Transfer of Qualified Pension Plan Portion to Inherited IRA (1099-R Question)

Submitted by Chris Stevenson on Sat, 2018-03-03 10:13

Hi I inherited a nonqualified and qualified portion from a pension plan of my parent who was non-married at time of death. I am a non-spouse beneficiary. The parent was not yet retired when they died. The nonqualified amount was distributed last year as a cash distribution and issued in a 1099-misc. I also inherited a traditional IRA from that same parent as well which is now designated as an inherited ira. I instructed the custodian of the pension plan I wanted them to do a custodian to custodian transfer to that inherited IRA account from which no distributions had been taken yet. They issued a check made out to the custodian “for benefit of” me along with the account number of the inherited IRA. The new custodian deposited the check into the inherited IRA.

For this tax year I have two 1099-r’s. One is from the first RMD from the inherited IRA which I took in 2017 (which included the qualified portion transferred). The 1099-r from the RMD has the same amount for gross distribution and taxable amount and has distribution code 4. The IRA/SEP/SIMPLE box is checked.

The other 1099-r I received from the pension plan who did the custodian to custodian transfer. They list the gross distribution transferred, taxable amount in 2a is blank, and total distribution box is checked. Distribution code indicated is 4G. IRA/SEP/SIMPLE box was not checked.

I am a bit confused that I received a 1099-r from the pension plan because from reading the forum I was under the impression that this custodian to custodian transfer was not necessary to report on a 1099-r. Does it sound like everything is the way it should be? Or do I need to follow up with the pension plan? I was explicitly clear with what I wanted them to do when I instructed them doing the custodian to custodian transfer.



Submitted by Ben Meyer on Sat, 2018-03-03 16:24

The form 1099-R from the pension plan looks correct.  A direct rollover from a pension plan to an IRA is technically considered to be a distribution from the pension plan, which requires filing of a form 1099-R as you have received.  This is considered to be a “direct rollover”, not a “transfer”, even though it is a transfer in a conversational sense.  The coding of 4G indicates that it is a direct rollover between plans made due to the death of the plan participant.  The value of zero or blank in box 2a shows that the transfer is not taxable.

Submitted by Alan - IRA critic on Sat, 2018-03-03 17:09

Benn is correct. What you read about non reportable transfers was for IRA to IRA direct transfers when the IRAs are of the same type. Your transaction was from a qualified plan, not an IRA and therefore had to be reported. Since this was a direct rollover, you would report the 4G coded 1099R on line 16a of Form 1040. 16b would be blank with “rollover” entered on the line next to 16b. The inherited IRA RMD would be reported on lines 15a and 15b with the taxable amount on 15b. You should check to determine if you inherited any after tax money from non deductible contributions the parent made to the IRA. Look for Form 8606 is their former tax records or IRA file.

Submitted by Chris Stevenson on Sat, 2018-03-03 22:56

Ok thanks for clarifying that clears things up. I’ll check if they ever filed form 8606.

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