Transfer of old PSP
A 74 year old retired client just notified me that he has $40,000 worth of mutual funds held directly at a fund company titled in the name of his profit sharing plan that has been terminated for more than 10 years. He was the sole participant in the profit sharing plan. Any suggestions on how to move this account to an IRA?
Thank you!
Permalink Submitted by Alan - IRA critic on Tue, 2014-04-08 16:06
He could just do a direct rollover to an IRA, but he now has delinquest RMDs from that plan. Those RMDs should be calculated and distribututed to him, and not be included in the direct rollover. The check should be made out to his IRA custodian FBO (name of client). It can be mailed to him and he can forward it to his IRA custodian. This avoids mandatory withholding. He could add this to an existing IRA or open a new one if he wants. He also needs to file a 5329 for each year the RMD was missed and request waiver of the penalty. His first year RMD was not delinquent until the year following the year he turned 70.5, so that year’s waiver request would include the first two years RMDs.
Permalink Submitted by Jonathan Sard on Tue, 2014-04-08 16:22
How would one calculate the RMDs since it has beens a few years and the ending year account balance would have been different had the RMDs been taken?
Permalink Submitted by Alan - IRA critic on Tue, 2014-04-08 17:49
The end of year balance is not adjusted for RMDs that were not taken. The actual 12/31 balance is used to determine the delinquent RMDs.
Permalink Submitted by Jonathan Sard on Tue, 2014-04-08 18:09
So I take the same 12/31/2013 year end balance and divide it by his life expectancy at the age of 72, 73 and 74? I then take a lump sum withdrawal by adding those three numbers together? He was born December 26, 1939.
Permalink Submitted by Alan - IRA critic on Tue, 2014-04-08 18:27
No, you still must use the actual year end balance for each of those years. But there is no adjustment of those balances for RMDs not taken. Figure each RMD using the age attained at the end of that year and add them together for the total RMD.