RMD withdrawal less than I computed

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  • #4990
    Tadpole
    Participant

    I worked for the University of Texas El Paso (UTEP) for a few years in the early 80s and was under their Optional Retirement Plan (ORP). When I left the representative suggested I move it to their money market and I agreed. I haven’t touched it since but have updated it’s value in my spreadsheets once a year. In 2008 I noticed it said that I might not be vested at the VALIC site where the account is held. I checked and decided I should have met vesting requirements so I emailed UTEP for vesting confirmation. I received a form from them with boxes checked saying that all, including employer contribution, was vested. I attempted to submit it but was told they check on vesting themselves when a withdrawal was requested. I turned 70.5 this year and tried to setup a automatic RMD withdrawal. After weeks of hassle, fax of the 2008 vesting information, and several calls I finally received a bank deposit. The RMD they withdrew was about $400 short of the amount I compute for the balance shown on the 12-31-18 statement. VALIC uses a call center in-between and doesn’t talk to you directly. I have been unable to get a response from the actual VALIC unit that could explain the discrepancy. I tried to make a one time withdrawal from this account for the difference and the website blocked it wanting me to check a box for the reason for the withdrawal none of which applied to a former employee.

    Am I at risk of receiving a 1099 that says that I only withdrew about 75% of the amount to meet RMD requirements? If so and assuming I can’t get this resolved, how do I let the IRS know that I tried and tried and tried to get their money?

    If I am also withdrawing a 10 year payout annuity from a 403b at TIAA that far exceeds the RMD for that account, will the excess cover the deficit $400 in the VALIC account?

    #4991
    Alan S.
    Participant

    It’s not clear what is going on here. Your plan statement by now should not show any non vested balance, but if it does the RMD must be calculated based on the total balance. However, the RMD distributed is paid first from the vested balance and will not include any non vested amounts.

    To check your RMD, you need to know the 12/31/2018 plan balance including any non vested amounts that have not been reclaimed by the employer. Then you need to verify that the correct RMD divisor is being used including the reduced RMD if your sole beneficiary is a spouse more than 10 years younger than you. Then determine if the total amount distributed in 2019 meets the correct RMD. If it does not, try to get an explanation of what balance they used and why. Do not worry about any IRS penalty since given the circumstances that the plan is determining your RMD, it the plan is wrong you can get the IRS to waive any penalty by filing Form 5329 explaining the reason.

    Since you are long since separated from service, you should be able to withdraw any amount you wish to including the amount you feel is an RMD shortfall. You cannot file the 5329 until you have made up the RMD shortfall. Given all these question, suggest you pose them to the plan administrator.

    #4992
    Tadpole
    Participant

    Thanks Alan S. It’s comforting to know the IRS will recognize this as VALIC’s computation. How does one go about talking to a plan administrator when you are only given a contact for a call center?

    This turned into a venting so the rest of this is just that.

    I would like to pose questions to someone other than a call center go-between but I don’t see a way to do that. I have to assume the vested amount is the total amount. That is what the UTEP letter said and I have not been told otherwise during the current RMD withdrawal. The message I asked the call center to give the RMD people at VALIC was to please send me the numerator and denominator used in the calculation. I did not receive an answer. It’s frustrating having to go through this call center with messages. My attempt to make the manual withdrawal on the website account led to a message “Online distributions are not currently available from your plan account. Please complete a paper distribution request form to request a distribution.” When I click the link in the last sentence then a link to withdrawals, I get a list of radio buttons to select the reason I want a withdrawals. None of the reasons apply to a simple withdrawal. They are:
    Separation from Service
    Inservice Withdrawal of available funds other than hardship
    Permanent and Total Disability
    Spousal Beneficiary
    Non-Spousal Beneficiary
    Alternate Payee under Qualified Domestic Relations Order(QDRO)

    If I just choose one, say, the first one, the website starts asking questions like the your date and reason for separation (retirement, termination). I just sent them all of that. I concluded that I couldn’t trust the call center or the website. The experience has felt like I was dealing with the vapor. The website shows the new balance but does not show that any transactions whatsoever have occurred in the account. I think they don’t update the transaction details until month’s end. So a change in balance but without any transactions.

