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Duke Energy Employees: What the IRS's New QCD Reporting Code Means for Your IRA and Charitable Giving
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'For Duke Energy employees and retirees who are considering charitable giving, understanding how Qualified Charitable Distributions are reported and coordinating with qualified tax professionals can help support more informed retirement planning decisions, and Michael Corgiat, a representative of The Retirement Group, a division of Wealth Enhancement Group, encourages individuals to review their overall retirement strategy with experienced financial professionals while seeking individualized tax guidance from their tax advisor.' – Michael Corgiat, a representative of The Retirement Group, a division of Wealth Enhancement Group.
'For Duke Energy employees and retirees, staying informed about Qualified Charitable Distribution rules and IRS reporting updates can help make charitable giving a more effective part of a broader retirement plan, and Brent Wolf, a representative of The Retirement Group, a division of Wealth Enhancement Group, encourages individuals to coordinate their retirement planning with financial professionals and consult their tax advisor for guidance specific to their situation.' – Brent Wolf, a representative of The Retirement Group, a division of Wealth Enhancement Group
In this article we will discuss:
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How Qualified Charitable Distributions (QCDs) work and the IRS eligibility requirements for making tax-efficient charitable gifts from an IRA.
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The new IRS Code Y on Form 1099-R and how it simplifies reporting Qualified Charitable Distributions beginning with 2025 reporting.
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Important planning considerations and common misconceptions about QCDs, including reporting responsibilities, Roth IRA rules, and potential retirement income tax benefits.
The option for people who are at least 70½ years old to donate up to $108,000 (2025 maximum) directly from their IRA to an approved charity is one of the most tax-friendly features available to eligible IRA owners. We refer to this strategy as a Qualified Charitable Distribution (QCD). Your taxable income does not include a QCD, making it an important retirement planning consideration for many Duke Energy employees. Unlike a traditional charitable contribution, which may only provide a tax deduction if you itemize, a QCD can offer a tax benefit without requiring you to itemize deductions.
The age requirement for making a QCD remains 70½ , even though the age for required minimum distributions (RMDs) has increased to 73 . Married spouses filing jointly may each contribute up to the annual QCD limit from their own IRAs.
Until recently, QCDs created a reporting challenge. IRA custodians generally reported these distributions on IRS Form 1099-R as standard IRA distributions rather than identifying them as Qualified Charitable Distributions. As a result, taxpayers and their tax preparers needed to correctly report the QCD on Form 1040 so it was excluded from taxable income, a process that occasionally resulted in misunderstandings or reporting errors.
Beginning with 2025 reporting , the IRS simplified this process by introducing Code Y on Form 1099-R to identify Qualified Charitable Distributions.
The New Code Y for Qualified Charitable Distributions
Starting with 2025 reporting, IRA custodians may identify a Qualified Charitable Distribution by entering Code Y in Box 7 of Form 1099-R. Code Y is used alongside another distribution code to provide additional information:
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- A QCD from a non-inherited (regular distribution) IRA uses Code 7.
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- A QCD from an inherited IRA uses Code 4.
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- A QCD involving traditional IRA assets without a readily available fair market value uses Code K.
- Code Y works well when the entire distribution qualifies as a QCD. If only part of the distribution qualifies, the eligible amount must still be accurately determined and properly reported.
The Myth About QCDs and Roth IRAs
Many people believe Roth IRAs cannot be used for Qualified Charitable Distributions. However, IRS guidance indicates that, under certain circumstances, QCDs may be made from Roth IRAs. Although technically permitted, this is generally not considered an advantageous tax-planning strategy because qualified Roth IRA distributions are typically already tax-free.
Not Every Charitable Gift Qualifies as a QCD
A Qualified Charitable Distribution is available only if:
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- You are at least 70½ years old.
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- The funds are transferred directly from your IRA to a qualified charitable organization.
Before requesting a QCD, it is important to review the applicable IRS requirements because eligibility depends on meeting all qualifying rules.
Regular Charitable Donations vs. Qualified Charitable Distributions
If you itemize deductions, charitable gifts made from your checking account or other non-IRA assets may qualify for a tax deduction, subject to applicable IRS limits.
A Qualified Charitable Distribution, however, is excluded from taxable income. Keeping taxable income lower may also help reduce Medicare premium surcharges and other income-related costs, which can be an important consideration for retirees, including many former Duke Energy employees.
