PENSION LUMP SUM
I have a client who is 79. He has a pension from his former employer and he has been receiving monthly checks since he retired at age 65. Last year he was informed that the pension was being shut and he could either move the funds to an income annuity or take a lump sum distribution. He decided on the lump sum distribution. Of course, the IRS ruling letter wasn’t issued until very late last year. They did send him his January pension check already but won’t send any more. Does his former company need to calculate what his RMD for 2023 would be and send him a check for that amount (less his January pension check) BEFORE they issue the rollover check? My concern is they issue the rollover check FIRST and that is his RMD check.
Permalink Submitted by Alan - IRA critic on Tue, 2023-02-14 00:28
Prior to any direct rollover to an IRA, the pension must distribute the balance of the 2023 RMD after crediting the January payment. Client should also be provided with a statement documenting the breakdown.
Permalink Submitted by Carlos Lopez on Tue, 2023-02-14 06:00
If this was coming from an ERISA plan, such as a401k or 403b, then the RMD would be required and calculated and taken out by the custodian. I am not sure if it works the same with a pension. The good news is that even if its required and the pension doesn’t take out the RMD, you can calculate the RMD for the client and ensure it comes out by the end of 2023.