Application of RMD Rules to Annuities (Posted April 22, 2005) Technical Tip 143: The following question and answer were from the IRS Q&A Session at the 2003 ASPPA Annual Conference: A participant in a 401(k) plan retires the year he turns 70½, and one of the plan distribution options is an annuity provided by an insurance company group annuity contract issued to the plan. The participant elects to transfer his entire account to the group annuity option and start receiving a monthly annuity from the insurance company under the auspices of the plan. The annuity will be payable for the life of the participant and start in the year the participant turns age 70½. The annuity is issued by the insurance company in the name of the participant, but the contract holder of the annuity is the retirement plan. Does the required minimum distribution, applicable to the year he turns 70½, have to be taken from the 401(k) plan prior to the balance of the funds being transferred to the annuity, or is the annuity stream, beginning in the year he turns 70½, adequate to meet the requirements of the minimum distribution rules? Response: Yes, it is okay to transfer; the annuity stream will be adequate. View all Tips © 2009 Reish Luftman Reicher & Cohen, a Professional Corporation Important notice: Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner's situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation.