QCD from a PSP?

Submitted by Emily Ciotoli on Fri, 2016-08-26 14:19

Hello,

I have a client who has a profit sharing plan where he is the only one contributing and withdrawing from the plan. Is the 2015 QCD RMD allowance eligible for participants of PSPs, too? What if there is a 401(k) provision within the plan document?

Thank you!



Submitted by Alan - IRA critic on Fri, 2016-08-26 19:48

Only an IRA can distribute a QCD, a PSP cannot. Taxpayer would have to do an IRA rollover, but would have to take the plan RMD before rolling over additional amounts. If he has no prior IRA balance, he does not have an IRA RMD for the year of this rollover, but for the following year he would have an IRA RMD due and could do a QCD to offset that IRA RMD income. In other words, if he has no prior IRA, use of the QCD would have to wait until 2017.

Submitted by Arthur Dicker on Mon, 2016-08-29 16:03

Suppose client has a 200,000 SEP-IRA and a 100,000 traditional IRA.  Client is over 70-1/2.  Can he combine the RMDs for both accounts and take them both as a QCD from the traditional IRA?I know you cannot do a QCD from a SEP-IRA.  But can you satisfy the RMD for the SEP-IRA as a QCD from a traditional IRA? Thank you,

Submitted by Alan - IRA critic on Mon, 2016-08-29 18:03

Yes, the RMDs can be aggregated. The QCD check must be distributed from the TIRA. Note that a QCD can also be done from a SEP or SIMPLE IRA as long as neither are “on-going” which means that employer contributions were made in the plan year ending during the taxpayer’s tax year.

Submitted by Arthur Dicker on Mon, 2016-08-29 18:26

Thank you, Alan.  Just so I understand your comment, are you saying that if the employer does not make a contribution to the SEP for 2016, then the employee can take his 2016 RMD from the SEP-IRA as a QCD?  What is the authority for this statement?  I do not see it in IRC sec. 408(d)(8). 

Submitted by Alan - IRA critic on Mon, 2016-08-29 18:34

Notice 2007-7, Q 36:

Q-36.  Is the exclusion for qualified charitable distributions available for distributions from any type of IRA?  A-36.  Generally, the exclusion for qualified charitable distributions is available for distributions from any type of IRA (including a Roth IRA described in § 408A and a deemed IRA described in § 408(q)) that is neither an ongoing SEP IRA described in § 408(k) nor an ongoing SIMPLE IRA described in § 408(p).  For this purpose, a SEP IRA or a SIMPLE IRA is treated as ongoing if it is maintained under an employer arrangement under which an employer contribution is made for the plan year ending with or within the IRA owner’s taxable year in which the charitable contributions would be made.

Submitted by Arthur Dicker on Mon, 2016-08-29 20:00

Thank you, Alan!

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