deadline for RMD when rolled to IRA from TSA

Submitted by Toby Hartley on Thu, 2018-10-25 21:08

I had the following question today and thought i’d double check with the group:

I am familiar with the RMD requirements for owners of 403(b) TSA’s. However, I am not certain about how they work in the following specific situation affecting one of my TSA owners who is thinking about retiring. She continues to work in the public school sector at current age 69. She has the option to continue working there for several more years if she chooses. She continues to contribute to her several TSA’s. She turns 70½ on December 10, 2019. If she retires effective January 1, 2019, I know how to advise her re her RMD’s. If she retires effective January 1, 2020, I also know how to advise her. But what if she retires effective July 1, 2019 at the end of her current school year (or at any other time well into calendar year 2019)? In those cases, are RMD withdrawal and reporting requirements totally deferred to calendar year 2020? The wording in IRS Publication 571, the prevailing IRS documentation on TSA’s, suggests that initiation of age 70½+ mandatory RMD’s is deferred until April 1 of the year following the year of retirement (seemingly regardless of the exact timing of the retirement date). And if that’s truly the case here, would she then also be required to do a second RMD before December 31, 2020?



Submitted by Alan - IRA critic on Thu, 2018-10-25 22:53

  • Since she will be 70.5 in 2019, if she retires anytime in 2019, then 2019 will become her first RMD distribution year using the 12/31/2018 balance. If her TSA’s document a 12/31/1986 balance (aka old money), the old money is exempt from RMDs until age 75. The 2019 RMD can be deferred in total or in part to 4/1/2020 latest. Any portion that is deferred to 2020 will be taxable in 2020 along with the 2020 RMD.  Deferral of all or part of the 2019 RMD does not cause an adjustment in the 12/31/2019 balance for purposes of calculating the 2020 RMD. The actual year end 2019 balance is used to determine the 2020 RMD.
  • The above paragraph does not address any IRA rollover. Any IRA rollover is deemed to come from the old money first, so the old money cannot be left in the TSAs in order to delay RMDs until 75 if a rollover is done. Doing an IRA rollover in 2019 will accelerate distribution of the TSA 2019 RMD to the date of the IRA rollover and eliminate deferral of that RMD until 2020, so this is a factor in determining when the IRA rollover will be done.

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