Is the RMD required prior to IRA rollover?

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echidna
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Is the RMD required prior to IRA rollover?

Post by echidna » Fri Feb 23, 2018 9:18 am

I have a situation with TIAA-CREF, where I am about to roll over a traditional IRA with them to a traditional IRA at another provider. They have been insisting that they need to make the RMD (calculated on this account in isolation) prior to the rollover (I am age 70 1/2 this year).

This appears to be wrong at several levels.

First of all, if I look at Investopedia at https://www.investopedia.com/articles/r ... 110503.asp I see:

"Prior to 2002, many IRA custodians would not allow an IRA owner to transfer an RMD amount to another IRA custodian. The IRA owner would have been required either to distribute the RMD amount prior to the transfer or leave the RMD amount behind to be distributed by the applicable deadline. This is no longer required. As allowed by the final RMD regulations, you may transfer your entire IRA balance even if an RMD is due, provided you take the RMD from the receiving IRA by the applicable deadline."


Secondly, you are allowed to satisfy the RMD (summed across all your traditional IRA's) by withdrawals from any one or from any combination of your traditional IRA's. How can TIAA-CREF know what I am doing unless they ask me?

Their form for requesting the rollover does have a section 4 relating to required minimum distributions, and at the end of this section is a check box, by checking which you attest to satisfying your RMD from another carrier in the current year - but the wording only applies for 403b's.


Anyhow, can anyone confirm or otherwise the quote from Investopedia above, or give other relevant information?


This is important in my case as I have already satisfied most of the RMD by distributing a couple of small IRA's with another provider as CD's within them matured. I do not want TIAA-CREF forcing a further unnecessary full distribution (from the account with them), which will be taxed at my marginal rate. At this point, I have got them to agree that I can handwrite onto the form, an attestation that the RMD is satisfied, but this seems superfluous (I should be able to satisfy the RMD later, up till 4-1-19), as does their requirement that absent said attestation, they will make the RMD prior to rollover.

And even if I can get my situation sorted out by making the handwritten attestation, and after persistent customer service calls, why are they doing this in the first place, for anyone in the same situation?
Last edited by echidna on Fri Feb 23, 2018 10:43 am, edited 2 times in total.

echidna
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Re: Is the RMD required prior to IRA rollover?

Post by echidna » Fri Feb 23, 2018 10:21 am

The Investopedia article I referenced above contains a link to a massive IRS document (154 pages!) on RMD's. This is a document dating from 2002, labelled "Required Distributions from Retirement Plans", "Final and temporary regulations", so I'm not sure if it is current, but anyhow, after much effort, I found the section below on page 25.

I am still interested to hear if anyone has specific knowledge of this issue.

"Other Rules for IRAs
These final regulations retain the general rule that the rules applying section
401(a)(9) to qualified plans apply also to IRAs, unless otherwise provided. In addition
to retaining the special rules for IRAs provided in the 2001 proposed regulations, these
final regulations provide a special rule for trustee-to-trustee transfers between IRAs to
coordinate with the rule that allows aggregation of IRA distributions. Although the IRA
to IRA transfer is not treated as a distribution for purposes of section 401(a)(9), in light
of the fact that the required minimum distribution with respect to the transferor IRA can
be taken from any IRA, the transferor IRA will be able to transfer the entire balance and
will not be required to retain the amount of the required minimum distribution for the
year."
Last edited by echidna on Fri Feb 23, 2018 11:38 am, edited 1 time in total.

The Wizard
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Re: Is the RMD required prior to IRA rollover?

Post by The Wizard » Fri Feb 23, 2018 11:14 am

My personal opinion is that yes, you should be able to rollover a tIRA from one custodian to another without regard to RMDs.

The area where it IS a problem is when you do a rollover from 401(k) or 403(b) to tIRA.
In that case, current year RMD must be taken first...
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House Blend
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Re: Is the RMD required prior to IRA rollover?

Post by House Blend » Fri Feb 23, 2018 3:44 pm

If you do a trustee to trustee transfer from one trad IRA to another, then (a) it is not a rollover, and (b) they should not have to take out an RMD first.

