changing annual payment date
L1: changing annual payment dateBorn 1-30-57, retired, and have my retirement accounts with Fidelity brokerage.
I had and existing traditional rollover IRA, and split out some of the funds and monies for fidelity to run their calculations on, into a new roll over IRA that became my new SEPP account.
Received first (elected to annual payments) payment 8-31-12 at age 55 1/2+. Received second payment 8-30-13. (They just transfer into individual brokerage account when the do their “sweep”)
I am anticipating a shortage of cashprior to the end of the fifth year, however that is why I left the other IRA, so I could get at it after age 59 1/2 without penalty, and without busting the SEPP account.
I wanted to change my annual SEPP payment date to 1-15-xx (so that I would receive my third and subsequent payments sooner. It was always my understanding that as long as youtook your annual payment per calendar year it was no problem with the IRS. I wanted my next payment to be on 1-15-14.
Fidelity seems to have a lot of problems with changing this date. Every time I talk to them I get a different answer. Their latest advice is that they can not just change the date andI have to send them a letter stating that I want to change my account from a 500 account to a 501 account and the new date. (I think that is thier own internal designation)
Fidelitystates that it will still have the same account number, but it will no longer be a SEPP account. They say I should check with my tax preparer to see if that is what I really want to do. (So I should ask him if he thinks it’s a good idea to cancel my SEPP? I know the answer to that!)
So my questions are:
1. Is the first time I can take additional money out of my SEPP 8-31-17?
2. Do I have to modify this SEPP account after 8-31-17 prior to taking money out?
3. I can take what ever I want out of my original IRA after 7-30-16 (I’ll be 59 1/2)
4. Shouldn’t I be able to modify the (annual) payment date?
5. Has anybody else gotten the run around like this from Fidelity?
Or has anyone changed the date with fidelity?
I don’t want to send a letter and have them do what the letter says if it is the wrong thing to do
2013-09-08 02:54, By: IHF, IP: [18.104.22.168]
L2: changing annual payment dateIf it were a plan that would end at age 59.5, I would say you can feel free to change the date.
However, it is a 5 year plan (not an age 59.5 plan) and I would say that you should keep the annual distribution date at 08/31 (#2). On a 5 year plan, timing is everything.
The first plan modification date is 09/01/2017 (#1) and you should watch not only the calendar year, but also the fiscal year so that no two payments occur in either the calendar year or the fiscal year.
#4: Re-read above
#5: Fidelity is being cautious, but I wouldn’t call it a “run auround”.
Take some time and search Google for “Arnold v. Comm., 111 TC No. 12 (1998)” where the IRS seemd to use a fiscal year for determining the proper annual distribution. This is really about the only case law that give a clear picture of how the IRS intreprets the 5 year plan rules.
If it were my plan, I would definately leave the annual distribution date at 8/31 and I would only take annual distributions.2013-09-08 08:18, By: Gfw, IP: [22.214.171.124]
L3: changing annual payment dateGFW — You are really scaring me, and probably everyone else who follows this website.
You have indicated forever that the only thing that matters re distributions is that the same ANNUAL amount must be taken each CALENDAR YEAR, and that the frequency during any year does not matter, and that you can change the freqency of payments every year, or even within every year.
I thought that people in his situation could advance the payments in any calendar year if needed, so long as the annual total was the same.
Now you seem to be saying that this cannot be done because a case 15 years ago MAY be one that the IRS now follows that it is a FISCAL YEAR ??? If so, what happens to all of the people who have been making changes in frequency all of these years ???
2013-09-08 18:25, By: dlzallestaxes, IP: [126.96.36.199]
L4: changing annual payment dateDlz…
What I said above and what I have always said is that a 5-year plan is subject to a different set of rules than a to age 59.5 plan – even our calculators reflect this approach. If a mode other than annual is selected and the first distribution doesn’t occur on 1/1, there are partial years calculated for the 1st and final year.
In a to age 59.5 plan, you can make lots of changes_ mode, dates, etc as long as in any given calendar year, the annual distribution is taken.
However, in a 5-year plan, the five years begins with the date of the 1st annual distribution and ends 365 days times 5 years plus 2 days for possible leap years.
My feeling has always been that on a 5-year plan you have to watch the calendar year, but you must also watch the fiscal year that starts with the date of the 1st distribution. Not watching the fiscal year is what caught Arnold and he lost.2013-09-08 18:59, By: Gfw, IP: [188.8.131.52]
L3: changing annual payment date
Thank you for your reply
If I am reading Arnold v. Comm correctly, he took his 5th annual payment and then assumed all requirements were met, and took more money prior to the end of the first modification date (in essence as interpreted by IRS as a 6th payment within 5 years.
What I wanted to do is as below:
Payment existing plan what I wanted
2 8-30-13 8-30-13
4 8-31-15 1-15-15
First mod 9-1-17 9-1-17
I agree that the time between 8-30-13 and 1-15-14 is not 12 months, but falls within both the next calendar year and the next tax year.
