Lump Sum Pension Rollover – RMDs Required
I plan to take a lump sum pension distribution, effective August 1, 2018 – rolling it over into an IRA. I am 70 1/2 years old. What are the rules for calculating the required minimum distribution on the lump sum? Since RMDs are based on retirement account holdings as of 12/31/17, is anything required to be withheld? If yes, how much? Can you direct me to an IRS ruling on the subject of required minimum distributions for lump sum pension rollovers?
Permalink Submitted by Alan - IRA critic on Thu, 2018-06-07 16:31
The 2018 RMD must be distributed to you at the time of the direct rollover or before. It is calculated using your 12/31/2017 plan balance. However, if there was no plan balance such as the case of a traditional DB plan, the plan that offers a lump sum must choose an IRS approved method on which to calculate the current year RMD. Since RMDs are not eligible rollover distributions there is no mandatory withholding, but you can probably elect withholding voluntarily if you wish. If there was a 12/31/2017 balance the RMD is figured just like any other typical RMD using the year end balance and your age at the end of the RMD distribution year from Table III or Table II if your spouse more than 10 years younger is the sole beneficiary.