By Andy Ives, CFP®, AIF®
IRA Analyst

QUESTION:

I just wanted to verify that a 403(b) plan is not subject to the pro-rata rule when doing a Roth IRA conversion. Can you please let me know if this is correct?

Thanks!

Lynn

ANSWER:

Lynn,

You are correct. When doing a Roth IRA conversion, the pro-rata rule looks at all of a person’s traditional IRAs, SEP IRAs and SIMPLE IRAs. Accounts that the pro-rata rule does not consider are inherited IRAs, other Roth IRAs, and work plans like a 401(k) or 403(b).

QUESTION:

Is a participant in a 401(k) plan, who moves from full-time to part-time status, but continues to work with the same company that sponsors that plan, still allowed to delay their required minimum distribution (RMD)?

ANSWER:

If a 401(k) plan includes the optional design feature of the still-working exception (and most plans do), then participants can delay their first RMD until April 1 of the year after the year they separate from service. However, there is no universal definition of “still working.” Part-time status normally would qualify, but we suggest you confirm with your 401(k) plan provider to see what definition of “still working” the plan uses.

If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.

https://irahelp.com/the-pro-rata-rule-and-the-still-working-exception-todays-slott-report-mailbag/