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Correct calculations of SEPP amount

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Byjr

L1: Correct calculations of SEPP amountI currently have $465K in a 401k as of December 2003 and it is now at $475 as of July 2004. I also have $20K in a qualified annuity. Can I use the 2004 value of the 401k AND combine this amount with the annuity amount (without actually withdrawing $$ from the annuity) to maximize the gross amount of distribution ? In other words, can I use the amortization payout method on $495K; $485K; $465K or any of the foregoing ? Thanks to my fellow SEPP taxpayers…….2004-07-12 10:41, By: JR, IP: [198.81.26.77]
L2: Correct calculations of SEPP amountHello JR:
I have to admit I have never faced this question before; however, I think the answer is no given that an annuity would be governed by IRC 72(q)(2) and SEPP distributions from your 401(k) would be covered under 72(t)(2)(A)(iv); e.g. two different code sections. However, were you to somehow takea lumpsum distribution from the annuity and deposit it into your 401(k) or IRA, I would give you a different answer.
TheBadger
wjstecker@wispertel.net
2004-07-12 12:11, By: TheBadger, IP: [66.250.23.21]

L2: Correct calculations of SEPP amountIf the qualified annuity is a deferred annuity that is being usedas a funding vehicle for an IRA (or other qualified plan), then the rules of 72(t)would apply-no different that any other investment – for the most part it is no different than using a CD.
However, if the qualified annuity is an immediate annuitythat is currently in distribution phase, it could not be included and would indeed be covered by 72(q).2004-07-12 12:30, By: Gfw, IP: [172.16.1.70]

L2: Correct calculations of SEPP amountJR:
Can you be specific about how your annuity is ‘qualified?’ If it is funding a 401(k) or IRA then without question it can beused for72(t) calculations. If it is governed by403(b) then I don’t believe you can include it. Of course it will have to be in ‘deferred’ status and not ‘pay out’ status as Garyexplained.
Now I just had another thought.Are you still funding your 401(k) or have you retired and the plan is dormant? If you are still funding the plan I don’t think you can do a SEPP with those funds … but I’m sure Gary and Bill will weigh in on this point.
Jim2004-07-12 13:27, By: Jim, IP: [68.225.115.136]

L2: Correct calculations of SEPP amountThanks very much, guys, for your expertise…..the $20k annuity is a single premium deferred annuity that is qualified insofar as it funds an IRA….yes, I am retired and while I will begin drawing from the 401(k) this year a la 72t/SEPP methodology, I’m simply trying to ensure that I calculate the correct amount of gross proceeds by including or excluding the annuity from the calculation and using the correct value of the 401(k)(i.e., the December 2003 amount or current 2004 balance)…the small amount of the annuity isn’t significant…..my sincere thanks to all………….2004-07-15 00:48, By: JR, IP: [198.81.26.77]

L2: Correct calculations of SEPP amountSounds like you have a good handle on things now. I would suggest leaving the small IRA / annuity out of the calculations.Use it as an emergency fund rather than have to ‘bust’ the SEPP if you suddenly need extra funds and have no other options.
Jim2004-07-15 10:17, By: Jim, IP: [68.225.115.136]

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