72t distributions – from one account?
L1: 72t distributions – from one account?I’m working with an individual who is wanting to explore the option of
taking substantially equal periodic payments under Code Section 72(t).
He has two investment accounts – a mutual fund account and a variable
annuity. Can he take the payments all from one account until that
account is exhausted (if both accounts are used in the calculation of the amount of the distributions)? For example, he would like to take the payments
from the mutual fund account and leave the variable annuity untouched
for now. As long as the correct amount of distributions are taken, is
this acceptable? I haven’t found anything to say that it isn’t, but
wanted to see if you ladies and gentlemen have any thoughts.Thanks!2009-08-28 17:08, By: MikeD, IP: [126.96.36.199]
L2: 72t distributions – from one account?Insufficient information.
What are the sources of the funds in the annuity and the mutual fund?
Are they both qualified accounts?2009-08-28 17:16, By: Gfw, IP: [188.8.131.52]
L3: 72t distributions – from one account?Yes, both are qualified accounts within his 401k plan. (401k plan with self-directed accounts)2009-08-28 17:21, By: MikeD, IP: [184.108.40.206]
L4: 72t distributions – from one account?Your client must be separated from service to request a SEPP from a qualified plan. Also a Qualified Plan administrator may not allow a SEPP distribution depending on the plan language/distribution options. It may be better ( if separated from service) to directly rollover to an IRA and then initiate the SEPP plan. You will have more control and possibly more investment options for your client.2009-08-28 17:56, By: jevd, IP: [220.127.116.11]
L4: 72t distributions – from one account?Assuming your client has seperated from service, did he seperate before or after age 55?2009-08-28 18:48, By: Gfw, IP: [18.104.22.168]
L5: 72t distributions – from one account?CLARIFICATION :
If your client will be 55 or older before 12/31/2009, and separates from service from the 401-k employer, then he should see if this plan administrator permitspartialdistributions from that plan. If so, then he should not set up a SEPP, but rather should take whatever amounts he wants whenever he wants, andn one of it will be subject to a 10% penalty, but will be subject to the federal and state income taxes, as usual.
If he is still working for the same employer, then this provision does not apply.
If he is54 or under, and planning to remain with this employer for a few years, then the rollover to his own IRA is the best alternative.
What is his date of birth, amount in each account, etc. ?2009-08-28 20:40, By: dlzallestaxes, IP: [22.214.171.124]
L6: 72t distributions – from one account?If he is still working for the employer, the only way he may take a direct rollover from the 401(k) to an IRA is if in-service distributions are allowed under the plan. There are restrictions as to what funds are available for in-service distributions. Elective contributions (deferrals) may not be distributed as in-service distributioins. Only employer contributions generally may be distributed and only after a certain number of years after being contributed. Your client should check with his plan administrator regarding the plan language if he is not separated from service.2009-08-28 20:59, By: jevd, IP: [126.96.36.199]