    Again, thanks. You have given me a little relief about the IRS.

    #4993
    Alan S.
    Participant

    With regard to the “reason” for the distribution, you would select RMD if available, but otherwise separation from service which normally opens up the entire balance for distribution. However, some plans might restrict partial distributions so if no RMD reason shows, I would use separation from service and add RMD to that reason.

    If you wanted to do a direct rollover to an IRA, the plan would have to distribute the RMD before rolling over the balance or at the same time as the direct rollover.

    Note that for the year you reach 70.5 you have the option of deferring all or part of that RMD to 4/1 of the following year, but if you do that you will have two taxable RMDs in that second year. Deferring is not beneficial in most cases, but there are few taxable income situations when it is beneficial.

    Finally, the call center might be confused by the numerator/denominator terminology you are using. While that is what it is, the usual figures are described as the account balance and the RMD divisor. As for the reps, you might ask to speak to a senior staffer, and if you are persistent enough you might get transferred there.

    #4994
    Tadpole
    Participant

    Yes, I realize the first year you have until April but I wanted to avoid putting it in the next tax year. Now my goal is just to get the amount corrected if I can, whenever I can. Thanks for your time and energy.

    I did have the call center “elevate” to a higher level, a supervisor at the call center. She was the person that said she would ask the VALIC RMD team to contact me.

    Thanks again. I will try again next week to get this resolved or explained.

    #4995
    Tadpole
    Participant

    I ran into this at the IRS and, if it applies, it might explain why they took the RMD over part of the balance:
    https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-required-minimum-distributions#4a
    Apparently the old rules for 403b type plans set the required withdrawal at age 75 and the laws were changed in 1987 to age 70 1/2. Under certain circumstances the amounts in the account prior to 1987 might grandfather to age 75. I don’t know if this applies to me or not but the numbers come out close with the estimates used.

    And it is also possible that I totally don’t understand what I read at that link so I still need to follow up with VALIC.

    #4996
    Alan S.
    Participant

    Yes, as long as the plan tracks your 12/31/86 balance, that portion of your total balance is not subject to RMDs until age 75. If you have a plan statement from any prior year after 1986, it should show your 12/31/86 balance. If you ever took a distribution from the plan since that time, the distribution would come from your old balance first, so if you find a statement dated prior to the year you took a distribution, then that old balance would be less now. So look for a statement that is after the latest distribution you took (if any). If after taking your RMD you roll the rest over to an IRA, your IRA RMDs must be based on the total IRA balance since the age 75 exemption only applies to RMDs for the 403b plan itself.

    #4998
    Tadpole
    Participant

    I went through our files and the earliest statement I could find was in 1993. It did not break the amounts into pre-1987 and post-1986 so all I have is the balance in 1993 or years thereafter and the employer contributions. I did find my termination date which was 05/31/86 so all the employer contributions were made prior to that. I used the employer contribution to do the estimate I mentioned above.

    Thanks for everything.

    #5000
    Alan S.
    Participant

    The following is copied from the 2002 RMD Regs:

    >>>>(b) The issuer or custodian of the section 403(b) contract must keep records that
    enable it to identify the pre-’87 account balance and subsequent changes as set forth
    in paragraph (b) of this A-2 and provide such information upon request to the relevant
    employee or beneficiaries with respect to the contract. If the issuer or custodian does
    not keep such records, the entire account balance will be treated as subject to section
    401(a)(9).>>>>

    Since the breakout does not appear on your 1993 statement, it is possible that the plan did not track the pre 87 balance and will not recognize that balance when calculating your RMD. Hopefully, the plan can provide an explanation regarding this, so you will know exactly how the RMD has been determined. It is possible that this becomes a gray area with respect to the IRS, if you want to contest the amount the plan indicates is the correct RMD.

    #5065
    Tadpole
    Participant

    Alan S., The reason for the lower RMD was, indeed, pre-1987 money. VALIC sent me the actual numbers that they used and an explanation. I just thought I would share the resolution with you.

    #5073
    Alan S.
    Participant

    Great, thanks.

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