Pension Roller for client over the age of 70 1/2.
My client’s DOB is 8/18/1942. He retired in February 2015. In March 2015, he rolled his 401(k). At that time, the the custodian withheld for his RMD, so I feel good about this part of the transaction. In addition, he also rolled over his Pension (using a Lump Sum Payment calculation) to the same Traditional IRA in the amount of $631,420.76. The pension plan did not require an RMD be taken. What is the best way to handle his RMD on the pension plan value? Just use the $631k number? Does rolling over the entire pension plan subject him to an excess contribution? If so, how is this handled? Thank you in advance for any assistance.
Permalink Submitted by Alan - IRA critic on Wed, 2015-03-11 20:07
Yes, there is an excess IRA contribution for 2015 due to the rollover of the plan 2015 RMD. You are correct about the determination of the amount of that RMD. The lowest option is described in the following paragraph in the IRS Regs for DB plan RMDs for a single sum distribution. The resulting excess contribution is treated as an excess regular IRA contribution and should be removed along with allocated earnings. It won’t cost much, but is difficult to properly report on the 1040, since the amount of the rollover shown on the 1099R must be reduced by the amount of the RMD and that will produce taxable income on line 16b.