Rmd

[Kram BergGold]

Client turned 70.5 in 2011. He took $10,000 from a pension of which $1500 was taxable. The rest was a return of his contributions. He also had an IRA from which he did not take an RMD. Can he use some or all of the pension distribution to meet his IRA, RMD?

[Koss]

Rmd

What kind of account was the pension?

401(k)?

403(b)?

Old-style defined benefit plan?

I'm not sure it makes a difference. If the "pension" was a 401(k) that was rolled over into a traditional IRA before he took the distribution, then he might be okay.

But if the pension was anything else, I don't think it's going to fly.

Did the pension have a minimum distribution requirement?

BMK

[FEDUKE404]

First thoughts

Since pension distributions and IRA distributions are reported on separate lines (lines 16 and 15) of Form 1040, I would think they are not interchangeable for anything related to RMD requirements.

From the facts stated, when all is said and done there will be nothing but a zero on lines 15a and 15b. Correct?

As for the $1500 taxable out of a $10,000 pension distribution, I'm a bit intrigued by the very large (percentage) "return of his contributions" amount. In the days of dinosaurs, and the "Three-year rule," you could commonly see stuff like that, but everything I've encountered in recent years has had pensions with only a small amount not taxable (normally via the "Simplified Rule" or an infrequent Form 8606 for past allowable but nondeductible IRA contributions). Many/most employers long ago changed over to employee pre-tax payments into pension funds while the employee was working.

Again, there may be total confusion on my part but the use of "return of his contributions" did catch my attention. Does the Form 1099-R (Box 2a vs Box 1) actually support those numbers?

FE

[DonPriebe]

As for the $1500 taxable out of a $10,000 pension distribution, I'm a bit intrigued by the very large (percentage) "return of his contributions" amount.

Could be a commercial annuity. $91.5K at 1.65% paid out over ten years. And it's reported on a 1099-R so it 'looks' like a pension.

[Roland Slugg]

Can he use some or all of the pension distribution to meet his IRA, RMD?

No. The RMD rules for IRAs apply specifically to them. There is no combining with distributions ... RMDs or otherwise ... received from other kinds of retirement plans or annuities.

The IRS has the authority to waive the 50% penalty for failing to take an RMD (Code §4974(c)), and it is my understanding that it is fairly liberal in waiving that penalty the first time it occurs for a given beneficiary. The waiver standard is "reasonable error" and requires that reasonable corrective steps are taken. If this were my client, I would advise him to withdraw enough right away to satisfy his 2011 RMD as well as his 2012 RMD if he hasn't already done so.

[Kram BergGold]

Thanks

Thanks everyone.