Pre-1987 Contributions to 403(b) Account

[Bali Hai Again]

What is the name of your state? New York

I have a tax deferred 403(b) retirement account with pre-1987 and post-1987 contributions. The IRC says that I can exclude the pre-1987 contributions from RMD calculations until age 75 if records are kept. I have received the itemized pre-1987 records from the custodian and can furnish them to the IRS.

However, I am taking a distribution (non-RMD) this year from this 403(b) account. This is the only time I have ever made a withdrawal from this account. I have without success tried to determine if the IRS considers the distribution as coming from the pre-1987 contributions or not. I have read where in some cases that withdrawals are considered FIFO (first in first out) by the IRS.

If the IRS applies FIFO to the pre-1987 contributions would it then reduce the pre-1987 contributions amount by the 2023 withdrawal for future RMD calculations?

As always any insight is greatly appreciated.

 

[LdiJ]

What is the name of your state? New York

I have a tax deferred 403(b) retirement account with pre-1987 and post-1987 contributions. The IRC says that I can exclude the pre-1987 contributions from RMD calculations until age 75 if records are kept. I have received the itemized pre-1987 records from the custodian and can furnish them to the IRS.

However, I am taking a distribution (non-RMD) this year from this 403(b) account. This is the only time I have ever made a withdrawal from this account. I have without success tried to determine if the IRS considers the distribution as coming from the pre-1987 contributions or not. I have read where in some cases that withdrawals are considered FIFO (first in first out) by the IRS.

If the IRS applies FIFO to the pre-1987 contributions would it then reduce the pre-1987 contributions amount by the 2023 withdrawal for future RMD calculations?

As always any insight is greatly appreciated.

I personally have no idea without significant research. Maybe Taxing Matters or Dave will know off the top of their heads. However, in general if FIFO is applied to a situation then yes, that would mean that the pre-1987 contributions would be reduced by the amount of the withdrawal.

 

[davew9128]

I personally have no idea without significant research. Maybe Taxing Matters or Dave will know off the top of their heads. However, in general if FIFO is applied to a situation then yes, that would mean that the pre-1987 contributions would be reduced by the amount of the withdrawal.

Yeah I have no idea. Not the day to be doing research on a fairly obscure area of qualified plan law.

 

[Taxing Matters]

Yeah I have no idea. Not the day to be doing research on a fairly obscure area of qualified plan law.

Well, I'd say being really busy on the extended filing deadline date is generally a good thing, unless you have so much to do that you are stressing out over it.

 

[davew9128]

Well, I'd say being really busy on the extended filing deadline date is generally a good thing, unless you have so much to do that you are stressing out over it.

It's more a matter of time management for administrative purposes and coordination of signatures, filing, etc. That's stressful even if you're not trying to complete returns.

Then again, IRS literally just gave us another month this morning because of some rain in January so what do I know?

 

[Bali Hai Again]

See below for those who may be interested:

The amount is based on your account balance at the end of the previous year and, generally, the life expectancy factor provided by the IRS in the Uniform Lifetime Table. Your RMD will change every year based on those two numbers. Please note: If you're participating in a 403(b) retirement plan, any contributions and earnings credited before 1987 are not subject to RMDs until the year you turn age 75 if such balances are separately accounted for by the plan and the plan permits. Keep in mind that any withdrawals you take before you are subject to the minimum distribution requirements, or withdrawals for more than the required amounts, will reduce your pre-1987 balance first.

 

[LdiJ]

See below for those who may be interested:

The amount is based on your account balance at the end of the previous year and, generally, the life expectancy factor provided by the IRS in the Uniform Lifetime Table. Your RMD will change every year based on those two numbers. Please note: If you're participating in a 403(b) retirement plan, any contributions and earnings credited before 1987 are not subject to RMDs until the year you turn age 75 if such balances are separately accounted for by the plan and the plan permits. Keep in mind that any withdrawals you take before you are subject to the minimum distribution requirements, or withdrawals for more than the required amounts, will reduce your pre-1987 balance first.

That answer doesn't surprise me. It's pretty logical.

 

[Bali Hai Again]

That answer doesn't surprise me. It's pretty logical.

It is pretty logical especially after being confirmed. A 2002 QDRO split the account in half. Does this mean that the ex took half the pre-1987 money? I think the “logical“ answer is yes. That makes the few remaining tax savings not worth the effort of pursuing. The government and ex win!

 

[LdiJ]

It is pretty logical especially after being confirmed. A 2002 QDRO split the account in half. Does this mean that the ex took half the pre-1987 money? I think the “logical“ answer is yes. That makes the few remaining tax savings not worth the effort of pursuing. The government and ex win!

I am not sure that the tax code addresses that. Also, whether or not it is logical in my mind would depend on whether any accrued prior to marriage.

 

[Bali Hai Again]

I am not sure that the tax code addresses that. Also, whether or not it is logical in my mind would depend on whether any accrued prior to marriage.

Thank you for your response.
All of the pre-1987 account funds accrued during the marriage and were contributed by my employer as part of a benefits package. None of the funds were contributed to this account in addition to the employer by my paycheck until later years.