L1: 72t RecalculationI have a client that has been taking SEPP from his IRA for several years, and would like to make the one time change. He is currently taking a monthly distribution of $2,500 and has taken a total of $7,500 this year. The $2,500 distributions were taken on 1/2/09, 2/2/09, and 3/2/09. I calculated his 2009 RMD based on his 12/31/2008 balance and a single life expectancy to be $6,431.90, therefore he has withdrawn $1,068.10 over his RMD for 2009. I know that I can just keep taking the $2,500/month this year and do the one time change in 2010, but I am trying to figure out if there is anything that I can do for 2009.
I read in one posting about rolling back theexcess into the IRA under the 60 day rule,and then stopping withdrawals for this year. I feel that I need more support before I do this. Also, I work for a major firm and may be at their mercy considering correct coding/recoding of the distributions. Any suggestions?2009-03-30 13:05, By: Andy, IP: [220.127.116.11]
L2: 72t RecalculationYes, the client can still make the one time switch effective 1/1/2009 by rolling back the $1068 within 60 days. The caveat here is that the client must not have used up his one permitted rollover per 12 month period, and the client must also be extra careful not to put himself in the position of having to do another rollover for the next 12 months if this one is permitted.
While a 72t distribution is NOT rollover eligible, a 72t distribution is only deemed to be the amount required to be distributed under the plan. With the one time switch the amount required to be distributed is only 6,432 in 2009, and therefore the $1068 is NOT considered a 72t distribution.
Obviously, there are other concerns here. Client needs to recalculate the 72t distribution every year remaining. That equals more calculations and more risk of error. Perhaps the largest risk is that the new lower amount may not be enough to live on, forcing client to bust his new plan. Then there is the lost rollover option for the next 12 months, which is a safety valve against busting a plan.
So- this can be done, but it raises the risks of busting the plan. The length of time to the plan modification date should be considered here – the longer it is, the more risk in doing this.
2009-03-31 05:01, By: Alan S., IP: [18.104.22.168]