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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4003
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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A company I worked for over 30 yrs ago had been taken over

Resolved Question:

A company I worked for over 30 yrs ago had been taken over by two other corporations. The most recent company contacted me last wek and stated that they had been trying to find me ( and a couple of others) that we were owed a cumulative pension for the many years. I would receive a bulk payment and be on a regular pension from now on ( I am 83 yrs old). This bulk payment will put me in a very high bracket, probably max, My question is there any way to spread this payment over 3 or 5 yrs in order to reduce the tax?
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

Customer:

Hi, I can help with this ...

Customer:

The first thing that comes to mind is to ask for a rollover to an IRA

Customer:

Almost ALL qualified plans (defined benefit pensions, 401(k), money purchase, profit sharing, end even 401(b) plans for teachers) have the option to do be received as an IRA rollover or custodial transfer

Customer:

As long as the transfer is done from the Pensions custodian as a rollover (where the check is made out to an IRA plan that you open ... OR ...

Customer :

at 83 I do not believe I can contribute to an IRAS

Customer:

done as a trustee to trustee (sometimes called custodial) transfer this is not a taxable event

Customer:

this IS NOT a contribution

Customer:

this is simpy a transfer of pre-tax money from one plan (the pension plan) to another, (the IRA)

Customer :

a electronic transfer is scheduled for monday, is it too late to stop what they propose to send to the IRS?

Customer:

then you will ()because you are over 70 and 1/2) be required to taek a certain amount out each year, but only the amount taken OUT of the IRA is taxed

Customer:

I would certainly try to get hold of the today of first thing monday and tell them you'd rather take it as a rollover

Customer :

the company proposes paying the IRS 55,000.

Customer:

If the transfer can't be stopped .....

Customer:

I bet thats 20%

Customer :

??? it listed as M3

Customer:

If you can get hold of the "plan document" (of the pension plan) which they should have provided by law

Customer:

The M3 means nothing legally, or relative to tax, probably an internal code

Customer :

u were going to say " if it cannot be stopped?

Customer:

THe plan document will tell you whether they are required to provide a rollover option ALSO, it will tell you whether you should have been ngiven an option to take it over a number of years, or as a monthly income for life

Customer:

YOu could still get it back into an IRA within 60 days and it can still be considered a rollover, you will have to come up with the difference between what you receive and the amount of the distribution

Customer :

the bulk amount will be sent to my checking account ( less the 55,000 and then there will be a monthly amount hence

Customer:

the number coming out of the pla ... must be the same as the amount going back into the IRA to be considered a rollover

Customer:

again, It's really strange (if this is an actual pension plan ... which is governed by Dept of Labor and IRS rules) that they did not provide options

Customer :

I understand, worse case is that I will probably get a large refund next april but this will throw me into a high bracket to file under, right now I am in a 10%

Customer:

They are trying to meet their obligation (under those ERISA-DOL) rules to provided what should have been paid to you all along

Customer:

Yes, you have it

Customer:

it will all simply be taxable income if you can't effect a rollover

Customer:

BUT

Customer:

Do you have access to their company website or a phone number for the custodian of their pension plan?

Customer:

income averaging is no longer possible, so unless you can ask for a more level payout or a rollover of then lump sum amount it will be ordinary income

Customer :

yes, but no one there until Monday, I have received notice from a bank that the transfer will take effect on Monday

Customer:

Well, i wish there were more options, but this sounds like a pretty good problem to have

Customer :

I do appreciate your help, I was thinking of incomwe averaging was not aware that it no longer existed

Customer:

I would, however, STRONGLY urge you to call 1st thing and ask why they didn't offer a rollover option

Customer :

will do

Customer:

Also, see if you get hold that "plan document," its called

Customer:

that is the communication that should have been provided outlining your options and the provisions of the pla

Customer:

all pensions have them, and they're supposed to be provided at least once per year and whenever changes are made to ALL plan participants

Customer :

will do

Customer:

And finally, enjoy it!

Customer :

TU

Customer:

Yw

Customer:

If this HAS helped, I would appreciate a feedback rating of 3 (OK) or better … That's the only way they will pay us here.


HOWEVER, if you need more on this, PLEASE COME BACK here, so you won't be charged for another question.

Customer :

ok

Customer:

Thanks

Customer:

Lane

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4003
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 4 other Tax Specialists are ready to help you
Expert:  Lane replied 1 year ago.



Thanks so much for the rating James.


As a follow-up (not sure if you saw this at the end of our chat, but this is the booklet about rights participants have in pensions:

http://www.dol.gov/ebsa/publications/wyskapr.html


And this is an article that documents for you that income averaging won't work, since the tax act of 1986:

http://www.dol.gov/ebsa/publications/wyskapr.html



If you'd like to work with ME again just say "For Lane only," at the beginning of your next question

 

... and thanks again,


Lane

 

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