I have been receiving a pension from a workplace. Last year, they decided to purchase an annuity for me instead of paying the pension. IRS wants to know what RMD I received from my annui=ty.
Executive summary
When an employer converts a pension to an annuity, the annual annuity payments generally count as required minimum distributions (RMDs) for the portion of the retirement account used to purchase that annuity, and recent law lets annuity payments sometimes satisfy RMDs for the originating account as well [1] [2]. The IRS will want documentation showing the annuity payments received during the calendar year and, where relevant, the year‑end fair market value (FMV) or the calculation that ties those payments to the account’s RMD requirement under SECURE 2.0 and existing RMD rules [3] [4] [1].
1. What the IRS is asking for — decode the request
The IRS’s inquiry about “what RMD I received from my annuity” is asking for the amount of annuity income that satisfies the RMD requirement for the relevant tax year — in practice that means the total annuity payments made to the participant in that calendar year and any calculation showing how those payments offset the account’s total required distribution [4] [1].
2. Basic RMD law that governs annuities
RMD rules require owners or participants to take minimum withdrawals beginning when the law’s required beginning date is reached (generally age 73 unless otherwise delayed), and the distribution rules apply to annuities held inside qualified plans and IRAs unless specifically exempted [2] [1]. For defined benefit plans that pay periodic annuity payments, the plan’s periodic annuity payments are how the plan meets its RMD obligations [5] [6].
3. How annuity payments count toward RMDs after an employer-purchased annuity
If an employer purchased a commercial income annuity with plan assets on behalf of the participant, the annuity payments made during the year are treated as the “annuity amount” and will be credited against the total required RMD for the originating account; SECURE 2.0 and implementing regulations define the “total required amount” and the “annuity amount” used in those calculations [4] [1]. Where only a portion of an account was annuitized, Publication 590‑B explains that the RMD for the remaining account can be the excess of the RMD calculated on the total (remaining balance plus the annuity’s value) over the annuity payments actually received [3].
4. How to calculate and document the RMD for the IRS
Two figures are typically required: (A) the total annuity payments actually received during the calendar year (this is the “annuity amount” under SECURE 2.0) and (B) if the account was partially annuitized, the calculation showing the RMD based on the combined value (remaining account balance plus annuity value) and the excess, if any, that remains as an RMD liability for the non‑annuitized portion [3] [4]. The insurer that issues the annuity reports the year‑end FMV of the annuity on Form 5498, which can be used in determining remaining RMD obligations, and plan or IRA custodians report distributions (and tax withholding) on Form 1099‑R [1].
5. Practical next steps and documents to assemble
Gather the insurer’s statement showing all annuity payments for the calendar year, the year‑end FMV reported to the IRS (Form 5498) or insurer valuation, and any plan documentation that describes how the employer converted the pension to an annuity; use those figures to show the IRS (a) the annuity payments received and (b) the RMD computation for any remaining account balance if applicable [1] [3] [5].
6. Common pitfalls, conflicting interpretations and when to get help
Regulatory changes under SECURE 2.0 altered how annuity payments interact with RMDs and left some implementation questions for plan administrators and insurers, so mismatches between insurer valuations, plan calculations, and IRS expectations are common — the IRS and Treasury finalized rules defining the “total required amount” and “annuity amount,” but plan administrators and issuers may differ in how they report or aggregate accounts [4] [1]. Where calculations are complex (partial annuitization, joint‑and‑survivor features, QLAC limits), seeking tax or plan‑administrator clarification is prudent because Publication 590‑B and IRS FAQs flag complicated scenarios and advise consultation [3] [5].
Bottom line
For IRS reporting the critical number is the annuity payments actually received in the year (the “annuity amount”) and, if only part of the account was annuitized, the supporting calculation showing how those payments satisfy or reduce the account’s total RMD obligation under SECURE 2.0 and IRS distribution rules [4] [3] [1]. If records or valuations are missing or the plan’s approach to annuity valuation differs from the insurer’s reporting, obtain the insurer’s year‑end FMV, payment history, and plan documentation and reconcile those items for the IRS; seek a tax advisor for complex or disputed calculations [1] [3] [5].