L1: Account balanceNew plan, dob 6/14/1961, date of first distribution 3/6/2017. Estimated account balance as of 2/28/2017 is $600,000. Pension lump sum to be added on 3/1/2017 is $900,000. Is it reasonable to value this account at $1,500,000 for calculating SEPP plan payments based on these facts and circumstances?2016-11-05 16:52, By: Bulldogger, IP: [220.127.116.11]
L2: Account balance1. Is it really a “pension”, or is it a 401-K ?
2. If you are working for a company which makes its contribution to the pension plan, or to your 401-K plan, I suggest that you immediately check with HR, etc. to determine the cost basis of the NUA employer stock in your account. Assuming that there is significant appreciation in these shares, you should be investigating the NUA regulations, rather than even thinking about a SEPP 72-T plan. You could save a fortune in federal income taxes under the NUA tax provisions.
3. If NUA does not apply to you, and you “separate from service” in the year that you will become 55 (or will already be 55), then there is no reason to roll over your 401-K to an IRA, and I would not recommend that you do so, unless your company will not allow you to leave your 401-K account with them. If you qualify, you can withdraw any amount whenever you want without being subject to the 10% penalty before 59 1/2. Therefore, why lock up your account until you are almost 61, and limit yourself from 59 1/2 to then based upon a fixed annual distribution ?
4. The basis of any SEPP 72-T annual distribution is determined near the date of your first distribution, if 12/31, 1/31, 2/28, etc. It is usually the highest month-end balance, but can be as of any date that you can document, and can be even 10/31 or 11/30, both of which will be within 6 months of your March 2017 initial distribution.
5. It is usually recommended to separate your IRA into multiple accounts, and to keep some reasonable amount outside of your SEPP 72-T IRA base for future unexpected needs.2016-11-05 17:16, By: dlzallestaxes, IP: [18.104.22.168]
L3: Account balanceIf you need an account balance over 600k to generate the SEPP distribution amount you need, and the age 55 separation exception does not work well because the plan requires a lump sum distribution, you need to be sure that the rollover amount is completed before partitioning your IRA into an account with the exact balance you need to generate your distribution. Once the IRA that you will use for the SEPP is established in the amount you want, then do your finalcalculation. Your account balance forthe calculationmust be taken after the date the IRA has been set up and alltransfers completedto establishthe right amount because you cannot use any balance other than for that IRA on a specific date.2016-11-05 21:28, By: Alan S, IP: [22.214.171.124]