For example, Jane, age 74, is required to take a $20,000 minimum distribution from her traditional IRA. She instructs her IRA custodian to transfer $15,000 directly to a qualified charity as a QCD. Because the $15,000 qualifies as a QCD, it is excluded from her taxable income. As a result, her adjusted gross income remains lower, which may reduce the likelihood of higher Medicare premiums. Had she received the full $20,000 personally before making the charitable gift, the entire amount would generally have been included in her taxable income before any charitable deduction was considered.
Your Responsibility in the QCD Process
Your IRA custodian cannot determine whether your distribution satisfies every IRS requirement for a Qualified Charitable Distribution. When reporting a QCD up to the applicable annual limit, custodians are permitted to rely on your reasonable representations. Many custodians include a checkbox on their distribution request forms that allows you to indicate your intent to make a Qualified Charitable Distribution.
Although custodians typically do not withhold taxes on distributions intended to qualify as QCDs, they cannot verify that every IRS requirement has been satisfied. You and your tax preparer remain responsible for confirming the distribution qualifies and is correctly reported.
What If Your Custodian Does Not Use Code Y?
Although Code Y became available beginning with 2025 reporting, the IRS made its use optional for that reporting year. As a result, not every IRA custodian immediately adopted the new reporting code.
If your 2025 Form 1099-R does not include Code Y, continue following the standard reporting process by informing your tax preparer of the amount that qualifies as a Qualified Charitable Distribution so it can be accurately reported on your federal income tax return.
Code Y Simplifies Reporting, But Accuracy Still Matters
The introduction of Code Y is a helpful improvement because it makes Qualified Charitable Distributions easier to identify on Form 1099-R and may reduce reporting errors. Even with this change, taxpayers should continue maintaining accurate records and working closely with their tax preparer to help confirm their QCD is reported correctly.
When used appropriately, Qualified Charitable Distributions remain one of the most tax-efficient charitable giving strategies available to eligible IRA owners and may be a valuable planning opportunity for employees and retirees with ties to Duke Energy.
If you have questions about how a Qualified Charitable Distribution could fit into your retirement income strategy, The Retirement Group can help you review your retirement planning options. To learn more about retirement planning considerations that may apply to your situation, call The Retirement Group at (800) 900-5867 and speak with a member of the team.
Sources:
1. Internal Revenue Service. Publication 590-B: Distributions from Individual Retirement Arrangements (IRAs). U.S. Department of the Treasury, Mar. 2025, https://www.irs.gov/publications/p590b.
2. Internal Revenue Service. 2026 Instructions for Forms 1099-R and 5498. U.S. Department of the Treasury, 2025, https://www.irs.gov/instructions/i1099r .
3. Fidelity Investments. 'Qualified Charitable Distributions (QCDs).' Fidelity , updated 2025, https://www.fidelity.com .
4. Charles Schwab & Co., Inc. 'Qualified Charitable Distributions (QCDs): Rules and Benefits.' Charles Schwab , updated 2025, https://www.schwab.com .
5. Vanguard. 'Qualified Charitable Distributions (QCDs).' Vanguard , updated 2025, https://investor.vanguard.com .
How does the Duke Employees' Retirement Plan calculate benefits at normal retirement age, specifically for employees who reach the age of 65? In what circumstances might an employee consider retiring before reaching this age, and how would the benefits differ if they choose this option?
Benefit Calculation at Normal Retirement Age: Duke Employees' Retirement Plan calculates benefits for employees who retire at age 65 by applying a formula that includes 1.25% of their average final compensation for the first 20 years of credited service and 1.66% for any additional years. If an employee retires before 65, they can do so after age 45 with 15 years of service, but their benefits will be reduced based on how early they retire, resulting in lower payments due to a longer payout period.
What considerations should an employee keep in mind regarding their unused sick leave or carry-over bank hours when calculating benefits under the Duke Employees’ Retirement Plan? How does Duke utilize these factors to enhance an employee's credited service for the purpose of benefit calculation?
Impact of Unused Sick Leave and Carry-Over Bank Hours: Unused sick leave and carry-over bank hours are converted into additional credited service, which can enhance the calculation of retirement benefits. Employees who have accumulated these hours can see their credited service extended, leading to higher pension benefits at retirement.
In what situations would an employee's benefits under the Duke Employees' Retirement Plan be automatically paid in a lump sum? How does the Plan determine the value of benefits that fall below the threshold for monthly payouts, and what implications does this have for retirement planning?
