Changing IRA Administrator

L1: Changing IRA AdministratorIf a person is taking SEPPs on the fixed annuitization method and wants to move to a different IRA administrator, can they change administrators and keep taking SEPPs without it being a modification that disqualifies the SEPPS?
2007-08-07 13:48, By: Mountinfun, IP: [216.215.245.190]

L2: Changing IRA AdministratorYes, you can change administrators. Just make sure to do an electronic trustee-to-trustee transfer. Don”t have the check made out to you, but you can hand carry a check made out to the other administrator if the current one refuses to do it electronically. Some of the current investments may be proprietary, and have to be sold before transferring the remaining investments plus cash. You will probably have trailing interest and dividend income no matter how you try to time the transfer. Don”t try this transfer after mid-November because it could get messed up, and you must get it done right in the same calendar year. Do it sooner rather than later.2007-08-07 14:08, By: dlzallestaxes, IP: [141.151.71.45]

L2: Changing IRA AdministratorHi,
It appears that Alan S. has a different opinion about transfers as posted from his July 9 response. It Reads:
By: Alan S. Date: 7/9/2007 Subject: Transferring Accounts during the SEPP Until PLR 2007 20023 can be put in perspective, I recommend passing on any transfers under either 72t or 72q. The risk-reward just does not warrant the move barring some extreme situation. Reading the PLR, while it deals with a partial transfer as a bust, and came as a total shock, it is not clear to me that the same thinking might prevail on total transfers. Given the amount of 72t transfers outstanding since inception dates, this is quite disconcerting. I believe that Bill Stecker has asked the IRS for further guidance on this, so my opinion is to give this some more time.
I hope we know soon what PLR 2007 20023 means to the common man. It seems dumb to think that you can bust your 72T because you changed custodians.
Dond
2007-08-07 14:41, By: dond, IP: [24.32.37.113]

L2: Changing IRA AdministratorI think Bill was hoping for something from the IRS by October. Until that time, and we know a little more about the PLR or at least clear the field for total rather than partial transfers, I would still avoid doing the transfer. A perceived couple points of annual investment improvement is not worth the risk, unless perhaps you are still in your first year of the 72t.
While it is not logical that the IRS would bust everyone that did a transfer unless they wanted to appear under oath in a US Senate hearing, it still is not worth taking that chance. The best outcome would be the demotion of whoever wrote PLR 2007 20023, which I would dub the “captive customer ruling”.2007-08-07 16:22, By: Alan S., IP: [24.116.165.60]

L2: Changing IRA AdministratorI need some ammunition to give to Merrill Lynch to re-code the 1099-r from “1” no exception to “2” exception applies. I am aware of the PLR–but this transfer was a trustee to trutsee of the full amount into a newly opened IRA account. I agree I shouldn”t be held captive, but should be able to change administrators. What would you say to ML?

Mountinfun2007-08-09 07:14, By: Mountinfun, IP: [216.215.245.190]

L2: Changing IRA AdministratorYour best alternative to to complete and file a from 5329 to claim the exemption.
With the PLR in question, the IRS again ”muddied the waters” and left more questions than answers so they will probably not make the change to the 1099. Another point, you will seldome get a 1099 code of ”2” on a transfer out.2007-08-09 07:26, By: Gfw, IP: [74.136.103.84]

L2: Changing IRA AdministratorWould you file the Form 5329–or just file the tax return claiming the SEPP?
Mountinfun2007-08-09 08:19, By: Mountinfun, IP: [216.215.245.190]

L2: Changing IRA AdministratorForm 5329 is filed with your tax return to claim the exemption.2007-08-09 08:27, By: gfw, IP: [74.136.103.84]

L2: Changing IRA AdministratorI guess I”m confused by the partial vs. full transfer issue with regard to changing custodians in a 72t. I know this issue was recently turned upside down with the PLR that suggested these transfers busted the 72t but I had always believed a partial transfer was allowed as well as a full transfer. Example: Investor has $500K in an IRA and transfers $200K to custodian A, $200K to custodian B and $100K to custodian C and sets up a 72t which includes the total amount of these accounts in the calculation. Assume all withdraws are taken from custodian B. Sometime later, a trustee to trustee transfer from custodian A is made to custodian B to replenish the account that the withdraw is coming from rather than settting up a new distribution from custodian A. Are we now saying that all along partial transfers such as this were not allowed? Any help would be appreciated.2007-08-09 09:52, By: Carol, IP: [74.93.198.9]

L2: Changing IRA AdministratorCarol:
I agree that this whole area of partial vs. complete transfers from 72t accounts is a mess and also that there won”t be a definitive answer until the IRS decides to straighten out the problems caused by the recent PLR on this topic.
That said, however, it would be reasonable to allow full transfers since that cannot affect the amount of money in the 72t account while a partial transfer can. While this would be reasonable it may or may not be what the IRS decides when they do get around to this issue.
Personally, I think that anyone who spreads their 72t accounts around as you suggested in your hypothetical situation is increasing the odds of busting their SEPP via the extra complexity of multiple accounts / custodians. If you have 3 custodians, per your question, and take quarterly SEPP payments, you will need to keep close track of 12 different checks each year. While this can be done, an error that is not corrected in time could become quite expensive via bustingthe SEPP. It is not cear to me what advantage multiple custodians could give an investor that would be worth more than the potential for problems. Certainly, any of the larger custodians can offer a sufficiently broad range of investments that good diversification can be obtained via investing with only one of them.
Remember that SEPP only lasts for the longer of 5 years or until age 59.5. In terms of a retirement that can last 25-30 years, this is not a large portion of that unless one retires at a very early age.
Ed2007-08-09 20:45, By: Ed_B, IP: [67.170.159.37]

L2: Changing IRA AdministratorHi,

Like Carol’s example, I also have 3 IRAs that make up my SEPP universe. I only take distributions from one account however and transfer dividends from the other two accounts to keep the third IRA in the black. Having distributions withdrawn for a single account also means I only get a single 1099R. I would rather have a single custodian, but my portfolio includes real estate and other non-stock investments that my custodian does not want to handle.

Dond2007-08-09 21:14, By: dond, IP: [24.32.37.113]