Expert: Allen - 9/17/2009

Question
I recently retired and elected to receive my pension in 60 payments.
I just turned 70. Can I still rollover these pension payments to an annuity or IRA which is not taxed until I start to withdraw?

Answer
The rules are complex. Unfortunately, it would have been easier if you had made an IRA rollover election rather than the 60 monthly payment election.  Nevertheless, it probably can still be done. However, it's complicated.

Payments over 60 months are considered "eligible rollover distributions" as this term is defined in the Internal Revenue Code. They therefore can be rolled over to an IRA. However:

1. You will need to check with the Plan Administrator that they will be reported as "eligible rollover contributions" on the form that is provided you each January.

2. If the Plan Administrator agrees, you can ask him to send the checks to your IRA.

2. Taxes will probably be taken out of each distribution. The full amount, before tax, can be rolled over to an IRA. Thus if the gross amount is $1,000 and the net after tax payment is $800, the Plan Administrator can only transfer $800 to your IRA. The other $200 must come from you.

3. A small portion of the amount paid you can not be rolled over. This is the required minimum distribution that must be taken after you reach age 70 1/2. This amount should not be transferred to an IRA. Hopefully, the Plan Administrator will pay this to you rather than transferring it to the IRA. If it's transferred, you will need to withdraw this amount from the IRA.

4. You will have to take an additional required minimum distribution from the IRA each year.