Client is attempting to rollout his DC portion of his retirement contributions from the State of Washington Retirement System. The request is being rejected with the following explanation. The client retired June 30, 2020 and received his first DB retirement check July 31. Any help or further reference would be appreciated. Mary

“IRS Section 415(b) requires that your annual defined benefit (DB, or pension), in the form of a straight life annuity, must not exceed $230,000 in 2020. This limit is adjusted for age, for after-tax dollars in your account, and for elective factors such as a survivor benefit. Your annual limit at the time you retired was $223,240 for the remainder of 2020, it will be $228,093 for a full year, and your annual benefit is about $90,149. This puts you well within the IRS limit, however your benefit is tested against the limit whenever there is a triggering event such as a withdrawal from your defined contribution (DC) account, a change in your survivor benefit, or if you return to membership and re-retire. In your case, the only triggering event that is likely to push you over the benefit limit is a withdrawal from your defined contributions.

If you decide to withdraw next year, at age 73, prior to your withdrawal, your DC balance will be multiplied by the IRS annuity factor for your age (0.0091175 at age 73), then multiplied by 12, resulting in an annual figure that will reduce your annual limit. If your DC balance were to be the same as it is today, the calculation would be: $2,005,223 x 0.0091175 x 12 = $219,391. That amount will be subtracted from your adjusted IRS limit of $229,996, leaving you a limit of only $10,604. Your annual defined benefit would be reduced by your after-tax contributions of $10,465, leaving you a DB of $79,684, a benefit that is over your adjusted limit by $69,080. Your benefit to limit ratio would be about 7.514.”