IRA to Pension Buyback
I would like to take a distribution from a simple IRA to fund buying back years in a state (Commonwealth of VA) pension plan? Is the distribution taxable for what looks similar to a rollover or is there a way to avoid taxes on the distribution. I am not at retirement age.
Thanks for any feedback!
Permalink Submitted by Alan - IRA critic on Sat, 2018-03-24 03:57
It is up to the plan what sources of funds can be used to purchase service credit. If the plan accepts direct rollovers from an IRA account, then it is legal under the tax code to fund the purchase with a direct rollover, which is a check payable to the pension plan for your benefit. There is no tax or withholding and this is reported as a rollover on line 15a and 15b of Form 1040. You would also have to attach an explanatory statement with your return. Of course, your SIMPLE IRA must have passed the 2 year waiting period from the date of your first SIMPLE IRA contribution before a direct rollover can be done to any account other than another SIMPLE IRA.