IRA back into 401k to avoid RMD | Ed Slott and Company, LLC

IRA back into 401k to avoid RMD

Individual is 70.5 in 2014. They are still working and plan to work at least 2 more years (Public company, so ownership rules are not an issue). Assuming that their current 401k plan allows them to roll the IRA back into it; will they still have to take a 2014 RMD since the funds were in an IRA 12/31/13?

Also, once he does retire, does he need to take an RMD in the year he retires or the following year?

2014 is the first RMD year for the IRA, although the first year RMD can be deferred to as late as 4/1/2015. But the distribution from the IRA to the 401k IF the 401k will accept the rollover requires that the 2014 IRA RMD be distributed and not rolled into the 401k. After the remaining IRA funds are in the 401k, there will be no further RMDs required until the individual retires from the 401k employer. The year of this retirement will then become the first RMD distribution year for the 401k plan which now also contains the IRA funds. That RMD can also be deferred to as late as 4/1 of the year following the year of retirement. However, if the 401k funds are rolled over to an IRA in the year of retirement, the RMD for the 401k plan cannot be included in the IRA rollover. In summary, the IRA funds can be shielded from RMDs by rolling them into the plan, but not for the year of the rollover (2014).

 

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