Distribution from qualified plan after age 55

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L1: Distribution from qualified plan after age 55Waitaminute….(t) 10-percent additional tax on early distributions from qualified retirement plans (1) Imposition of additional tax If any taxpayer receives any amount from a qualified retirement plan (as defined in section 4974(c)), the taxpayer”s tax under this chapter for the taxable year in which such amount is received shall be increased by an amount equal to 10 percent of the portion of such amount which is includible in gross income. (2) Subsection not to apply to certain distributions Except as provided in paragraphs (3) and (4), paragraph (1) shall not apply to any of the following distributions: (A) In general,,, (iv) part of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the employee or the joint lives (or joint life expectancies) of such employee and his designated beneficiary, (v) made to an employee after separation from service after attainment of age 55,…….. (3) Limitations (A) Certain exceptions not to apply to individual retirement plans Subparagraphs (A)(v) and (C) of paragraph (2) shall not apply to distributions from an individual retirement plan. (B) Periodic payments under qualified plans must begin after separationMaking a distinction between substantial periodic payments and distributions upon termination after 55 does not compute.ARE WE SURE THAT DISTRIBUTIONS *FROM A QUALIFIED PLAN* MADE AFTER 55 DUE TO TERMINATION ARE SUBJECT TO THE 10% PENALTY IF NOT MADE IN THE FORM OF PERIODIC PAYMENTS?2006-04-18 13:41, By: ehodgens, IP: [24.5.98.241]
L2: Distribution from qualified plan after age 55If termination from employment occurs in the year attaining age 55 (or after) distributions from an employer plan (not an IRA) aren””t subject to the 10% penalty. Merely read the exceptions posted on this site or the many previous posts on this forum that also deal with the subject.2006-04-18 13:47, By: Gfw, IP: [172.16.1.74]

L2: Distribution from qualified plan after age 55I”m embarrassed to say that after (God Lord, I”m getting old) 35 years in the “pension business”, I”d forgotten about the age 55, termination exemption. My only excuse is that I”ve been far more involved in Trust Administration than Record Keeping in the last ten years.There seems to be quite a lot of ignorance about this, if my informal survey of some people I know who are directly involved in Record Keeping is any indication.Without naming names, two major RK providers headquartered in the San Francisco Bay Area don”t seem to have a clue. One of the call center people at one of them told me he had never heard of it, and they have always been taught that it”s 59 1/2 or periodic payments, period!Another is trying to tell me that the exception only applies if I have not only terminated at age 55, but I have to be *retired*, i.e. not working somewhere else. Where he came up with that I can”t imagine. This is in a 401(k) plan. I”m wondering what color the sky is on the planet he comes from (or more likely whoever taught him that come from).So far, the only major Record Keeping people who seem to actually have it right is Fidelity.Even more amazing, the two organizations I cited above have been issuing incorrect 1099Rs for this for, literally, over a decade, and I imagine there are literally thousands, if not tens of thousands, of former plan participants who have eaten a 10% penalty they didn”t have to pay, most of them beyond the three year limit of being able to amend their returns to recover it.I think both of those organizatons are going to get their clocks cleaned big time when this comes out. The mind boggles.2006-04-19 13:49, By: ehodgens, IP: [24.5.98.241]

L2: Distribution from qualified plan after age 55Why do you think they call it the “land of fruits and nuts” when referring to San Francisco and other “left coast” locations?
Nowlet”s seriously address what appears to be a true failure of fiduciary responsibility on the part of these companies.I think you have a pretty good case … as in class action case… to bring against the folks who have been incorrectlyreporting distributions. Don”t scream at the IRS … Department of Labor (DOL) is the correct organization to handle pension problems like this.
Good luck and I hope you have a few attorneys who got hosed by these folks.
Jim2006-04-19 14:16, By: Jim, IP: [70.184.1.35]

L2: Distribution from qualified plan after age 55Jim & ehodgens – can either of you show me where it is the responsibility of the Plan Administrator to give a code of ”2” on a 1099? Just courious.
Like most items in the tax code, there is an alternative and like most items in the code if you choose to go it alone, then you also take the responsibility – right or wrong. That”s why it almost always pays to consult a professional when it coes to distributions from retirement plans.
This year there will probably be many more companies that will start ”not” giving a code of ”2” and leave it up to the taxpayer and the IRS.
BTW – A 1099 form and it”s coding is subject to the IRS,not the DOL. The DOL oversees ERISA, not the tax code.
Just my thoughts.2006-04-19 15:17, By: Gfw, IP: [172.16.1.73]

