How do I tell if a pension is qualified? If it is qualified, how do I calculate the Required Minimum Distribution?

Forum|Forum|4 years ago
February 20, 2022
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My mom has a state pension. On the 1099-R form it just says "pension payment". The "IRA/SEP/SIMPLE" box is not checked. Do Required Minimum Distribution (RMD) requirements apply to pension payments where the "IRA/SEP/SIMPLE" box is not checked?

Looking around, I found the Retirement Plan and IRA Required Minimum Distributions FAQs page. It asks for the IRA balance for the previous year. But this doesn't make sense for pensions, right?

So if this is a pension, and pensions don't have RMDs, why is TurboTax asking if part or all of the pension payment is an RMD?

Thanks in advance
Ben

Best answer by ColeenD3

She has a pension, not an IRA. Yes, pensions must distribute RMDs and she must take her RMD if she has reached age 72.

Qualified vs. Nonqualified Retirement Plans

Employers create qualified and nonqualified retirement plans with the intent of benefiting employees. The Employee Retirement Income Security Act (ERISA), enacted in 1974, was intended to protect workers’ retirement income and provide a measure of information and transparency.1

In simple terms, a qualified retirement plan is one that meets ERISA guidelines, while a nonqualified retirement plan falls outside of ERISA guidelines. Some examples:

Qualified plans include 401(k) plans, 403(b) plans, profit-sharing plans, and Keogh (HR-10) plans.
Nonqualified plans include deferred-compensation plans, executive bonus plans, and split-dollar life insurance plans.

ColeenD3Answer

She has a pension, not an IRA. Yes, pensions must distribute RMDs and she must take her RMD if she has reached age 72.

Qualified vs. Nonqualified Retirement Plans

In simple terms, a qualified retirement plan is one that meets ERISA guidelines, while a nonqualified retirement plan falls outside of ERISA guidelines. Some examples:

Qualified plans include 401(k) plans, 403(b) plans, profit-sharing plans, and Keogh (HR-10) plans.
Nonqualified plans include deferred-compensation plans, executive bonus plans, and split-dollar life insurance plans.

benjamingsladeAuthor

@ColeenD3 wrote:
She has a pension, not an IRA. Yes, pensions must distribute RMDs and she must take her RMD if she has reached age 72.

In TurboTax Deluxe (on my PC), in the help for the RMD it says

"The amount depends on your life expectancy and and the balance in the account"

But there is no "balance" for a pension, right? It just pays indefinitely. So how do you calculate the RMD for a pension with no balance?

JulieS

You do not have to calculate the RMD of a pension. If it is a qualified pension, the plan has to determine the RMD and distribute that amount to the pensioner each year.

When you have a 1099-R for a qualified pension, you can assume that the entire amount is the RMD and that the entire RMD was received during the year for that plan.

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