Pension RMD
My brother is retired, he turned 70 in November 2016 and he has not yet begun collecting his pension.
He needs to check to see if his pension is continuing to grow. Isn’t there usually a deadline after which a pension stops growing?
Are pensions subject to Required Minimum Distributions?
If so, are separate distributions required from his pension, 401(k) and IRA, rather than withdrawing the correct total amount from any of the three accounts?
Thank you.
Bill Briner
Permalink Submitted by Alan - IRA critic on Wed, 2017-01-25 16:14
Pensions may or may not offer a lump sum option that can be rolled over. Otherwise, distributions from the pension must meet the RMD requirements of non increasing payments once the payouts begin. Most pensions are paid out using an individual or joint life expectancy which meets the IRS RMD requirements meaning that the entire payment is deemed to be the RMD. If the pension payments begin prior to 70.5, the required beginning date is deemed to be moved up to the date of the first payment and that eliminates any of the payouts from being eligible for rollover..
Permalink Submitted by Bill Briner on Sun, 2017-12-24 06:56
My brother was 71 years old on November 9, 2017. He has not yet begun collecting his pension, but his pension Benefit Commencement Date is January 1, 2018. He can take a lump sum distribution of $500,000 or an annuity of $4522.90 per month. He must take his year 2017 Required Minimum Distributions from his 401(k) and Traditional IRA by April 1, 2018 and his year 2018 401(k) and TIRA RMD’s by December 31, 2018, but what are the 2017 and 2018 RMD rules related to his pension?
Permalink Submitted by Alan - IRA critic on Sun, 2017-12-24 21:01
If he takes the monthly pension, the annual distributions received will meet his RMD requirements for 2017 and 2018. However, if he elects the LSD the pension will be treated as an individual account such as the 401k. There would be a 2017 RMD due by 4/1/2018 and the 2018 RMD also due on the earliest of the date he either does an IRA direct rollover or 12/31/2018. Of course, he should confirm this with the plan administrator.