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miltf
Level 3

When do I take my first RMD from a pension lump sum rollover to an IRA?

I turned 70 1/2 in 2018.  Subsequently I had a pension from my former employer rolled over to an IRA in 2019.  (The rollover should actually be complete tomorrow.)  When do I need to take my first RMD?  I was told that it would be in 2020 based on the value of the IRA on Dec, 31, 2019.  But I was also told by someone else  that I needed to take an RMD for 2018 since that is the year that I turned 70 1/2.  Which is correct?

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Accepted Solutions
dmertz
Level 15

When do I take my first RMD from a pension lump sum rollover to an IRA?

The pension plan should have forced you to take the pension-plan RMD before rolling over the remainder.

If your 2018 RMD from the pension plan was not satisfied before or coincident with rolling over the pension plan to the IRA, the distribution from the pension plan included your pension-plan RMD and you impermissibly rolled the pension-plan RMD over to the IRA because RMDs are not eligible for rollover.  This results in an excess contribution to the IRA that is subject to penalty unless resolved.  You have until the due date of your 2018 tax return, including extensions, to obtain a return of the excess contribution from your traditional IRA.

What is the code in box 7 of the Form 1099-R from the pension plan?

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49 Replies
macuser_22
Level 15

When do I take my first RMD from a pension lump sum rollover to an IRA?

Please explain how you had the "pension" rolled to an IRA?    Were you receiving monthly payments from the pension in 2018?    Was the "pension" actually a 401(k) plan?

(In most cased a pension, once established, cannot become a lump sum distribution that can be rolled into an IRA.)
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
macuser_22
Level 15

When do I take my first RMD from a pension lump sum rollover to an IRA?

To add further:  A retirement account subject to RMD's, if eligible to be rolled into an IRA, cannot be rolled over until the RMD has been satisfied.   No part of an RMD is eligible for rollover and the RMD must be satisfied first.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
miltf
Level 3

When do I take my first RMD from a pension lump sum rollover to an IRA?

No, I wasn't receiving monthly payments from the pension. I chose to receive the pension as a lump sum rather than an annuity, so the lump sum amount was distributed into an IRA at Fidelity as of this month (should be there tomorrow.)
dmertz
Level 15

When do I take my first RMD from a pension lump sum rollover to an IRA?

The pension plan should have forced you to take the pension-plan RMD before rolling over the remainder.

If your 2018 RMD from the pension plan was not satisfied before or coincident with rolling over the pension plan to the IRA, the distribution from the pension plan included your pension-plan RMD and you impermissibly rolled the pension-plan RMD over to the IRA because RMDs are not eligible for rollover.  This results in an excess contribution to the IRA that is subject to penalty unless resolved.  You have until the due date of your 2018 tax return, including extensions, to obtain a return of the excess contribution from your traditional IRA.

What is the code in box 7 of the Form 1099-R from the pension plan?

miltf
Level 3

When do I take my first RMD from a pension lump sum rollover to an IRA?

There was no 2018 1099-R from the pension plan since I didn't initiate the pension until 2019.
macuser_22
Level 15

When do I take my first RMD from a pension lump sum rollover to an IRA?

@dmertz - 2018 or 2019 RMD.   OP said turned 70 1/2 in 2018 but not pension payments ever received and then had a lump sum pension rolled over in 2019.   Would there be a 2018 RMD if not receiving pension payments until 2019? It seems strange to be for this to be a "pension" that did not start periodic payments at retirement and then allowed a lump sum payout.   Perhaps this is actually a 401(k) plan and not a pension.

The OP said the "rollover" is in progress so there won't be any 1099-R until next January.  I would suggest that the OP discuss this with the pension plan administrator to see if the RMD was withheld from the rollover and they will send the OP a separate check for the 2019 RMD amount.   

If they did not take out the RMD, then the OP probably need to have the new IRA custodian distribute the RMD amount of the pension, not the IRA, as a "return of excess contribution" so that it will not be subject to penalty.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
miltf
Level 3

When do I take my first RMD from a pension lump sum rollover to an IRA?

This is a pension,  not a 401(k).  I did discuss it with the pension plan administrators.  At first I was told that there would be an RMD withheld that would be paid by check.  Then later I was told by another representative that the first RMD would be due in 2020 based on the IRA value at the end of 2019.  Presumably, there is no known value for the pension at the end of 2018 since the lump sum is calculated based upon my age, interest rates, etc  at the time that I actually requested the payout (which was in 2019).
dmertz
Level 15

When do I take my first RMD from a pension lump sum rollover to an IRA?

Both defined contribution plans and defined benefit plans (pensions) are subject to the same § 401(a)(9) RMD requirements.  The pension plan still had an RMD requirement for 2018 unless you were still working for the company until at least early 2019.  <a rel="nofollow" target="_blank" href="https://www.law.cornell.edu/cfr/text/26/1.401(a)(9)-6">https://www.law.cornell.edu/cfr/text/26/1.401...>
dmertz
Level 15

When do I take my first RMD from a pension lump sum rollover to an IRA?

There was also an RMD from the pension for 2019 that was required to be satisfied before doing the rollover, so *two* RMD amounts have been impermissibly rolled over, the 2018 RMD and the 2019 RMD from the pension.
dmertz
Level 15

When do I take my first RMD from a pension lump sum rollover to an IRA?

The pension obviously had a value, otherwise there would have been nothing to roll over to an IRA.
miltf
Level 3

When do I take my first RMD from a pension lump sum rollover to an IRA?

The pension had a value, but no one knew the actual exact amount until it was calculated in 2019  so how would anyone know what the RMD would be for 2018?
macuser_22
Level 15

When do I take my first RMD from a pension lump sum rollover to an IRA?

It should have been calculated by the account trustee in the year that you turned 70 1/2 or retired, whichever was later, using the method described in the IRC, the same as any other pension.  The trustee should know how to calculate RMD's - they must do it for all pensions that they manage.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
miltf
Level 3

When do I take my first RMD from a pension lump sum rollover to an IRA?

But the value depends upon the actual date that I take the lump sum, so how would they know the value ahead of time?  
dmertz
Level 15

When do I take my first RMD from a pension lump sum rollover to an IRA?

I would imagine that the value of the pension for the purpose of calculating the 2018 RMD under these circumstances would be the amount that would have been be rolled over to the IRA had the pension buyout occurred on December 31, 2017.  Similarly, the RMD for 2018 would be calculated on the value of the pension buyout had it occurred on December 31, 2018.  However, I don't think there is any specific IRS guidance on this.
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