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Level 1

If a retirement account is rolled over to an IRA prior to turning 70 1/2 does RMD have to be withheld at the time of rollover?

i received annuity payments from the IRA to which the retirement account was rolled over. these payments almost equal the RMD that would have been required from the original account if it had not been rolled over. Do these payments count as RMD for 2015.

3 Replies
Level 20

If a retirement account is rolled over to an IRA prior to turning 70 1/2 does RMD have to be withheld at the time of rollover?

Was the original account an account in a qualified retirement plan or was it an IRA?  If it was an IRA, was the money moved to the annuity IRA by trustee-to-trustee transfer?

Did you receive a Form 1099-R for the movement of the money from the original account to the annuity IRA?  If so, what is the code in box 7?  Is the IRA/SEP/SIMPLE box marked?
Level 1

If a retirement account is rolled over to an IRA prior to turning 70 1/2 does RMD have to be withheld at the time of rollover?

Yes, it was a qualified retirement plan.  No it was not an IRA.
I did receive a form 1099-R. The code in box 7 is "G". The IRA/SEP/SIMPLE is not marked.  In 2b the Total distribution box is marked.  No taxes were withheld at the time because it was rolled over to a Traditional IRA.
The account no longer exists.  I was told by the retirement plan personnel that RMD was not withheld or otherwise addressed by them because I was not yet 70 1/2 at the time of the rollover.  I did not receive a Form 5498 from them.
Level 20

If a retirement account is rolled over to an IRA prior to turning 70 1/2 does RMD have to be withheld at the time of rollover?

You question seems to imply that you were subject to an RMD from the qualified retirement plan for 2015.  To confirm that, did you reach age 70½ in 2015?  Were you no longer employed with the company, were more than 5% owner of the company, or the qualified retirement plan requires all employees to begin RMDs in the year the employee reaches age 70½?

Assuming that you were required to take a RMD from the qualified plan for 2015, the RMD was required to have been distributed before the rollover was performed, even if you would not have reached age 70½ until later in 2015, because the first amounts distributed from your qualified retirement plan in 2015 were considered to be RMD until the RMD is satisfied.  Even though the rollover was a direct rollover, it was still a distribution from the qualified retirement plan.

Amounts that are RMD are not eligible for rollover.  The amount of your qualified retirement plan RMD deposited in the IRA is now an excess regular contribution to the IRA to the extent that it exceeds your eligibility to make a regular contribution to the IRA.  You'll need to work with the IRA custodian to make a return of contribution of any portion of the amount that was ineligible to be rolled over or treated as a new, regular contribution.  If you will be treating any portion as a regular contribution, you'll need to get the IRA custodian to correct their 2015 Form 5498 to show in box 1 the portion that is regular contribution and to reduce the amount in box 2 by the amount moved to box 1, with the rest being distributed to you as a return of contribution reported on a code P 2016 Form 1099-R.