NY (917) 991-2945 | NJ (201) 771-5871 Robert@cannonwealthsolutions.com
IRA Expert,
I have a client that has $3M in a profit sharing plan (PSP). He is rolling over $1.5M of it to an IRA with me. He plans to take his RMD ($54,744) on that $1.5M after he turns 70½  on 4/3/2018 and give it directly to charities. He wants to wait until 2019 to take his RMD on the money staying in the PSP (and knows he must take it by 4/1/2019).
Is it okay to take the RMD in 2018 for some qualified money and take the RMD on other qualified money in 2019 or is the decision an all-or-nothing one (take full RMD in 2018 or 2019)?  Thank you for shedding light on this for me!
Hello Erin:
Your question doesn’t make clear whether your client rolled over the $1.5 million to the IRA by the end of 2017 or is doing so only now in 2018.
The amount of a required minimum distribution (RMD) from a retirement account is based on the balance in the account at the end of the prior year. If your client didn’t make the rollover to the IRA during 2017, then the entire $3 million was in the profit sharing plan on December 31, 2017, so an RMD on the entire $3 million must come from the profit sharing plan. The 2018 RMD must be taken prior to rolling over to an IRA. This RMD cannot be paid directly to charity as a QCD because it must be paid from the plan. QCDs only apply to IRAs, not plans.
On the other hand, if the rollover was completed last year, you have the $1.5 million in the IRA on December 31, 2017, and then separate RMDs are required from the profit-sharing plan and IRA based on the $1.5 million in each. You could satisfy the IRA RMD by doing a QCD.
Because your client reaches age 70 ½ during 2018, the RMDs for 2018 must be completed by April 1, 2019. But there is no requirement that a RMD be taken in one lump sum; it may be received through multiple distributions over this period that total to the required amount.  If separate RMDs are necessary for both the IRA and profit sharing plan, this is true for both.
I work with a business who just started a 401(k) and want to terminate it and replace it with a SIMPLE IRA for his company’s retirement plan. I understand the process of terminating the 401(k) but need to know the following:
  1. Does the SIMPLE IRA have to be active for 2 years before they can roll their 401(k) into the new SIMPLE IRA plan?
  2. Does the SIMPLE IRA have to be active for 2 years before they can roll IRAs into the new SIMPLE IRA?
  3. Once they give the 60-day notice to employees, do they have to wait 60 days before starting the SIMPLE IRA plan?
Best regards,
Hi Tim,
There is a two-year waiting period before a SIMPLE IRA can accept either a rollover from a 401(k) or a non-SIMPLE IRA. That two-year period begins with the date of the first contribution to the SIMPLE IRA.
The 60-day election period usually starts 60 days before the beginning of the plan year. However, with a new SIMPLE IRA plan, the plan can start when the election period starts as long as employees have the opportunity to make or modify elections during the 60-day period.