RMD from a defined benefit plan
Client is 74, last day of work was August 13, due to closure of the business. Receiving severance pay weekly until November 13, will then apply for unemployment. If he rolls the pension into an IRA:
1. Is the plan required to pay the RMD before it’s rolled into an IRA?
2. If the RMD is paid to the client, will that affect his ability to collect unemployment? If yes, is there a way to delay the rollout from the plan that would allow him to collect unemployment?
Permalink Submitted by Alan Spross on Sat, 2008-09-27 00:30
1) Yes, if the plan has a cash value option, it is handled in the same fashion as a defined contribution plan. The RMD for the first distribution year of 2008 must be withheld and is not eligible for rollover to an IRA. If the IRA transfer is not done until next year, the 2009 RMD must be withheld as well.
2) Payment of the RMD or any other distribution should not effect his eligibility for UC. I am not sure that the severance pay restricts it either, perhaps that should be checked out.
Permalink Submitted by mk foss on Sat, 2008-09-27 22:12
If his last day of work was in August, isn’t the first RMD due April 1, 2009?
Permalink Submitted by Alan Spross on Sat, 2008-09-27 22:29
Yes, that would be the RBD. But if a rollover is done, the RMD must still be withheld since 2008 is an RMD distribution year. If the assets are left in the plan, no RMD need be taken until the RBD.