Question: Mom received two RMD letters one for her Roth IRA and one for her Roth 401k. As these are both Roth’s isn’t she exempt from mandatory distributions? Regardless she hasn’t owned the accounts for at least 5 years.

Answer: Regarding the RMD letters, your Mom does NOT need to take an RMD from her Roth IRA.  They centralized the process of sending out RMD letters this year, and someone erroneously failed to delete the Roth IRAs from the list.  I apologize for the error made by Quest IRA, Inc.  The only time you ever have to take an RMD from a Roth IRA is if the Roth IRA is an inherited IRA.

However, if your Mom has reached age 70 ½ she DOES have to take an RMD from her Roth 401(k).  Nothing in the 401(k) regulations exempts Roth 401(k)s from the mandatory distribution requirements.  As a 5% or more owner of the company, she cannot defer distributions as she could if she was just a worker bee.  The fact that she has not met the 5 year requirement to make it a qualified distribution doesn’t change the distribution requirements.  Essentially, her contributions and the profits will come out pro rata, so that if 75% of the money in her Roth 401(k) is her contribution and 25% is profit, then the taxable portion of her distribution will be 25% until she meets the 5 year requirement.

Let me know if you have any questions. Have a great day!

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