72(t)(2)(A)(v)

L1: 72(t)(2)(A)(v)Ihave left my job and am 56yrs old. I have 2 fully vested qualified plans that I need to address.1) Cashout or rollover pension plan2) 401k planThe company has Principal Financial Group administer both plans. They have advised me that I will get hit with the 10% penalty unless I use a SEPP on the 401k. I do not want to sign up for a 5yr plan when I am only 2.5 years from 59.5 years.My first thought was to combine both plans into one IRA with B of A so I could take an active role in my investing. Principal only offers a limited array of Mutual Funds.After getting their assessment that I needed to go the SEPP route I came to this site and began to pick up enough information to realize that you all are a great resource for information.My new direction is:1) rollover the pension plan into a B of A IRA account and begin to build my portfolio.2) keep the 401k plan with Proncipal and withdraw funds as needed for living expenses. I understand that they will provide a 1099-R form to me and the IRS and I would need to complete a form 3952? to IRS identifying my age and circumstance when I file taxes. Thereby precluding me from the 10% penalty.Does anyone have any feedback on my approach? Thanks, Tim.2007-01-30 10:37, By: tim, IP: [71.202.245.240]
L2: 72(t)(2)(A)(v)You cited the 72t section regarding age 55 separation from service. Your plan is fine providing you are sure you have correctly interpreted that section and meet the requirements. The key is your age when you actually separated, and Principal is either unaware of that rule OR you separated before the year your turned 55. You must be very nearly 57 now, and it would be nice to avoid the 72tSEPP paymentsif you can. What installment options does the 401k offer, and how long do you have to maintain them?
The correct form # is 5329 to claim exception to the penalty if a plancustodiandoes not provide the exception coding on your 1099R.
2007-01-30 11:05, By: Alan S., IP: [24.116.66.98]

L2: 72(t)(2)(A)(v)There is either a typo, misinformation, or your e-mail and facts do not make sense. You said “I have left my job and am 56”. But later you state “I am only 2.5 years away from 59.5”. Either you are 57, or are 3.5 years away from 59.5. Maybe you meant to start by saying that you were 56 when you left your job a year ago.
It is always best to give all dates, i.e. date of birth, date left job, date plan started (in applicable cases), amount in plan(s), etc. so we have all of the info needed to give proper answer to your question, and possibly provide advice on alternative approaches to consider.
You are correct that you should try any alternative to SEPP that could get you to 59.5 before a 5-year SEPP 72-T plan would end (after 59.5).
Have you spoken with a Principal supervisor or compliance officer to determine why you cannot take distributions from your 401-k without the 10% penalty. Possibly the “flunky” you spoke with is unaware of the different rules for 401-ks, and he thinks they are the same as for 401-ks ?
If there are EMPLOYER SHARES in either of your plans, IMMEDIATELY look into the tax provisions for “NUA” (NET UNREALIZED APPRECIATION) EMPLOYER SHARES. DO NOT ROLLOVER ANYTHING UNTIL YOU CHECK THIS OUT. It could save you enormous amounts in taxes.

2007-01-30 14:58, By: dlzallestaxes, IP: [4.175.9.164]