 2025 RMD calc at 401k plan is using Single Life Table, essentially doubling the RMD factor. Spouse notified plan she wanted to be treated as a participant for RMD calculation purposes and again recently. We made the plan aware of Sec 327 of Secure Act and requested they update factor to Uniform Table for 2025 RMD calculation. After a few weeks of back and forth the plan said the don’t/won’t recalculate but to speak with their tax advisor. I don’t feel the plan disagrees but since plan may not have adopted the regs they will only send the RMD based on Single Life Factor.
To provide some specifics, the Single Life RMD is $103,979 vs. Uniform RMD of $57,652 so a significant amount at a single tax rate and has no need for the funds. Her hope is to roll back the excess as a 60 day rollover then note on tax return.
Our worry is the IRS not allowing the 60 day rollover then charging her an excess penalty but regs/laws seem clear she can roll back the excess since plan refused to correct. She has documentation of calls to plan, the plan will not put anything in writing, plan keeps using the hold harmless of contact tax advisor.
Do you see any issues with the 60 day rollover of the excess??
Permalink Submitted by Alan - IRA critic on Mon, 2025-10-06 11:32
As long as the intent to be treated as the participant was made to the plan and documented, if the plan declines to accept the election, the statutory RMD is limited to the correct Uniform Table divisor which is contained in the proposed Sec 327 IRS Regs should the SS be under age 73.
Amount distributed in excess of the correct Uniform Table statutory RMD are eligible for rollover to her own IRA within 60 days of distribution.
Of course, withholding by the plan is probably excessive as well, and the SS might need to use much of the funds received to complete the rollover, then recover the excessive withholding when filing.
Permalink Submitted by BruceM on Mon, 2025-10-06 12:07
Just curious….
is there a reason the widow doesn’t roll this inherited 401(k) to an inherited IRA where she should have full control?
Permalink Submitted by MIKE KRUCHTEN on Mon, 2025-10-06 12:24
The widow is processing a full rollover once the 2025 RMD is removed. She is moving to her own IRA, not a beneficiary IRA to begin using the Uniform table vs Single Life. Both were/are over 73 years old and doesn’t need the RMD funds so wanting to receive least amount of RMD funds possible then process partial Roth conversion in future years for beneficiary planning.
Permalink Submitted by MIKE KRUCHTEN on Mon, 2025-10-06 14:29
In regards to NUA, there are company shares with a market value of 250,000 and basis of $20,000. The plan will facilitate the in-kind delivery and seemed to confirm these shares could receive NUA treatment but plan would not separate gain vs basis she would have to at tax reporting time. Because she was not original participant was the explanation provided.
Does the NUA tax benefit continue to widow/spouse since account still under 401k structure?
Permalink Submitted by Alan - IRA critic on Mon, 2025-10-06 14:55
NUA distributions can be made to a plan beneficiary, but they are subject to the same qualified LSD requirements as the participant. If the plan 2024 RMD was paid to the surviving spouse, that would be an intervening distribution, which is a distribution after the triggering event (death of spouse) and before the LSD year. As such, the plan should not treat the 2025 LSD as qualified for NUA purposes nor issue a 1099R showing cost basis and NUA amounts if the shares were distributed out to a taxable brokerage account after an intervening distribution.
That’s harsh when applied to the year of death RMD, but if the participant had lived his own RMDs would also have been intervening distributions if taken in a year after the triggering event (say 59.5) and prior to the LSD year.
The plan may not be aware of this, but it also makes no sense that the plan cannot determine the cost basis and NUA per share from their records.
Permalink Submitted by Alan - IRA critic on Mon, 2025-10-06 12:18
Best option here depends on knowing the age of the surviving spouse, but either a direct rollover to an inherited IRA or owned IRA must be preceded by the 401k beneficiary RMD for 2025.