Lump-Sum Payments for Small Benefits: If the value of an employee's benefit is $5,000 or less, Duke Employees' Retirement Plan automatically pays it as a lump sum. For benefits between $5,000 and $10,000, employees can choose between a lump-sum payment or a monthly pension. This can significantly impact retirement planning, especially for employees weighing whether to take a smaller upfront amount or spread it over time.
How does the Duke Employees' Retirement Plan handle benefit adjustments for employees who continue to work beyond their normal retirement age? What factors influence how these adjustments are calculated, and what implications might this have for future financial planning for employees nearing retirement?
Benefit Adjustments for Postponed Retirement: Employees who continue working beyond their normal retirement date will see their benefits increased annually (by no less than 10%) to account for the shorter period during which they will receive payments. The plan recalculates benefits based on the employee’s continued service and compensation after age 65.
What options are available to employees of Duke University regarding payment forms when they retire, and what are the long-term implications of choosing each option? How do these choices affect both the retiree's monthly income and survivor benefits for a spouse or other beneficiary?
Payment Form Options and Implications: At retirement, employees can choose various payment options such as a single life annuity, joint and survivor annuities, or a lump-sum payment. These choices affect the amount received monthly and any survivor benefits for a spouse or beneficiary. Employees should carefully consider their long-term financial needs and the needs of their beneficiaries when selecting a payment option.
What specific protections does the Duke Employees' Retirement Plan provide for spouses in the event of an employee's death, and how does this influence the choice of payment options? What steps must an employee take to ensure that their spouse's rights are upheld under the Plan?
Spousal Protections: The Plan provides protections for spouses in the event of an employee's death. A surviving spouse can receive 50% of the employee's reduced monthly benefit through a joint and survivor annuity. Employees must take steps to ensure spousal rights are protected by selecting the appropriate payment option and ensuring the necessary documentation is completed.
How can employees of Duke University ensure that they are informed about their rights under ERISA while participating in the Employees' Retirement Plan? What resources and tools does Duke provide to help employees understand and assert these rights?
Employee Rights Under ERISA: Duke provides resources for employees to understand their rights under ERISA, including access to plan documents and assistance in filing claims. Employees are encouraged to use Duke's available tools to assert their rights and ensure they are fully informed about the benefits available to them under the Plan.
In what ways can employees at Duke University navigate the complexities of reemployment after retirement, and how does their choice of retiree status affect their benefits? What regulations govern how benefits are recalculated if they choose to return to work at Duke?
Reemployment After Retirement: Employees who return to work at Duke after retiring can continue to receive their pension if they work fewer than 1,000 hours per year. However, if they exceed 1,000 hours, their payments will be paused and recalculated based on additional service and earnings when they retire again. This provides flexibility for employees considering reemployment after retirement.
What impact do legislative changes, such as those introduced by the IRS, have on the Duke Employees' Retirement Plan’s structure and benefits? How should employees approach understanding these changes in the context of their personal retirement strategies?
Impact of Legislative Changes: Changes introduced by the IRS or other regulatory bodies can impact the structure of the Duke Employees' Retirement Plan and its benefits. Employees should stay informed about these changes and how they affect personal retirement strategies, particularly regarding tax laws and pension calculations.
How can employees at Duke University contact the Retirement Board for questions or clarifications regarding their retirement benefits? What is the best approach for reaching out to ensure that they receive timely and accurate information?
Contacting the Retirement Board: Employees can contact Duke's Retirement Board for any questions or clarifications regarding their retirement benefits. The Retirement Board is responsible for managing the Plan, and employees are encouraged to reach out directly for timely and accurate information to address any concerns about their retirement.
For more information you can reach the plan administrator for Duke Energy at 550 S Tryon St Charlotte, NC 28202; or by calling them at (800) 777-9898.
https://hr.duke.edu/benefits/retirement/457b/ https://investors.duke-energy.com/news/news-details/2022/Duke-Energy-expands-clean-energy-action-plan-02-09-2022/default.aspx https://www.stordahlcap.com/insights/understanding-net-unrealized-appreciation-nua-and-its-tax-benefits https://corient.com/insights/articles/net-unrealized-appreciation-strategy-after-tax-contributions https://www.thelayoff.com/duke-energy?page=2 https://www.myplaniq.com/LTISystem/f401k_plan.action?ID=4666 https://www.sec.gov/ https://simpleqdro.com/
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