You recently wrote about having your IRA custodian send a qualified charitable distribution (QCD) to a charity from your IRA. I tried to do this through New York State’s TIAA Supplemental 403(b) for New York State workers. I was told this was not possible through TIAA.
QCDs can only be created from Individual Retirement Accounts, and the TIAA 403(b) is not an IRA. It is an employer-sponsored pension plan.
As I explained last week, a QCD counts towards your required minimum distribution from a retirement account, but is not taxable.
Tax law does not allow QCDs from employer-sponsored plans such as 401(k), 403(b), and 457 plans, or from an SEP and SIMPLE IRA plan if its sponsoring employer contributes to the plan in the year the QCD is performed.
But when you leave a job, you can transfer your savings from your former employer’s plan to an IRA.
I am 72 this year and have started taking RMDs from my IRA. I’m still working and my new employer has a 401(k) plan. Can I defer taking RMDs from this plan until I stop working for the company?
Yes. Provided you don’t own 5% or more of the business, you can defer RMDs from the tax-deferred portion of this plan until you stop working there.
But if the 401(k) plan includes a designated Roth account, you must withdraw the RMDs from the Roth. (They’re not taxable if you’ve owned the Roth portion of your business plan for five years. But there’s a penalty if you don’t take them.) If you’ve owned it for less than five years, its earnings are taxable. on a pro rate basis: if 10% of your Roth balance in the plan represents income, 10% of the Roth RMD is taxable.
The bottom line
The tax rules governing a retirement account depend on the type of account it is.