I'm 71 years old. I currently work for two employers, and I have a 401(k) at each company. May I keep postponing annual required minimum distributions (RMDs) if I transfer my 401(k) from Employer A's plan to Employer B's plan, then stop working for Employer A, and keep working for Employer B?
It depends on the rules of the two 401(k) plans.
You're not legally required to take RMDs from your current employer's 401(k) until April 1 of the calendar year after you leave the job, unless you and/or members of your family own more than 5% of the company employing you. But nothing in the law prevents a 401(k) plan from requiring participants to take distributions after reaching the plan's retirement age. That's usually 65.
You should be able to postpone RMDs from both plans, as long as you work for both companies, provided both permit current employees to delay RMDs and you don't own more than 5% of either company, says Ed Slott, a Rockville Centre tax accountant.
What about your rollover idea? The law allows 401(k) plans to accept rollovers from other plans, but doesn't require them to do so, Slott says. Your strategy will only work if Employer B's plan accepts rollovers, and Employer A lets current employees roll their 401(k) accounts into other companies' plans. But if Employer A requires you to quit your job before you roll your money to Employer B, you'll have to take an annual RMD. "Once you separate from the first company, you'll have an RMD for that year. That RMD cannot be rolled over," says Slott. "You must take it before rolling over the remaining balance to the second plan."
The bottom line
Every 401(k) sets its own rules. Those rules can't be more permissive than the law, but they can be less permissive.
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