Distribution options in last year of SEPP
L1: Distribution options in last year of SEPPHi there,
I am currently taking SEPP payments, began in July/2011, and took a “full year” of payments in the first year. I will be59.5 by the last year (2016), and since I will have already taken the five years of distributions by 2016, I have no distribution to take in 2016. Since I will bealready 59.5 in 2016, what are my options for withdrawals in that yearbefore the SEPP plan ends in June? Am I wrong in thinking that I cannot take out additional dollars before the plan ends? Would additional withdrawals be considered a modification to the plan, OR is it okay as now these are normal (not early) withdrawals.
Thanks in advance.2014-12-18 22:50, By: Muddling thru SEPP details, IP: [188.8.131.52]
L2: Distribution options in last year of SEPPYou cannot change the amount of the calendar year amount until 60 months after the first distribution. After then, if you are 59 1/2, then you can take any amount, or no amount, from that date.2014-12-18 22:55, By: dlzallestaxes, IP: [184.108.40.206]
L3: Distribution options in last year of SEPPWithout their actual birthday, they need to be careful if this is a 5-year plan. If it is, they can’t take anything out in 2016 until after after the plan ends in July 2016 or they will bust the plan. Correct?2014-12-18 23:29, By: Red Baron, IP: [220.127.116.11]
L4: Distribution options in last year of SEPPHaving read Arnold vs Commissioner several times, I don’t see the basis for any special rules that distinguishes 5 year plans from those that end at 59.5, other than a minimum of 5 years worth of distributions must be withdrawn.Arnold simply mistook the 5 year measurement to mean something other than 5 years from the date of the first distribution. He then took two distributions in the same year well before the plan endedthat exceeded the annual SEPP amount by a large margin. Anyone would have considered that plan to be busted.
The IRS has not released anything else regarding the final stub year affect on what are acceptable SEPP distributions. The question then becomes “what is anacceptable SEPP distribution?” Accordingly,in this case you should be OK to take out nothing in 2016 before the plan ends,the full annual amount which would bring the total amount distributed to 6 full years in 6 different calendar years, or an amount pro rated by the month. Note that had youpro rated your first year distribution, then your choice for 2016 would be limited topro rate by the month to bring the total distributions to 5 years worth, or a full annual.
There is no anecdotal evidence that the IRS would bust the plan for any of these options. We have not heard of any such occurrences. That said, taking out nothing before the modification date in 2016 is probably the lowest risk option, but by very little.
2014-12-19 04:12, By: Alan S, IP: [18.104.22.168]
L2: Distribution options in last year of SEPPI appreciateeveryone’s help. To be on the safe side, I will go with my original plan and not take out any distributions before July 1, 2016.2014-12-19 17:01, By: Muddling thru SEPP details, IP: [22.214.171.124]
L3: Distribution options in last year of SEPPThe OP has been very general about dates in this thread, so I would like to make the following comment.
Because the OP turns 59.5 prior to the SEPP expiration minimum of 5 years, or 59.5 they have what is termed a 5 year plan. Therefore, as GFW pointed out only 60 monthly, or 5 annual distributions may be taken. This means that in 2016 no distributions may be taken until 1 full day after the 1st distribution 5 year anniversary. If??? the 1st distribution occurred on 7/1/2011 then the OP should wait until 7/2/2016 the day after to take any distribution they may chose.2014-12-20 14:13, By: Scott, IP: [126.96.36.199]