Defined Benefit Plan Qualified Rollover

[Leyeden]

What is the name of your state (only U.S. law)? ohio

i have a defined benefit pension through my trade union. the pension summary plan description reads

" H. Can my payment be directly rolled over into an individual retirement account or another employer plan? Generally not. However, if your distribution qualifies as an eligible rollover distribution, you may elect to have your distribution directly rolled over, within sixty days after you elect to do so, to an individual retirement account or another employer sponsored, tax qualified retirement plan. these kinds of transfers are referred to as "direct rollovers." in a direct rollover, the eligible rollover payment is made directly from the plan to an ira or another retirement plan that accepts rollovers. if you elect a direct rollover, you are not taxed on the amount rolled over until you later receive a distribution from the ira or the retirement plan that received the direct rollover. monthly pension benefits are not eligible for rollover."

what is a qualified eligible rollover(i know i have to ask them, but is there an irs law or something for this?), can i move my money once every year to an ira? are they aloud to charge me a penalty for this.

i am just starting out in my career with this pension and the trustees over it appear incompetent and are doing things that i believe will cost me money so i would like to rollover into an ira if possible. i know defined benefits are awesome but i don't trust the trustees and there are other similar pensions in the tank right now. i am vested (it takes i think 5 years)



ive been reading through 26 CFR 1.401(a)(31)-1 - Requirement to offer direct rollover of eligible rollover distributions; questions and answers.



any information or direction on this is greatly appreciated.

 

[Leyeden]

Q-2: Does section 401(a)(31) require that a qualified plan permit a direct rollover to be made to a qualified trust that is not part of a defined contribution plan?

A-2: No. Section 401(a)(31)(D) limits the types of qualified trusts that are treated as eligible retirement plans to defined contribution plans that accept eligible rollover distributions. Therefore, although a plan is permitted, at a participant's election, to make a direct rollover to any type of eligible retirement plan, as defined in section 402(c)(8)(B) (including a defined benefit plan), a plan will not fail to satisfy section 401(a)(31) solely because the plan will not permit a direct rollover to a qualified trust that is part of a defined benefit plan. In contrast, if a distributee elects a direct rollover of an eligible rollover distribution to an annuity plan described in section 403(a), that distribution must be paid to the annuity plan, even if the recipient annuity plan is a defined benefit plan.


this appears to say i have a right to rollover, but can i roll it over into a personal ira, not an employer sponsored one

 

[cbg]

Defined benefit plans and defined contribution plans are NOT the same and the rules are different. You're asking questions about defined benefits but showing a regulation for defined contribution. Which is yours?

 

[Leyeden]

Defined benefit plans and defined contribution plans are NOT the same and the rules are different. You're asking questions about defined benefits but showing a regulation for defined contribution. Which is yours?

defined benefit, i thought the regulation dealt with both, thanks

 

[HRZ]

It's hard to imagine rolling over a defined benefit plan to some other entity as generally speaking thenplan focuses on the payout not the principal.....some plans do allow the individual to withdraw and roll over the individual contribution....but that suggests some serious homework as to the math and yields involved via a move

 

[Leyeden]

It's hard to imagine rolling over a defined benefit plan to some other entity as generally speaking thenplan focuses on the payout not the principal.....some plans do allow the individual to withdraw and roll over the individual contribution....but that suggests some serious homework as to the math and yields involved via a move

i believe you can only rollover the principal (what was paid in for the hours you worked (mines $4/hr) not interest or yield) but i don't know for sure

i would probably do it once or twice every year

 

[PayrollHRGuy]

i believe you can only rollover the principal (what was paid in for the hours you worked (mines $4/hr) not interest or yield)

i would probably do it once or twice every year

And where in the law have you found that is the case with a defined benefit plan? Is your a defined benefit plan?

Not that you are wrong but it is generally better to backup your answers here with a cite.

