72T and 401K accounts
L1: 72T and 401K accounts
I started an SEPP plan in 2017 for what I assumed was a qualifying account.
I just got off the phone with Fidelity and they say that my 401K account (I retired in 2014) does not qualify for 72T withdrawals.
Any thoughts? Do I have some ‘splaining to do with the IRS?
My birth date April 1962. I have already started an SEPP plan based on amortization schedule. I took my first distribution in 2017 and second in 2018.
2019-01-07 20:48, By: Kent, IP: [2601:601:827f:eda5:595e:31eb:8602:be1c]
L2: 72T and 401K accounts
I would terminate the “excessive” SEPP 72-T plan immediately.
You can start a new SEPP 72-T plan using just the IRA remaining balance. You can use the highest IRA balance within the last few months, and the applicable interest rate.
When did you take the 2017 and 2018 distributions ? How much were the distributions ?
You paid the taxes on these distributions in 2017 and 2018. You would be subject to the 10% penalty for “early distributions” because of the SEPP 72-T plan probably being invalid as an exception to the 10% penalty.
Since there is probably no documentation that the IRS has, or Fidelity, you might be able to terminate the plan retroactively to just before the 2018 distribution, if it would have been about right for a new plan starting in 2018. That way you might only have penalties and explaining to do for 2017. Otherwise, you might be on the hook for penalties for 2018 also.
As you found out, 401-K plans and IRA plans are independent.
2019-01-07 21:18, By: dlzallestaxes, IP: [184.108.40.206]
L3: 72T and 401K accounts
I apologize for misunderstanding your situation. I thought you had included an IRA and your 401-K balances both in your calculation. I mis-read your posting, or confused it with another posting.
2019-01-10 16:29, By: dlzallestaxes, IP: [220.127.116.11]
L2: 72T and 401K accounts
I’m doing SEPP withdrawals from a 401K through Fidelity. It took a great deal of communication and follow-up to make it happen. Some at Fidelity said it could be done, others said no. After my first withdrawal, some said I owed a 10% penalty. I finally reached out to the HR department at my former employer, and after additional discussions about 72t rules and regulations, the HR rep confirmed for Fidelity that SEPP withdrawals were allowed with my plan. Since that time, everything has worked out with respect to filing taxes.
I share this because you might need to speak to several people, and not everyone at Fidelity is knowledgeable. There was a “back office” processing group at Fidelity that I could only communicate with via FAX, which was very frustrating. I was assigned a case number that accompanied all my communications.
My big takeaway is that anyone wanting to do SEPP withdrawals from a 401K should FIRST get in writing that the specific 401K plan allows for them.
2019-01-10 15:18, By: Tess, IP: [18.104.22.168]