QCD from a SIMPLE IRA

Submitted by Joseph Schwarz on Wed, 2017-04-26 15:46

I have a client who retired in 2016 and is looking to do a partial QCD from the same SIMPLE IRA in 2017. No deposits, matching. or payroll contributions have been made in 2017 to this client’s SIMPLE IRA and the client is no longer an active employee. Would this client qualify for a QCD from the SIMPLE IRA? Other employees are still making deposits to their SIMPLE IRAs and I’m not clear on the IRS language/definition “active”. Does “active” apply to the entire company SIMPLE IRA plan, or the individual SIMPLE IRA accounts? Thanks!



Submitted by Alan - IRA critic on Wed, 2017-04-26 23:42

The term is “on going” SIMPLE IRA. Following is the IRS definition per Notice 2007-7 Q 36. Since a SIMPLE IRA is a calendar year plan, if no contributions will be made to client’s SIMPLE IRA for plan year 2017, it is no longer an on going SIMPLE IRA. Client must also be at least 70.5 to do a QCD. Despite this SIMPLE account being eligible for a QCD distribution, as long as client first contributed over 2 years ago, it would probably be best to transfer the balance to a TIRA account, then do the QCD.

Q-36.  Is the exclusion for qualified charitable distributions available for distributions from any type of IRA?  A-36.  Generally, the exclusion for qualified charitable distributions is available for distributions from any type of IRA (including a Roth IRA described in § 408A and a deemed IRA described in § 408(q)) that is neither an ongoing SEP IRA described in § 408(k) nor an ongoing SIMPLE IRA described in § 408(p).  For this purpose, a SEP IRA or a SIMPLE IRA is treated as ongoing if it is maintained under an employer arrangement under which an employer contribution is made for the plan year ending with or within the IRA owner’s taxable year in which the charitable contributions would be made.

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