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RMD from 403b and IRA--can they be combined


Guest rkal66
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Next year I will have to take a RMD. I have an IRA and that is not a problem. I also have a 403b with TIAA that is a 10 year payout annuity. The payment each year gets rolled over to the IRA. I have asked TIAA how I take the RMD from this and every time I get a different answer. They tell me just to take it from the IRA and the IRS will not bother me as long as the total works for both accounts. Is this correct? They say there is no way to make the separate RMD distribution. I guess I could direct the payment to me and then roll over the payment minus RMD within 60 days, but they will withhold 20% if I do this. Any ideas?

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Guest Jeff Ashendorf
Next year I will have to take a RMD. I have an IRA and that is not a problem. I also have a 403b with TIAA that is a 10 year payout annuity. The payment each year gets rolled over to the IRA. I have asked TIAA how I take the RMD from this and every time I get a different answer. They tell me just to take it from the IRA and the IRS will not bother me as long as the total works for both accounts. Is this correct? They say there is no way to make the separate RMD distribution. I guess I could direct the payment to me and then roll over the payment minus RMD within 60 days, but they will withhold 20% if I do this. Any ideas?

Someone is giving you bad advice.

You cannot satsify your 403b RMD requirement by "taking it from the IRA". In fairness, whoever told you that is undoubtedly thinking that 403b's are treated as IRAs for purposes of the RMD requirements (which is generally true), and that you can combine multiple IRAs taking the aggregate RMD from any of them (which is true), so you should be able to take your 403b RMD from your IRA (which is not true).

You can combine multiple 403b accounts, and satisfy their aggregate RMD from any of those accounts, and you can combine multiple IRAs, as already mentioned, but you cannot combine 403bs and IRAs for that purpose. And the regulations are crystal-clear about that. (You also may not combine 403b accounts that you have as an employee with 403b accounts that you may have as a beneficiary, but that is not your issue.)

Did TIAA give you any clue why "there is no way to make the separate RMD"? It should be simple arithmetic, which they would have to do anyway, because the RMD amount is not eligible for rollover, and is therefore not subject to 20% withholding. But if they don't do it, then they don't do it. Other than finding another provider and moving your entire account (or ignoring the RMD requirement, as they apparently would have you do), you seem to have only two choices. You can do it yourself -- the calculations, that is -- and give TIAA explicit instructions for each payment, rather than having distributions made automatically. Or you can keep after them untill you find a rep who knows what he or she is doing. I would think there would be one somewhere at TIAA.

In summary then -- if you receive a 10-year payout, that will satisfy your RMD requirement (for the 403b). So obviously you're not concerned only about satisfying it. And if your concern is the 20% withholding, as I've already mentioned, a portion of your annual distribution is not subject to that withholding; so even though they'll withhold 20% of the amount in excess of the RMD (assuming no direct rollover), it's not going to be a full 20% of the entire distribution. Assuming of course that you are able to get them to do it correctly. Otherwise, what that leaves is you manually computing your RMD, instructing TIAA to cut you a check for the RMD amount, and separately instructing TIAA to roll the rest of the "10-year payment" to your IRA (if that's what you want).

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Next year I will have to take a RMD. I have an IRA and that is not a problem. I also have a 403b with TIAA that is a 10 year payout annuity. The payment each year gets rolled over to the IRA. I have asked TIAA how I take the RMD from this and every time I get a different answer. They tell me just to take it from the IRA and the IRS will not bother me as long as the total works for both accounts. Is this correct? They say there is no way to make the separate RMD distribution. I guess I could direct the payment to me and then roll over the payment minus RMD within 60 days, but they will withhold 20% if I do this. Any ideas?

Is your 403b payment a complete distribution to be made in 10 annual installments or is it an annuity which is guaranteed for the greater of 10 years or life? If the payment is the former you will have to take a MRD due on the 403b plan under the MRD rules, e.g. 1/27.4 at 70 1/2 but the excess over than amount can be rolled over to an IRA. Note: you need to check with TIAA on how the payment will be made. Generally payments made over a specified period of 10 or more years are ineligible for a rollover. However If the 10 payments are made over a period of only 9 years you may qualify for a rollover of the excess.

If your annual distribution is paid in the in the form of an annuity for the greater of 10 years or life, the entire payment is considered an MRD which cannot be rolled over.

mjb

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Thank you both for your advice. The payments is what TIAA calls a "Transfer Payout Annuity". It is the only way to get your money out of TIAA (for my plan anyway) without some kind of lifetime annuity. I have been rolling these over directly to an IRA for the past 6 years. I guess the simplest way for me to do it is to just redirect future payments to me, rather than to the IRA. I then have the choice to roll over the amount of the payment minus the RMD to the IRA. I can live with any withholding they impose.

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  • 1 year later...
Guest Coyotearms
Thank you both for your advice. The payments is what TIAA calls a "Transfer Payout Annuity". It is the only way to get your money out of TIAA (for my plan anyway) without some kind of lifetime annuity. I have been rolling these over directly to an IRA for the past 6 years. I guess the simplest way for me to do it is to just redirect future payments to me, rather than to the IRA. I then have the choice to roll over the amount of the payment minus the RMD to the IRA. I can live with any withholding they impose.

I know the above response is over a year old, but I think it is incorrect. If you have future payments to yourself, you cannot roll over any of it into an IRA, because I am pretty sure roll overs have to be directly deposited into the IRA account, and not "hand carried" as you suggest. The best thing to do, as has already been suggested, is get someone, most likely at TIAA-CREF headquarters, NOT the benefits office at your university, to find the right answer.

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Thank you both for your advice. The payments is what TIAA calls a "Transfer Payout Annuity". It is the only way to get your money out of TIAA (for my plan anyway) without some kind of lifetime annuity. I have been rolling these over directly to an IRA for the past 6 years. I guess the simplest way for me to do it is to just redirect future payments to me, rather than to the IRA. I then have the choice to roll over the amount of the payment minus the RMD to the IRA. I can live with any withholding they impose.

I know the above response is over a year old, but I think it is incorrect. If you have future payments to yourself, you cannot roll over any of it into an IRA, because I am pretty sure roll overs have to be directly deposited into the IRA account, and not "hand carried" as you suggest. The best thing to do, as has already been suggested, is get someone, most likely at TIAA-CREF headquarters, NOT the benefits office at your university, to find the right answer.

What do you think is incorrect?

Are you saying that a participant cannot roll over any distributions that are paid to him by the plan?

Do you have a citation?

mjb

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