L2: Distribution from qualified plan after age 55Jim, California is the nation”s top producer of fruits and nuts, but the gratuitous insult is about as welcome as me referring to people living in “fly over country”. We”re all Americans, here.Not only that, but the call centers giving me incorrect information are located respectively in Minnesota and Ohio, so please go bark up some other tree.The reporting requirements come out of the Internal Revenue Code, not ERISA. The DOL couldn”t care less – take my word for it, I did ERISA enforcement for the DOL right after the crust of the Earth cooled off.And you”d perhaps be right surprised about how little the IRS cares about over-collected taxes. Underpay them and they”ll be all over you like white on rice. They might enjoy fining these organizations for mis-reporting, tho.I don”t know that this constitutes a “fiduciary breach” at any rate. Record Keeping is NOT a fiduciary duty, it””s ministerial.>Jim & ehodgens
– can either of you show me where it is the responsibility of the Plan
Administrator to give a code of ””2”” on a 1099? Just courious.It”s acually the responsibility of the “payor” to issue 1099Rs correctly. Unless the plan administrator issued the check, it”s the trust company who issued them who is on the hook for doing it incorrectly. Not that the plan administrator is going to be at all happy about finding this out, but it is not their fault.Having had three hours sleep last night, I”m drawing a blank about where the payor reporting Regs are to be found, although God knows I”ve read the thing more times than I can count.One of the organizations in question is a national bank, and the Office of The Comptroller is going to be VERY unhappy. The other is state-chartered, so the place to go to complain about them is the FDIC, who I believe will be similarly unamused.Evan2006-04-19 15:42, By: ehodgens, IP: [24.5.98.241]

L2: Distribution from qualified plan after age 55I just re-read the instructions for the 2005 1099R and the wording for the age 55 coding a ”2”for retirement distributions is more clear than the coding of a ”2” fro a SEPP plan.
However, if the trust isn”t furnished the DoB information by the Plan Administrator and is only doing investments,they maynot be able touse a code of ”2”.
If they are doing alll the allocations and administration, then theyshould know the DoB and using a code of ”2” would be appropriate and right.

2006-04-19 15:53, By: Gfw, IP: [172.16.1.73]

L2: Distribution from qualified plan after age 55Evan:
My appologies if I struck a nerve with my “fruits and nuts” comment. I was just trying to interject some levity into what seemed to be a very frustrating situation for you.
My concern with this situation is based on the following two paragraphs:
Without naming names, two major RK providers headquartered in the San Francisco Bay Area don””t seem to have a clue. One of the call center people at one of them told me he had never heard of it, and they have always been taught that it””s 59 1/2 or periodic payments, period!Another is trying to tell me that the exception only applies if I have not only terminated at age 55, but I have to be *retired*, i.e. not working somewhere else. Where he came up with that I can””t imagine. This is in a 401(k) plan. I””m wondering what color the sky is on the planet he comes from (or more likely whoever taught him that come from).
I think there may be a fiduciary responsibility breakdown. If the people who are supposed to know the rules are giving the wrong information to the call center people, and employees arebeing forced to paypenalties when they should not have to pay penalties, then it looks like someone closer to the top is responsible for this problem. No, I don”t know all of the legal aspects of this situation but common sense (that is a scary thought) would indicate this is an ERISA problem, and thus would require DOL involvement.
Jim2006-04-19 16:10, By: Jim, IP: [70.184.1.35]

L2: Distribution from qualified plan after age 55>I think there may be a fiduciary
responsibility breakdown. If the people who are supposed to know the
rules are giving the wrong information to the call center people, and
employees arebeing forced to paypenalties when they should not have
to pay penalties, then it looks like someone closer to the top is
responsible for this problem. No, I don”t know all of the legal
aspects of this situation but common sense (that is a scary thought)
would indicate this is an ERISA problem, and thus would require DOL
involvement.Well, I am going to copy the appropriate DOL area office when I bring it to the attention of the OCC and IRS, but I would be greatly surprised if the DOL will have much interest. This is an error in administration, but the reporting requirements are part of the Code, not ERISA. I don”t discount the idea that they might decide teaching the wrong thing to people in call centers is a fiduciary breach, but as a former employee of the DOL, I”ll give you two to one odds it goes directly into the trash can.
2006-04-20 21:58, By: ehodgens, IP: [24.5.98.241]