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Pension lump sum payout .. taxable event?
Old 12-13-2019, 12:52 PM   #1
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Pension lump sum payout .. taxable event?

I have two legacy pensions, which are frozen. They both offer either lump sum or monthly annuity options.
I am leaning towards lump su, for several reasons but, I want to understand how that is looked at tax-wise. Can the lump sum be rolled over into an IRA?

I've looked at the pensions documentation and haven't found any discussion of this. If the pensions can be rolled into tax-differed accounts (tIRA) that would be great.


Thx
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Old 12-13-2019, 01:02 PM   #2
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We did this about 10 years ago when DH received his. A quick Google search found this: https://rodgers-associates.com/newsl...ension-to-ira/

I'm sure there's something on the IRS website, but I'm ready for my afternoon nap and this article seemed to provide a nice summation.
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Old 12-13-2019, 01:12 PM   #3
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This is helpful. Thank you.
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Old 12-13-2019, 01:24 PM   #4
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IRS explanation page

https://www.irs.gov/retirement-plans...-distributions
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Old 12-13-2019, 01:47 PM   #5
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Originally Posted by albireo13 View Post
Can the lump sum be rolled over into an IRA?
Yes, we've done this twice over the years. Do it the same way as rolling a 401k to tIRA - do it as a trustee-to-trustee transfer if possible.
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Old 12-13-2019, 02:08 PM   #6
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OP doesn't mention the type of pension plan. Any Qualified plan, as defined by ERISA, can be rolled into an IRA with no tax event. Emphasis on "qualified" Most, but not all pensions are qualified.

If you already have taxed monies in the tIRA, it may be easier to keep track of the qualified rollover in the future as a separate Rollover IRA. If it is all pretax money in the tIRA, then go ahead and combine the two.
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Old 12-13-2019, 03:29 PM   #7
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OP doesn't mention the type of pension plan. Any Qualified plan, as defined by ERISA, can be rolled into an IRA with no tax event. Emphasis on "qualified" Most, but not all pensions are qualified.

If you already have taxed monies in the tIRA, it may be easier to keep track of the qualified rollover in the future as a separate Rollover IRA. If it is all pretax money in the tIRA, then go ahead and combine the two.
It may also be possible to roll the after-tax money separately to a Roth IRA and send the pre-tax money to a rollover (traditional IRA). I did this with my 401(k) in 2013.
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Old 12-14-2019, 08:08 AM   #8
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the pensions are all totally employer funded. I never contributed to them. So, I guess they would be considered pre-tax money a tIRA would work.
I'll dig deeper to find out if they are Qualified pensions.

Thanks.
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Old 12-14-2019, 08:17 AM   #9
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I took a lump sum from my pension in 2015 and rolled it directly into an IRA.
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