Transfer of Account in which SEPP has begun

L1: Transfer of Account in which SEPP has begun
Mr. Smith, age 57,rolled his 401k into an IRAbrokerage account (mutual funds) two years ago and has taken SEPP distributions for each of the last two years. Now he wants to movehis IRA account out ofthe brokerage accountand into a deferredannuity policy. Heplans to continue SEPP distributions for at least three more years so that he meets the 5-year requirement. Does the IRS care if the investment vehicle changes as long as the annual SEPP distributions continue?Is the SEPPbusted bymoving the account from equities to an annuity policy?
2007-02-15 14:34, By: Alan, IP: [69.38.115.33]

L2: Transfer of Account in which SEPP has begunA transfer of assets from the 72t account into a new 72t account does not bust the plan, but it does set create potentially negative investment results. Does the annuity agent realize that he is buying the annuity with his (probably only) SEPP account and that at least 3 more years of distributions must follow? Will there be surrender charges on the amount needed to fund the distributions, and if so this should kill this idea right away. Will the insurance company be reporting distributions using the exception code on the 1099R?
I would get in writing that the dollars needed to fund the 72t distributions will be distributed without penalty of any kind using the distribution schedule desired, and that he is to reimbursed for all costs as a result of such failure. He should also be aware that should he needadditional funds, he will probably incur a surrender charge plus retroactive penalty and interest to the inception of the 72t plan.
2007-02-15 16:42, By: Alan S., IP: [24.116.66.98]

L2: Transfer of Account in which SEPP has begun
Alan S.,
Thanks for your response. Yes, both the client and his advisor are aware that the SEPP distributions must continue for at least 3 more years after the money is moved. The insurance company issuing the annuity does a good job of administering 72(t)s, doing the proper tax reporting, etc, and surrender charges don”t apply to the SEPP distributions. Client justwants a temporary income stream until his other retirement income sources kick in, and will not need to make any withdrawals from the annuity after three more years of SEPP distributions, so the annuity”s surrender charge schedule is not an issue for the client.2007-02-16 06:12, By: Alan, IP: [69.38.115.33]