Why does TurboTax ask for RMD for a pension?

[vanderlc]

That is what I did for my mother. Makes sense.

[MKS01]

Despite my previous comments, defined benefit plans are in fact subject to RMDs. Even though the forms for the IRS may be the same by declaring no RMD is required for these plans, I agree with the response by IsabellaG  that the withdrawal is an RMD.

[BillK]

Thank you, KarenM90, for providing a reply.  However, I think TT needs to do better in helping users know that their pension is a "defined benefit plan" that is not subject to RMD.  When I ran into this problem last year, I had no idea what a defined benefit plan was or that my pension was such a plan.  I had to do a lot of research on my pension's website to learn that it was a defined benefit plan.  They didn't provide any information about RMDs or that they weren't required for this plan.  So, I had to do a lot of research on IRS.gov to learn that RMDs don't apply here.  After that, I struggled to find a way to correctly answer TT's questions.  I didn't know that my answers weren't reported on my tax form.  And the trick of saying that all of my distributions constituted the full RMD for this plan didn't occur to me and doesn't make sense anyhow.  So, I think TT should probe further to determine if a pension is a defined benefit plan or at least to provide more information about whether an RMD applies to this pension.

[macuser_22]

This issue/question has come up EVERY year since I have been answering questions here (since 2009) and TurboTax is not going to change it.   TurboTax will ask the question blindly for ANY 1099-R if you age is 70 1/2 or more.

Virtually all pension plans, defined contribution plans, and annuities in existence today fall under section 401 of the tax code.

Required minimum distributions for defined benefit plans and annuity contracts all require RMD's after age 70 1/2.  If you receive periodic (monthly) payments from any pension plan you can be assured that the custodian of the plan is meeting the requirements so you can safely answer "yes" to the question.

The rules that the plan administrator must use to calculate the RMD as required by §401(a)(9) are defined in § 1.401(a)(9)-6) of the Internal Revenue Code (IRC).

The answer to the question does not go on your tax return, it is simply to make sure you do not owe any penalty for not taking the RMD or use it for an ineligible rollover.

The question is just to be sure that the requirement was met.

https://ttlc.intuit.com/replies/3302117

[BillK]

macuser_22,

I think you have missed some of the fine print in the IRS rules about RMDs.  KarenM90 quoted the IRS list of retirement plans that require an RMD (and she gave a link to the relevant IRS publication).  This list includes defined contribution plans but NOT defined benefit plans.  So, I think TT is flawed in not asking if my pension is a defined benefit plan and requiring me to report an RMD.  I buy TT so that it will lead me through complex tax issues such as this.  I think TT has failed me on this issue, and I think it wouldn't be so hard for the programmer's to put in more help for people like me.

[macuser_22]

Defined benefit plans are almost non-existent today.  Almost all retirement plans today are defined contribution plans (I will change my above post accordingly - then was my mistake).

But in any event you are NOT required to *report* ANY RMD.     Nothing about a RMD whatsoever goes on a tax return.   The ONLY purpose of the question is to protect you from not taking it if you are required to do so.  (And not allowing any part of a RMD to be rolled over).

I agree completely that there are some situations that the questions simply does not apply to, but this has gone to the TurboTax developers more times that I can remember, over many years, and they always decline to change anything.

[emosteve5]

The responses on this have been very confusing, so I'm not surprised that TT hears about it every year. I called my pension custodian (Prudential) and was told by the first person I talked to "Ask your professional tax advisor." No one could confirm or not that an RMD was being taken out (although another person from Prudential is supposed to call me back). If I tell TT "Yes", then I have to say how much of my annual distribution was an RMD, which I have no way of knowing.

[DaveF1006]

At this point to move on, just indicate that all of the pension distribution is an RMD amount. This will not significantly impact your tax return just as long as the IRS is reasonably sure you are taking your RMD distributions.

[macuser_22]

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@emosteve5 wrote:

The responses on this have been very confusing, so I'm not surprised that TT hears about it every year. I called my pension custodian (Prudential) and was told by the first person I talked to "Ask your professional tax advisor." No one could confirm or not that an RMD was being taken out (although another person from Prudential is supposed to call me back). If I tell TT "Yes", then I have to say how much of my annual distribution was an RMD, which I have no way of knowing.

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For one thing, there is NOTHING whatsoever on a 1099-R that identifies any distribution as a "pension" so TurboTax has no way to know what the 1099-R is for.   Rather than have a lengthy interview that would be just as confusing, TurboTax just asks the RMD question for any 1099-R when age 70 1/2 or more.   If you know that the 1099-R is for a pension then it is automatically all a RMD since that is a requirement of the pension trustee, but it is indeed a RMD.

[jhurvi]

This issue comes up every year. Most folks think that a pension payment does not require an RMD. But apparently  it does, so  why doesn't TT end this needless confusion by just giving us the information we need about how to fill out that box?

[macuser_22]

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@jhurvi wrote:

This issue comes up every year. Most folks think that a pension payment does not require an RMD. But apparently  it does, so  why doesn't TT end this needless confusion by just giving us the information we need about how to fill out that box?

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Most pensions DO require a RMD, but the computed pension amount that the payer sends you IS the RMD.     Since the pension is automatically a RMD, there is probably no need for the question IF TurboTax knew that it was a pension, and not some other type of retirement plan with an identical 1099-R.   So the question is asked to any one over age 72.

TurboTax does not know if  it is a pension - only you know that.

[jhurvi]

Thanks to the Community Comments, I now understand  how to handle this item on the form. The question that I and many others have is: why can't TT provide this same information on the form? 

[ColonelB]

The answer from the expert that the plan administrator calculates the RMD for a pension does not make sense.  My state and military retirement pensions are calculated by years of service (states) or years of service plus total participation points (military).  So the question remains, why does TT ask if the proceeds are an RMD?

[VolvoGirl]

Say all of it is the RMD. If you are 70 1/2 it will ask you if it is the RMD. Just say YES.   The pension doesn't need to calculate any RMD.  Anything your pension pays you is considered to be the RMD. Traditional pensions automatically fulfill the rules of an RMD.  

[BillK]

What VolvoGirl and others have said about whether distributions from defined benefit pensions are RMDs is true.  However, TT doesn't give the least bit of guidance on this issue, not even in the help files.  It took me days of online research and hours calling the plan administrator to find out that this type of pension is exempt from RMDs.  Then it took more time to figure out that I should answer YES to this question.  I'm not a tax expert and I buy TT to get help with technical details like this.  So, I think TT let me down by not clarifying this issue and by asking the question in a way where YES is not the obvious answer.  I don't understand why TT can't have an extra question asking whether this 1099-R is for a pension and what kind.  Even a sentence after the question text that says something to the effect of "If this 1099-R is for a defined benefit plan, this doesn't apply and you should answer YES, and click this link for additional help" would be a great help.  Because this issue comes up every year indicates that TT needs to provide more help to the affected customers.