If you do an "indirect rollover", wherein custodian A cuts a check payable to you, and you turn around and deposit the proceeds into a trad IRA at custodian B, then A has no idea that this is any different from a standard distribution, so they might withhold taxes, penalties, or force you to take RMDs first depending on circumstances.

TIAA is extremely skilled at supplying the wrong forms, and it would not surprise me at all that they've given you a generic form for rollovers when they have a specific form for trustee to trustee IRA transfers.

You may get better results if you contact Custodian B and ask them to initiate the IRA *transfer*. Be clear that you are not asking for a rollover.

jebmke
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Re: Is the RMD required prior to IRA rollover?

Post by jebmke » Fri Feb 23, 2018 3:47 pm

House Blend wrote:
Fri Feb 23, 2018 3:44 pm
If you do a trustee to trustee transfer from one trad IRA to another, then (a) it is not a rollover, and (b) they should not have to take out an RMD first.
Correct. And the custodian should not issue a 1099-R. It is just transfer from one institution to another.
When you discover that you are riding a dead horse, the best strategy is to dismount.

echidna
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Re: Is the RMD required prior to IRA rollover?

Post by echidna » Sat Feb 24, 2018 12:27 pm

Thank you House Blend (and jehmke) for that information!

I'm not quite sure when the word "rollover" came into the picture, but I believe I began by simply saying I wanted to move the IRA elsewhere to a like IRA (I've never had to do this before). The process they described involves them sending a check to the new trustee, so it seems to qualify as a "trustee to trustee transfer". TIAA-CREF also told me the process had to be initiated from their end.

Anyhow, next week I'll be calling the supervisor I've been communicating with most recently at TIAA-CREF, and will try to straighten this out.

I've leaving TIAA-CREF after beginning with an employer-sponsored plan nearly 40 years ago. Over that time, there have been assorted snafus and dissatisfactions. The replacement of their legacy computer system years ago was a monumental mess. Extracting my funds from the original employer plan investments after separation was a decade-long process involving a "transfer payout annuity". I find their website a pain to navigate. Fund expenses seem high. Plus I now want options they don't seem to offer.

Customer service has been a problem on multiple occasions. The specialist IRA rep. (at least that is what I was told he was) who first processed my recent request was very business-like at first (didn't even ask me why I was leaving in the beginning). Then once we'd gone through the administrative stuff, he sort of segued into what I would call "save the account" mode. By the end of this conversation, he was verging on being rude once it became clear he couldn't persuade me to change my mind.

Now that I've made my decision, his behavior and the hassle over the transfer process are just final nails in their coffin. I know TIAA-CREF has been having much larger issues with their clientele in recent times. I've learned in my limited interactions with them of late that they're not the organization they once were. End rant :annoyed

Alan S.
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Re: Is the RMD required prior to IRA rollover?

Post by Alan S. » Sat Feb 24, 2018 1:38 pm

Sounds like this rep might have been dealing with 403b plans in the past where an IRA rollover cannot be done until the RMD is distributed, and thinks that IRA transfers fall under the same rules when they don't.

Be careful to avoid an unnecessary distribution from the IRA, because if you do a 60 day rollover, it will use up your one permitted such rollover for the next year. More critical, if you did a 60 day rollover in the past 12 months you couldn't even roll over a distribution from this IRA. Therefore, you should insist on talking to a competent rep or supervisor to get the non reportable direct transfer done.

Or you could have the new custodian initiate the direct transfer for you to pull the account out of TIIA.

ralph124cf
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Re: Is the RMD required prior to IRA rollover?

Post by ralph124cf » Sat Feb 24, 2018 7:59 pm

You said that TIAA told you that the process had to be initiated from their end. This is simply not true.

I think they got confused because they mostly deal with 401 (a)s and (k)s, and 403 (b)s.

Ralph

The Wizard
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Re: Is the RMD required prior to IRA rollover?

Post by The Wizard » Sat Feb 24, 2018 8:35 pm

ralph124cf wrote:
Sat Feb 24, 2018 7:59 pm
You said that TIAA told you that the process had to be initiated from their end. This is simply not true...
Well, you can INITIATE the transfer from the recipient custodian, Vanguard in my case, but TIAA won't send the funds until you fill out their form as well.
I'm in the midst of this with a Roth IRA...
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