Changing investments with 72T assets

You are here:
  • KB Home
  • Changing investments with 72T assets
< Back

L1: Changing investments with 72T assetsIs there any problem changing some of the investments you have with one mutual fund family (on a 72T distribution) and moving those assets to another mutual fund family as long as you keep the same distribution amounts with the new fund? I have a fund company saying there is a problem.
Thanks for any help.2008-02-15 12:42, By: Stan, IP: []

L2: Changing investments with 72T assetsThe reason the company is saying that is likely due to PLR 2007 20023, on which the IRS ruled that a taxpayer who transferred part of his 72t IRA to another firm”s new IRAhad busted his plan. SInce then the IRS has not been able to explain the rationale behind this, and they have not been hounding the thousands of people who have done these transfers in the past.
Accordingly, there should be almost no risk in transferring an entire IRA account to a brand new -0- balance IRA account with the new firm. The risk here is limited other errors you might make in failing to maintain the proper distribution. You would also have to file a 5329 because you are unlikely to receive a 1099R with the exception coding.
Doing a partial transfer should also be OK, but is more risky that a full transfer because of the PLR in addition to the risks cited above. I would be inclined not to pursue a partial at this point until the IRS explains their decision in the PLR cited above OR more time passes to be sure there are no follow up surprises from it.
You might ask the fund family if this is the problem as they see it, or just the more typical use of leverage to try to retain the assets. In other words, they could be right, but for the wrong reasons.
2008-02-15 15:49, By: Alan S., IP: []

L2: Changing investments with 72T assetsHello, Stan:
It seems to me that the best favor we SEPP owners can do for ourselves is to fly below the IRS radar for the entire time of our SEPP plans. By not attracting notice, there should not be an audit of our SEPPs. This is not to say that our SEPPs would not survive an audit intact because most of them surely would, just that it would be better not to have to go through the audit process if we don”t have to. Doing anything that changes this is probably more trouble than it is worth. Unless there is a serious problem that makes changing to a new custodian worthwhile, I would be tempted to grit my teeth and hold on to an original SEPP plan until it expires. Once the age 59.5 / 5-year conditions for your SEPP have been met, you can then do whatever you want with it. Until then, however, remaining quietly anonymous seems an excellent idea to me.
I did a LOT of careful research into various possible custodians for my 401k plan to IRA rollover money. Although there have been a few bumps along the way, it has worked out pretty well.
Ed2008-02-16 07:42, By: Ed_B, IP: []

L2: Changing investments with 72T assetsStan, I agree wholeheartedly with Ed B.
Two years ago I got a letter from the IRS stating I owed a big bag of money due to IRA withdrawals. It turns out my 5329 was not factored in and after an exchange of letters/calls from my Advisor to the IRS, a got a ”congratulations” letter from the IRS saying I didn”t owe the taxes.
My Advisor says the IRS watches these SEPPS like a hawk. They know how old you are, and when an IRA withdrawl is done, a beacon goes off at some beancounter”s desk.
By laying low in the reeds and not getting cute with the SEPP, however legal it may be, will save you from high blood pressure, panic attacks, and frantic phone calls.

Good luck!
2008-02-22 07:54, By: Francis3, IP: []