DW was a minister for several years and has money in a Church retirement fund -- some money contributed by her, other by the denomination. She's saying that the denomination, as administrators of the fund, does not allow her to do a rollover. This is in spite of the fact that she hasn't been a minister for over a decade. Can an organization holding a retirement fund refuse to do a rollover?BG
Retirement plans do not have to offer a lump sum withdrawal option to retirees and others separated from service.A rollover is a lump sum withdrawal from the plan which is then sent to another plan. So if the plan doesn't allow lump sum withdrawals, you effectively can't do a rollover.--Peter
Thank you, Peter.That seems rather odd to me as it would endlessly trap an employee's retirement money as well as open the door for some potential fee abuse. I guess there must be some reason the laws allow this (denying rollovers), but it seems odd.
I guess there must be some reason the laws allow this (denying rollovers), but it seems odd.Not saying this is your situation, but one typical reason is the retirement obligation is not funded.Our laws about pensions are odd and they interact with the tax code. If a company's retirement fund investments make lots of money some portion was considered a profit years ago. In the first part of this century I remember reading with great amazement how the retirement investments of operations like GM and say the State of CA were going to obtain returns of over 7.5% a year - were the projected returns more in line with reality large payments into the retirement fund would be required.GordonAtlanta
Gordon, thanks to you too -- that makes a lot of sense.As for the assumptions about returns, I think a number of large companies went that way. I think IBM was using 9% or so. Buffet went on a bit of a tirade about this for a while.
State of CA were going to obtain returns of over 7.5% a year - were the projected returns more in line with reality large payments into the retirement fund would be required. There are more politics behind the CA numbers. When the estimates aren't met the taxpayers have to make up the difference. When the estimates are realistic, state employees have to contribute more.
If the Church retirement was set up well, a man benefit of the funds being left in their retirement fund is that they might still qualify for the housing exemption and be non-taxable. Their are rules that go along with it, but I would definitely follow up with the Church retirement fund administrators to see if they designate the distributions as housing allowance. If so it would be limited by the lesser of fmv and actual expenses.After all, to offset the benefit of taking tax-free distributions, the rate of return difference between that account and whatever you would roll it over too would have to be fairly large.
As I understand it, if a retirement fund is funded to <80% of future obligations, then they are prohibited from distributing lump sums. This is to protect the other participants.No idea if this is the situation in your particular case or not.
Thank you all for your replies. Here is some new information I got today:"The RCA Retirement Plan is not eligible for rollovers. Upon retirement you may begin systematic withdrawals and at age 59 1/2, once per calendar year, you may take a lump sum distribution of up to 5%."I should add that this is an unqualified plan.Does it make sense that one can't EVER do a rollover?BG
The answers are in their Q&A https://www.rca.org/sslpage.aspx?pid=1960 A nonqualified plan is not permitted to make tax-free rollovers.
Does it make sense that one can't EVER do a rollover?Making sense has nothing to do with it. We're dealing with tax law, not logic.An IRA or other qualified retirement plan can only accept rollovers from other qualified retirement plans. Since your plan is a non-qualified retirement plan, there is no other plan available that can accept a rollover.Bottom line - you're stuck with this plan for life.--Peter
*sigh*Thanks folks -- doesn't seem right, but then again as Peter points out....
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