L1: 72t busted?My husband has been taking early distributions from his IRA under the IRC 72t provision. Last year his requestedamount to be distributed from Vanguard was his calculated SEPP amount butthe amount he actually received(and which was reported on his1099-R for 2010) was reduced by redemption fees. Will this discrepancy invalidate his plan?2011-03-19 20:48, By: Kaye, IP: [22.214.171.124]
L2: 72t busted?Hello, Kaye:
I am a Vanguard client as well and had a SEPP with them from 2005-2010. I never saw any change in my distributions due to Vanguard’s fees. They always took their fees from the balance in the IRA and never from the distributions. I assumed that this was the standard distribution method for anyone with a SEPP in place. Have you talked to a Vanguard rep about this? If not, I would suggest that you do so ASAP. If you do not get a thorough and complete explanation from the rep, ask to speak with a supervisor. If your plan balance changes due to market moves or custodial fees, the IRS does not count that as busting the SEPP. I don’t know about your particular situation with the actual distribution being changed. You need clarification of this from Vanguard and sooner rather than later. In general, changes in your SEPP distribution are not allowed unless you are either recalculating your annual distributions or are using the 1-time switch from the amortization or annuitization methods to the RMD method.
2011-03-19 23:48, By: Ed_B, IP: [126.96.36.199]
L3: 72t busted?I agree with Ed. My Vanguard SEPP has been running since 2007, and I have never seen a variation in my payout due to any redemption fees. KEN2011-03-20 01:47, By: Ken, IP: [188.8.131.52]
L4: 72t busted?Certain Vanguard funds do have redemption fees. But, I agree that this should never affect the amount distributed to you.
Please give the detailed amounts that you are refering to. The amount of the actual check for the distribution is the key figure, not the total on the account which shows “withdrwals”, because that figure wuld be all withdrawals including any fees, but it is not the amount reported on the 1099-R. What is the Gross Distribution on the 1099-R, and how much is your annual distribution amount ?2011-03-20 02:35, By: dlzallestaxes, IP: [184.108.40.206]
L5: 72t busted?He has a calculated SEPP amt of $96,479 and his 1099-R states $95,522 so it is only a 1% difference, but I’m worried. My husband isn’t worried because he says it is supposed to bea substantially equal payment not exactly equal.2011-03-20 12:52, By: Kaye, IP: [220.127.116.11]
L6: 72t busted?Typically,substantually equal to the IRS means a variance of $1 or less on the calculated annual payment. He only needs to be worried if he gets an audit notice. Did you ever follow the previous advice and follow-up with Vanguard? 2011-03-20 13:05, By: Gfw, IP: [18.104.22.168]
L7: 72t busted?I made my husband call Vanguard but it was Saturday and he was told to call backon Mondaybecause the Resource Dept(?) was not available on Saturday.BTW – 2010 was his3rd year he has been receiving distributions. He has onlytwo more years to go until he meets both the 5yr min and turns 59 1/2.2011-03-20 14:13, By: Kaye, IP: [22.214.171.124]
L7: 72t busted?Vanguard refuses to issue a corrected 1099-R. They say it is correct as is.2011-03-25 10:59, By: Kaye, IP: [126.96.36.199]
L8: 72t busted?At little more information.How did they explain the variance? Why wasn’t the amount the same?2011-03-25 12:08, By: Gfw, IP: [188.8.131.52]
L9: 72t busted?It is possible that they distributed all of the CASH that was available, and that you did not monitor you account properly to make sure that you had enough cash available.Further, as we have warned repeatedly, it is your responsibility to look at your Nov statement, and consider any Dec withdrawals, to make sure that the total distributions for the year will be correct.Did you do that ?2011-03-25 14:30, By: dlzallestaxes, IP: [184.108.40.206]