72t split distribution

L1: 72t split distributionI am planning to begin SEPP distributions from my retirement account(s) beginning in January 2007 (I am under age 55). Between now and then, I am considering a possible 50% rollover from my 401k plan to an IRA to be more professionally managed by another institution. When calculating the distribution should the sum of two accounts be used as the “account balance” when determining the distribution? Secondly, can I direct the total distribution to be made from either of the accounts (401k or IRA) or must the distribution be from both, equally?
There may be intangible distribution advantages if I can direct the distributions come from one, and not both, accounts.2006-08-22 21:41, By: Steve, IP: [206.229.189.27]

L2: 72t split distributionSteve,
Since you apparently separated prior to the year you turn 55, the separation exception cannot apply. Therefore, I would approach your situation as follows:
1) Check into NUA possibilities if your 401k contains highly appreciated employer stock from the purchase price. If so, you may want to move some shares to a taxable account as part of a lump sum distribution. There are several details to doing this correctly that need to be observed.
2) Barring NUA, I do not see why you would not directly transfer the entire 401k to a traditional IRA, especially if you have a source you consider will better manage the assets. IRAs now have creditor protection in the event of bankruptcy, though this is still not quite as broad as ERISA protection for the 401k. Not too many 401k plans support a true SEPP distribution program, and even given the choice the IRA would probably be a better source.
3) If you have enough funds as you seem to have, you would then partition the TIRA account into one account to be used for the SEPP and it would contain the starting balance to yield the SEPP amount you feel you need. The other account could be used for emergency distributions or to fund a later supplemental SEPP plan. In other words, your “SEPP universe” is composed of whatever # of accounts you designate when you begin, but there are fewer complications starting with just one. Just be sure not toconfuse SEPP and non SEPP IRAs and don”t transfer any funds between them under any circumstances.2006-08-22 22:12, By: Alan S., IP: [24.116.68.91]