Mycash problem would be in early 2016 (like February) When I anticipatemy brokerage account to be exhausted. By 7-30-16 I would have no worries, as I would be able to access my other remaining IRA penalty free. Getting my 5th payment 8-31-16 serves no purpose for me, but getting it 1-15-16 would last me until 7-30-16 no problem.
After 7-30-16 I don’t need (budget wise) to receive any more payments, but I realize I would still have to receive my 8-31-16 5th annual payment (if payment date was left unchanged).
The only problem I THOUGHT I was going to have was not getting a 6th payment on 1-16-17, as I can’t modify the SEPP account until 9-1-17.
Also, I don’t understand (even if I left everything unchanged) HOW do I keep from getting a 6th paymenton 8-31-17 if I can’t modify the account until 9-1-17????
2013-09-08 20:08, By: IHF, IP: [184.108.40.206]
L4: changing annual payment dateYou shouldn’t take the 6 payment on 8/31/17, if you take a 6 payment wait until after 9/1/17. Arnold didn’t take a 6 payment, he took an additional 5 year payment.
You can do what you want to do and take what you want to take. I am merely giving you my opinion about how I interpret Arnold v Comm and how I would handle if it were my plan.
If you have other funds, use them and leave the SEPP alone.
This sounds like another example of trying to plan after the fact. 2013-09-08 20:48, By: Gfw, IP: [220.127.116.11]
L5: changing annual payment dateThank you again for all your help
I’m sorry I’m being so dense, I didn’t mean that he took a 6th payment in 6 years, I meant that he took his 5thpayment and before the end of his 5th year he took another.
It’s not that I didn’t plan this out. I had conferred with fidelity several times and they had always told me it was calendar/tax year, and I could change the date anytime I wanted as long as I took the right amount per year.
I had planned on changing this date from the beginning, and that is how I decided how much money to put into the SEPP and how much to leave in the original IRA. Fidelity never told me that I would have to change the account from SEPP to non-SEPP until I tried to make the change.
If I changed the date to 1-15-xx and took my 5th distribution on 1-15-16 I always realized I could do no more to this account until9-1-17.
I agree with you that it appears best to leave this SEPP alone.
But if I leavethe SEPP with no changes, Fidelity is still scheduled to do a distribution on 8-31-17. That would be the 6th payment (or year 8-31-17 to 8-30-18). I don’t want or need that payment (because I can use my other IRA by then and I don’t need it to satisfy the SEPP rules). But Fidelity would have to be notified 2 weeks prior to8-31-17, and then I could only change the account as I outlined in my original question (SEPP vs. non-SEPP). Fidelity sends the 1099R as no exception, and then you have to file forms saying it is exempt because it is from a SEPP. I don’t want it to be a non-SEPP and say it is. I tried to ask Fidelity, but they told me any time after the 5th payment I was done and could modify the account. I know that is wrong isn’t it?
It looks to me that not only am I stuck with nochanges to the distribution date, but also a 6th payment for the 8-31-17 to 8-30-18 year.
Lastly I am confused by your suggestion to change the date to 9-1-17 as:
“You shouldn’t take the 6 payment on 8/31/17, if you take a 6 payment wait until after 9/1/17.”
I don’t understand why, and I would still be in the same catch22 with Fidelity, and having to give them 2 weeks notice, and the whole SEPP vs. non-SEPP issue.
2013-09-08 23:25, By: IHF, IP: [18.104.22.168]
L6: changing annual payment dateYou don’t have to take a 6th payment, only the first 5. If you wanted a 6th payment 09/01 would be after the SEPP ends so it wouldn’t be subject ot the SEPP Rules.
Fidelity can classify you IRA as a SEPP or as a no-SEPP – makes no difference. If they stop giving you a code of 2, fill out form 5329, it isn’t difficult. Besides… regardless of what Fidelity says, the SEPP is between you and the IRS. If you have a problem, don’t expect them to come to your rescue – they will probably only provide a history of fund balances and distributions with no footnotes. 2013-09-08 23:55, By: Gfw, IP: [22.214.171.124]
L7: changing annual payment dateSince this event will not occur for 3 years, maybe you should consider getting a part-time or full-time job so that you can accumulate enough money to cover the 6 month or so period that you will need the additional funds for.
If you own a home, you could consider a home equity loan to carry you thru that period. You could repay it after your 5-year period is over, plus you’ll probably start SS at 62 if your finances are so tight.2013-09-09 04:33, By: dlzallestaxes, IP: [126.96.36.199]
L8: changing annual payment date
Is what I wanted to do any different than what is in the log listed below?
“By:jkerval, on 2013-08-17 20:36, Views:135, Replies:3, Last Reply on:2013-08-18 19:30, 188.8.131.52
It seems they changed theirpayment date from June to January
Thanks2013-09-09 21:43, By: IHF, IP: [184.108.40.206]