 

[Leyeden]

And where in the law have you found that is the case with a defined benefit plan? Is your a defined benefit plan?

Not that you are wrong but it is generally better to backup your answers here with a cite.

i have not found a credible source for that info, but i have read that somewhere and it sounds legit,but that doesn't mean anything. i'm the OP by the way. i edited the post in question to say i don't know for sure (i agree with you, thanks)

it is a defined benefit plan (traditional pension), not a defined contribution (what i would call annuity)

 

[HRZ]

THe defined benefit plan my spouse has allows a roll out at retirement of ones own contribution ....but the imputed rate of return to stay in is far far better and safer in my opinion than the options upon roll out.

IF however you are in some plan with a dubious history or prior problems ...then to roll out might be a different set of issues.

 

[Leyeden]

THe defined benefit plan my spouse has allows a roll out at retirement of ones own contribution ....but the imputed rate of return to stay in is far far better and safer in my opinion than the options upon roll out.

IF however you are in some plan with a dubious history or prior problems ...then to roll out might be a different set of issues.

yeah i likely will not roll at retirement, i am talking about doing in something like semi-annually while i work throughout my career

 

[PayrollHRGuy]

i'm the OP by the way.

Sorry, I thought I'd scrolled up and checked the name of the OP. I just didn't want you to get bad info.

 

[Leyeden]

Sorry, I thought I'd scrolled up and checked the name of the OP. I just didn't want you to get bad info.

no problem, i appreciate your comment, it helps anyone else that runs across this thread on a search for the info in the future

 

[cbg]

No, the rules for a defined benefit plan and a defined contribution plan are most definitely not the same. Consider yourself lucky if you still have a DB plan - they're much more expensive for the employer and many if not most employers are scaling back or even eliminating them altogether. My employer, which has one of the most generous benefit packages I've ever seen in close to 40 years of administrating employee benefits, closed their DB plan to new employees over 15 years ago. Employees who were already enrolled in it will keep their benefits but there have been no new contributions made to the DB plan, and no new employees have been allowed to enroll in it, since 2002. It's defined contribution all the way these days.

Tell me, in what way do you believe you would benefit by rolling over your DB plan to an IRA? A DB plan is a pretty good benefit just on its own.

 

[Taxing Matters]

yeah i likely will not roll at retirement, i am talking about doing in something like semi-annually while i work throughout my career

That you cannot do. With a defined benfit plan, in-service distributions (distributions while working) are not possible until you reach the normal retirement age (generally age 62). You will see that noted by the IRS here:
https://www.irs.gov/retirement-plans/choosing-a-retirement-plan-defined-benefit-plan

You must be able to take a distribution before you may roll it over.

 

[Leyeden]

No, the rules for a defined benefit plan and a defined contribution plan are most definitely not the same. Consider yourself lucky if you still have a DB plan - they're much more expensive for the employer and many if not most employers are scaling back or even eliminating them altogether. My employer, which has one of the most generous benefit packages I've ever seen in close to 40 years of administrating employee benefits, closed their DB plan to new employees over 15 years ago. Employees who were already enrolled in it will keep their benefits but there have been no new contributions made to the DB plan, and no new employees have been allowed to enroll in it, since 2002. It's defined contribution all the way these days.

Tell me, in what way do you believe you would benefit by rolling over your DB plan to an IRA? A DB plan is a pretty good benefit just on its own.

the defined benefit plan is administered by trustees from the union and trustees from the contractors association (i believe 3 and 3), they have benefit payout very high, the guys on the trustees will be retiring in the next 10 years, we will eventually have to lower the benefit because its not practical to expect the economy to sustain at the current levels. there have been several other defined benefit plans in the trade unions that have went under in the recent years where beneficiaries benefits were cut in half. (teamsters around here did just last year). somehow they already made it were we are not getting credited for something like $0.35/hr. our labor contract is that $4.00/hr is put into the defined benefit on our behalf