Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question:  My 73 year old client participated in a designated Roth account as part of her former employer’s 401K plan.  She left a substantial balance in the account when she retired earlier this year.  Is she required to take required minimum distributions (RMDs)?

Answer:  Yes.

The RMD rules that apply to regular 401K account balances also apply to designated Roth accounts.  If the client was not an owner of the company sponsoring the plan and retired from the plan-sponsoring employer this year, she must take an RMD from the account based on the December 31, 2012 designated Roth account balance.

The first RMD must be taken on or before April 1, 2014.

The client can avoid having to take post-2013 RMDs during her lifetime by rolling over the designated Roth account to a Roth IRA.  Roth IRAs have no RMD requirements while the taxpayer is still alive.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.