Minimum distributions | Ed Slott and Company, LLC

Minimum distributions

I have a professor/client who retired from his NJ community college in 5/07. He will be 72 in November 07. He rolled over his pension funds(401a/403b) into a personal IRA roll-over account 5/07. Does he need to take a minimum distribution from the IRA for the calendar year 2007; there is no "prior year-2006" balance in his IRA. Thanks Jeanne Weaver

The plan administrator should have withheld the RMD for 2007 from the transfer since 2007 will be his first RMD distribution year. I would re check with the professor to see if this was done or was possibly distributed prior to the rollover before the plan knew he was retiring or as part of their procedures. The entire balance should NOT have reached his IRA, but if it did, then he is going to have to take the RMD from the IRA account. I would start with the plan administrator before taking further action.

Alan - since the RMD was not rollover-eligible, and if the RMD did not come out first, would the earnings on the RMD have to come out of the IRA as well? Or is this nit-picking?

Yes, because the contribution of an RMD to the IRA that was not roll over eligible must be corrected by the excess contribution procedures, therefore an earning computation must be made. The worksheet in Pub 590, p 30 could be used if for some reason the IRA custodian will not do the calculation. The custodian will have to know the correct figure for the RMD that is excess. Unlikely, but it is also possible that the employer plan required RMDs at 70.5 and that the "still working" deferral did not apply. In that case, the RMDs were already coming out. This is unlikely, but am trying to figure how/why the plan may have failed to withhold the RMD.

Ignorance. I have received many erroneous pieces of advice from Plan Administrators and Employers alike.

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