March 2025

Email Guidance - 401(k) RMDs are Ineligible to be Rolled Over

Q-1. As you know, Mary retired in February. Her 2025 RMD is $3,500. She rolled over $85,000 from her 401(k) into an IRA. Did she need to take an RMD for 2025 for the $85,000 she rolled over? She did not take an RMD before rolling over.

A-1. The 401(k) plan administrator should have known better. An RMD is ineligible to be directly rolled over. The 401(k) plan should have paid her the 2025 RMD and then directly rolled over the remainder.

A non-tax person may think - what does it matter as long as she takes the RMD by December 31? The IRS publishes many statistics regarding IRAs and if the entire amount is rolled over then the rolled over amount is “wrong” because it includes an RMD.

As a practical matter Mary should withdraw her 2025 RMD. Sooner is better than later.

The IRS if it knows about the situation will inform the 401(k) plan - ask that the RMD be returned from the IRA to the 401 (k) and then the 401(k) should distribute the RMD amount to the participant.

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