Instructions for excess accumulation in qualified plan (Not An IRA)

Forum|Forum|2 years ago
January 14, 2024
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According to Form 5329,
I can avoid penalty on missed 401k distribution,
if the amount distributed from IRAs (line 53)

exceeds the amount of RMD which is IRA RMD plus 401k RMD. (line 52)

Both lines say see instructions, but 5329 instructions say nothing about plans other than IRAs.

Bsch4477

Level 15

Interesting omission but the section heading does refer to any qualified retirement plan.

dmertz

Level 15

"I can avoid penalty on missed 401k distribution, if the amount distributed from IRAs (line 53)

exceeds the amount of RMD which is IRA RMD plus 401k RMD. (line 52)"

False. A distribution from an IRA can never be used to satisfy an RMD for a 401(k). The RMD for the 401(k) can only be satisfied with a distribution from the 401(k). To correct a missed RMD for the 401(k) you must take the late distribution from the 401(k). This will mean taking from the 401(k) in a single year both the late RMD for the past year and the RMD for the current year, and both will appear as income on the tax return for the current year.

Note that because an RMD for a 401(k) can only be satisfied from that RMD, the plan knows when an RMD is required for a particular year and the plan risks disqualification if it does not force out an RMD by the deadline for making the RMD, so it's odd that he 401(k) plan did not make the distribution automatically to avoid a missed RMD.

fanfareAuthor

Level 15

OK @dmertz

yes I remembered that rule but it was a long time ago that I saw it.

My question, unspoken, was, where are the instructions to be consulted for the proper filing in such a situation.

Regards,

dmertz

Level 15

Ah yes, I forgot that in the draft 2023 instructions they removed the instructions for requesting a waiver. There is not yet any evidence that they will refuse to grant a waiver if requested as described in the 2022 instructions and 2023 TurboTax still includes the ability to request such a waiver..

The latest draft (January 8, 2024) of the instructions for 2023 Form 5329 have the request-for-waiver instructions added back in.