Q and A – Final Minimum Required Distribution from a Retirement Account

Question:  We have an 84-year old tenant who has a retirement account and is required to take out a minimum required distribution each year. She takes out $6,000 each year. We included $6,000 as income on her March 2015 Annual Recertification and did not list the retirement account as an asset on the 50059. This year, while conducting her March 2016 Annual interview, we asked her if she was taking out the same $6,000 distribution. She said no – there is only $1,500 remaining in the account.  She said she will withdraw the remaining $1,500 on April 1, 2016 and will then close the account. What do I count as income on the March 2016 Annual?

~ Simon, Georgia

Answer:Retirement funds can be tricky! Because she plans to withdraw the remaining balance on April 1, 2016, the distribution (the periodic payment) will occur during the term of the March 2016 Annual. This $1,500 payment should be included as income on the 2016 Annual. Once the account is closed, there will be no income from this source on the 2017 Annual.

As a general reminder for all readers, per Change 4, 5-6L1, “the full amount of periodic payments from…retirement funds…is included in annual income.” The key term here is ‘periodic payments.”  Section 5-6L2 goes on to say “Withdrawals from retirement savings accounts such as Individual Retirement Accounts and 401K accounts that are not periodic payments do not fall in this category and are not counted in annual income.”  It is important to recognize that what makes a payment periodic is the frequency it is paid, not the amount of the payment. In this scenario, the annual minimum required distributions were periodic payments. The only adjustment made for the 2016 Annual was the amount of the distribution received.