401(k) rollover to IRA

L1: 401(k) rollover to IRAI have a client, age 58 who has a 401(k). She retired a year and a half ago and wants to roll it over to an IRA. When she asked a question about this process to her 401(k) custodian, they told her she cannot roll it over because she will bust her 72(t). She has no recollection of ever setting up a 72(t) and has never taken any distributions from her 401(k). Even if she did inadvertently set up a 72(t), if she has never taken any distributions and has no documentation indicating a distribution method or first payment date, why wouldn”t she be able to roll it over to an IRA? 2007-03-16 17:07, By: therock27, IP: [71.233.204.43]
L2: 401(k) rollover to IRA
Sounds to me as if the 401k custodian is confused. Setting up a SEPP is not something that can be done by accident. It”s difficult enough to go through all of the steps involved on purpose! She should ask the 401k custodian what documentation they have on her SEPP. It would be interesting to see what they can or cannot come up with for this. I would imagine that no SEPP is possible without the active participation of the employee since a number of signatures are generally required to complete the paperwork.
If she separated from service during the year she turned 55 or older, she may be able to take withdrawals from her 401k plan. Some plans allow this and some do not. This may be what the 401k custodian is thinking about, although any custodian should know the difference.
Where I worked, only a lump-sum payout was available so rolling it into an IRA and starting a SEPP was necessary for me to retire early. Taking withdrawals from a 401k plan is not the same as a SEPP. There is no 10% early withdrawal penalty for 401k withdrawals as long as the employee has separated from service and is 55 or older at any time during the year of separation.
I”m not sure if I have answered your question fully here. This is a great web site for 72t information, so I”m sure that others will comment if I have missed anything or made any mistakes.
Ed_B
2007-03-16 20:15, By: Ed_B, IP: [67.170.159.37]

L2: 401(k) rollover to IRAThanks Ed, that really cleared things up. It was what I initially thought when she told me this, and the custodian either truly doesn”t understandor is trying to confuse her and make her keep the money there.
One thing I”d like to clarify however; the fact that she is able to take distributions from her 401(k) age 55 or above with no penalty does not effect her ability to roll over her money in any way whatsoever. Is this correct?
2007-03-17 06:03, By: therock27, IP: [71.233.204.43]

L2: 401(k) rollover to IRAIt sounds like your client was age 55 or older when she retired, so the penalty-free withdrawals from the K-plan is allowed, per IRS rules. However, like Ed said, check the distributions options for your client”s specific plan. She may not be allowed to take periodic distributions and may be restricted to only a lump sum which points to the Rollover IRA, which sounds like what she wants to do in the first place.
It should be easy to determine if she has an activeSEPP Plan associated with her K-plan. Simply review all of her quarterly statements and see if there are any distributions being made. Ifso, then where is the money going if your client says she isn”t receiving anything.
Whether there is or is not an active SEPP Distribution Plan active on her K-plan, you can still do an IRA Rollover.
Jim2007-03-17 11:17, By: Jim, IP: [24.252.195.14]

L2: 401(k) rollover to IRANote that the plan administrator”s terminology is not technically incorrect. 72t is the section of the code that deals with the 10% early withdrawal penalty, and the age 55 separation is just one of the sub sections. Substantially equal periodic payments are another. An IRA rollover would end the age 55 exception, and that is probably what they meant. If not, they might have been right by accident, and hopefully were not just trying to retain assets.2007-03-17 21:21, By: Alan S., IP: [24.116.66.98]