Pension Lump sum distribution and RMD

[Sh19]

My situation is that I received a lump sum pension distribution in July, 2019.

I rolled it over to a IRA. 

I did not receive any Form1099-R or documentation from the employer if they had taken out the Federal and State taxes prior to the rollover. 

I turned 70 1/2 in December 2019.  Am I required to file for RMD now for 2019 and also 2020, 2021, etc?   Do I report the 2019 RMD if paid before April 2020 on the 2020 tax return?  

I understand there is a new law requiring RMD at age 72.  Would I be able to be grandfathered in?

Thanks

[fanfare]

you must take your 2019 RMD now, and your 2020 RMD by the end of the year.

It all goes on 2020 tax return.

[macuser_22]

The new law that changed the age took effect on Jan 1, 2020.  Anyone that turned 70 1/2 before that is still subject to the previous law that requires a 2019 RMD.

[Sh19]

I appreciate the information on the new RMD law.

The other question I had is Am I required to take RMD for the pension that I moved to an IRA for 2019.

I did not get any notification from the new financial account for 2019 but notified for 2020. 

I only had the pension middle of July 2019 and then turned 70 1/2 in December 2019.

Also if I paid the RMD before April 2020, would I file it in the 2020 return or can it be noted in 2019 by Turbo Tax.

Thanks for your prompt response.

[dmertz]

If you are no longer employed by this employer, even though the rollover might have been done by direct rollover (code G on the Form 1099-R), the lump sum pension distribution included your RMD for the pension and that portion of the distribution was not eligible for rollover to the IRA.  Since you mistakenly rolled that money over to the IRA, that money in the IRA constitutes a regular contribution to the IRA, not a rollover contribution, and is and excess contribution must be returned by an explicit return of contribution, otherwise it is subject to an excess-contribution penalty each year that it remains in the account.

Obtaining the explicit return of excess contribution from the IRA may take some explaining to the IRA custodian as to why the portion that was RMD and originally deposited as a rollover contribution does not actually constitute a rollover contribution and must be returned to you.

If this IRA did not exist prior to 2019, there is no RMD for this IRA for 2019 and only the excess contribution (assuming that you were not still employed by this employer at the end of 2019) needs to be removed.

[Sh19]

I would like clarification on the response received about the excess contribution from the IRA  that my pension was transferred to and the comment about if this IRA did not exist prior to 2019, no RMD is required for 2019.

I did not retire with my pension until July 2019 so I did not have this IRA that it was transferred to before 2019. 

Also  why would I have excess contribution and RMD at the time of the transfer if I was not 70 1/2 at the time?

I apologize for the confusion and not understanding what is being explained to me. I do appreciate all

of the help.

Thank you.

[dmertz]

First, it would be helpful to know what Forms 1099-R you received from the pension plan and the code in box 7 of each of those forms.  This will identify the type of rollover, direct or indirect.

Also, did the distribution from the pension plan in July occur before or after your separation from service in July?

The date that you reached age 70½ in 2019 does not matter.  With respect to RMDs, what matters is that you reached age 70½ on some date in 2019.  Because you reached age 70½ at some point in 2019 and you were no longer employed with this company at the end of 2019, any distribution from your pension plan in 2019 was RMD for your pension plan until the RMD is satisfied and that money was ineligible for rollover to the IRA.  Had you not separated form service with this company until after 2019, the still-working exception to taking RMDs from the plan would have applied, but this is not the case.

[Sh19]

I responded but did not getfeedback.

The 1099-R code in box 7  was G. 

I think I get it.  Would it be best to check with my employer pension plan provider to see if they took out the RMD amounts prior to transfer to the new IRA account?

Or Can I just have my new IRA provider just take out the 2019 RMD amounts and be okay? 

Thank you for the wonderful assistance and guidance provided by Turbo.

So glad to use this service. This is 1st time and have used Turbo for years.

Happy President's Day. 

[DMarkM1]

You will need to have the current IRA custodian take care of the RMD for 2019.  Code G is a direct rollover not a normal/RMD distribution.  So the old custodian did not report any RMD on that form 1099-R.  

[dmertz]

DMarkM1, your reply is incorrect unless by "take care of the RMD" you mean make return of excess contribution.  If the RMD was not distributed from the plan before any of the plan was rolled over to the IRA, the distribution rolled over to the IRA included the RMD from the plan ans is now an excess contribution to the IRA that needs to be removed by return of excess contribution.

Sh19, if the plan issued the RMD before rolling over the remainder, you would have received a separate cod 7 Form 1099-R reporting that distribution.  If you did not receive a code 7 Form 1099-R in addition to the code G Form 1099-R, you have an excess contribution in the IRA to resolve before the due date of your tax return, otherwise you'll incur a 6% excess contribution penalty each year that the excess remains in the IRA.  TurboTax does not have an explicit way to deal with this distribution error by the plan because less then the amount reported as rolled over was permitted to be rolled over.  Unfortunately, by the plan making this distribution error, the amount reported on the code G Form 1099-R does include the RMD from the plan even though it should not have been included in the rollover.

[DMarkM1]

As DMertz mentions above, since the RMD was not done before the rollover you and the current custodian must work the return of excess contribution.   

[Sh19]

Thank you again for the support you and the Turbo team have provided me. I have already sent EM to my financial advisor.