Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax questions posed by producers.  Here’s the question of the day.

Question: I had a client retire at age 60 from a company, and the administrator is paying out the complete pension plan balance to the client in equal payments over a five year period. Are those payments eligible for rollover to an IRA?

Answer: Yes.  The kind of scheduled payments described above are eligible for rollover to an IRA.  A longer stream of payments might not be eligible for rollover.

Here’s what IRS Publication 590 says about the subject:

Eligible rollover distribution. Generally, an eligible rollover distribution is any distribution of all or part of the balance to your credit in a qualified retirement plan except the following….

1. Any of a series of substantially equal periodic distributions paid at least once a year over:
   1. Your lifetime or life expectancy,
   2. The lifetimes or life expectancies of you and your beneficiary, or
   3. A period of 10 years or more.

In this example, if the administrator’s payout was for ten years instead of five, the payments would not be eligible for rollover.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.