DB to IRA Rollover – RMD Question
Good Morning
I am looking for guidance with the following fact set:
Retired participant was receiving annuity payments from his former employer’s DB plan.
In 2012 a lump sum distribution was rolled to an IRA
In 2012 participant reach 70.5
When is the 1st RMD required?
When is 2nd RMD requiered? Was an RMD required from the DB plan prior to rolling the assets to an IRA?
DB plans are not in my “wheelhouse” so all help is appreciated.
Thank you
Permalink Submitted by Greg Henson on Wed, 2012-06-13 17:31
Since he reached 70.5 in 2012, his first RMD isn’t due until April 2013. His second RMD is then due 12/31/2013.
Permalink Submitted by Alan Spross on Wed, 2012-06-13 19:23
Are you sure that annuity payments stopped? Once they begin, the annuity option is typically irrevocable.
Or perhaps part of his pension was eligible for a lump sum while the rest continues as an annuity. With respect to the rollover of any lump sum payment, since he reaches 70.5 this year and 2012 would be an RMD distribution year, the plan should not roll over the 2012 RMD, just the excess of the RMD. In other words, doing the rollover in an RMD distribution year eliminates the option of waiting until the RBD for the first RMD.
If that 2012 RMD actually was rolled to an IRA in error, the participant is still deemed to have received his RMD, however it was then rolled to an IRA as an excess contribution because RMDs are not eligible for rollover. Participant would then have to request removal of the excess IRA contribution with allocated earnings from the IRA custodian.
If the 2012 RMD was NOT included in the rollover, the 2nd RMD from the IRA would have to be distributed no later than 12/31/2013.
Permalink Submitted by ShipsnGiggles on Wed, 2012-06-13 19:25
[quote=”[email protected]“]Since he reached 70.5 in 2012, his first RMD isn’t due until April 2013. His second RMD is then due 12/31/2013.[/quote]
Mrgreghenson
If his 1st RMD is due by 4/1/2013 it woud be based on the IRA value on 12/31/2011; which is zero.
My thought is the participant should have taken an RMD from the DB plan prior to rolling his assets into the IRA. No?
Please clarify.
Thanks again,
Brian
Permalink Submitted by ShipsnGiggles on Thu, 2012-06-14 15:02
Alan
Thank you.
I believe I am correct in stating the distribution of the excess contribution (i.e. RMD amount) would be taxable for 2012 tax year. Correct?
Are the earnings taxable for 2012 tax year? Does the 10% early withdrawal penalty apply to the earnings (if no exceptions apply, i.e. 59 1/2)?
Thank you