Issue 8. If a recipient of a qualifying public retirement or pension distribution that is fully deductible under subsection (11) rolls that distribution into a private IRA, will subsequent distributions from the private IRA qualify for the same treatment under subsection (11)?

Answer: Yes, the recipient’s public benefits rolled into the IRA would get the same treatment coming out of the IRA as they did prior to the rollover and would be fully deductible. However, any distributions from the IRA that are attributable to contributions made directly into the IRA, a rollover from a qualifying private retirement benefit source, and any earnings would be treated as private benefits and subject to the private benefits deduction limits. This is true regardless of the type of IRA into which those funds were converted (i.e., traditional or Roth). The tax-deductible character of the original retirement plan survives the rollover. See Magen v Mich Dep’t of Treasury , 299 Mich App 566 (2013), RAB 2017-21, and RAB 2017-25.

Taxpayers that claim a subtraction based upon the result in Magen may be required to submit all relevant account documentation establishing the source, timing, and amount of the rollover, and a statement of any post-rollover contributions and accrued earnings.