401K for SEPP

L1: 401K for SEPPLike low-rider, I have a 401K that I believe cannot be set up as a SEPP, meaning that I don”t think they will automatically make the checks out on a regular basis. My question: if I withdraw the amounts the SEPPS should be on my own, each month or each year, and do not touch the money for other purposes, should this be o.k.? I am assuming that the fund could not be touched for anything but these payments. In other words, does it really matter whether the adminstrator gets involved with coding for the SEPP? Hope this isn”t too confusing. Thanks so much. I really want the money to stay with the protections afforded a qualified plan.2006-05-16 11:59, By: Ray, IP: [206.194.127.112]
L2: 401K for SEPPHello Ray:
It is always nice to have a cooperative plan administrator but it is not necessary as long as they will process your withdrawal request(s). However, unless you are near/over 55, this raises the bigger question: why keep the money in the 401(k) plan?
TheBadger
wjstecker@wispertel.net
2006-05-16 16:36, By: TheBadger, IP: [66.109.211.254]

L2: 401K for SEPPI”m afraid any incomewill have to come out of the 401K. I probably will not be able to get medical insurance when I am no longer working, and I don”t want 350K going to pay hospital bills. Maybe that wouldn”t happen, but if it does, and the money is in a qualified plan, no one can get it, except for federal taxing authorities, someone with a Quailifed Domestic Relations Order, or the Plan itself, if I actually defrauded it. Thanks so much for your help. 2006-05-16 17:51, By: Ray, IP: [206.194.127.112]

L2: 401K for SEPPRemember that the federal bankruptcy act passed last October now accords bankruptcy protection to IRA accounts. Some states also provide complete IRA protection.
Also, remember that if you meet the age 55 separation from service requirement, there is no penalty on 401k plan distributions, and therefore no need for a SEPP. If not, you can use the plan for SEPPs, but you need a complete understanding of what your partial distribution options are with the plan. For example, some plans only allow fixed installment amounts and they are not based on the correct calculators for a SEPP.
2006-05-16 21:28, By: Alan S., IP: [24.116.165.157]

L2: 401K for SEPPThanks, Alan. I really appreciate the interest and generosity of your sharing your knowledge. And the same to you, Badger, and everyone else who helps. Thanks. This is a wonderful place to get and share a little knowledge.
I will be 53 in September. I have about 345K right now, 310 in a 401K with a former employer, at a fixed 5.44%. That rate will increase big-time. I have another 35K in my current employer”s 401, all in the stock market. Fromthe large account, I would have to ask for each distribution, in any amount. I can do as many as I like, but the administrator won”t do it automatically. That”s the one I”d like to use for the SEPP, probably taking 30K as a penalized withdrawal before beginning a SEPP. Byearly2008, the account ought to be back up to about 300K , which would bethe SEPP money. The small account would be the emergency fund, and I would try to not touch it often. That plan would do the SEPP distributions, but it has no decent fixed return, and I”m really paranoid about the stock market, as a lot of others probably are after the last week and a half or so. Can I use the big planas a SEPP if I have to request each distribution?
I would like to become re-employed with a company with a decent 401, roll over the big account, and then separate after age 55, or during the year I turn 55. I should be able to pull that off, though I”m not sure. Does anyone know of any rules regarding such a maneuver? Would I have to do the rollover prior to the year I turn 55? It just doesn”t seem to me that the IRS would allow someone 55 years old to change employers, do a rollover, and then take all the money penalty-free. If that”s true, I won”t use a SEPP; I could certainly find an employer with a decent 401K eventually. I read in AARP magazine that even Starbucks has a 401K for part-time employees. The 401K would have to be suitable for my purposes – distribution options, investment vehicles, etc.
I”ve talked with several folks about this, including the IRS, and no one sees a problem, although, I”ve never asked about whether the rollover could occur after age 55.
I wouldn”t ordinarily write a book like this, but no one could help if I didn”t share some details. I am going to have to retire for health reasons, but I have little hope at all of any disability from SS. I won”t be able to get medical insurance, so I can”t leave the funds vulnerable. I know this may seem unethical, but otherwise I have nothing to live on and no way to earn a living. Such happens to people. I knowthe new bankruptcy law exempts IRAs. A 401K is protected outside of bankruptcy, too. And a 401K plan does not become even a part of the bankruptcy estate.
Thanks, all.
Ray

2006-05-17 11:15, By: Ray, IP: [206.194.127.112]

L2: 401K for SEPPRay:
As long as your actions are within the law and it may seem that your are “taking advantage” of something that maylooklike a “loophole” to you, don”t worry about it. Judge Learned Hand (that”s his real name) of the 2nd Circuit Court for DC gave a veryuseful opinion on this subject many years ago, which I will try to paraphrase here. Judge Hand said that a person is not required to arrange their financial affairs to benefit The Government but may arrange things, within the law,to the benefit of the person. If anyone has the exact quote this would be a good time to paste it in.
So, learn all you can about what you can and cannot do, within the law, and run with it. If you can find the right K-plan to suit your needs and the employer who will hire you, then go for it. Yes, you can find the final employer and transfer all other K-plans into your last employer, then retire during the year you reach age 55, and make withdrawals without the 10% Early Withdrawal Penalty … but you do have to pay the taxes. Talk with the HR office at the employer(s) for details of what you can and cannot do with their plans.
Good luck.
Jim2006-05-17 11:31, By: Jim, IP: [70.184.1.35]