Pension following old 70.5 RMD age
Is a pension fund able to elect to not follow the new starting ages for RMDs and keep the 70.5? Client received a letter from their pension stating that they discovered error and should have began distributions in 2022. Client DOB 4/15/1951. Pension wants to make a large lump sum payment for missed payments which would spike their income as they are still working full-time. Pension fund has told the client they do not have to follow the new RMD ages.
Permalink Submitted by Alan - IRA critic on Wed, 2024-10-16 11:15
Is this a DB plan and is client still working for that plan sponsor?
Permalink Submitted by Keith Hubble on Wed, 2024-10-16 11:49
Yes DB, no its prior employer plan.
Permalink Submitted by Alan - IRA critic on Wed, 2024-10-16 13:07
A DB pension is allowed to continue basing their RBD on age 70.5. If so, client would be subject to RMDs for 2021 (reached 70.5) and 2022-2024, so 4 years in the lump sum. Am not aware of any relief from the effect of the large distribution due to pension error all being taxable in 2024.