Fidelity calculation doesn’t match

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L1: Fidelity calculation doesn’t match 72t.netAge 54 (7/1958), 1.10% interest, $211,059.05 (they use 12/31/11 value), single life, 9/27/12 pmt comes out to $8183.22 online. Fidelity comes up with $7984.22. Have to wait til Monday to talk to Fidelity. Anyone have any idea why they are off $199? I come close if I use age 53.
thanks2012-09-22 15:41, By: sepp092712, IP: []

L2: Fidelity calculation doesn’t match 72t.netThey are probably using an amortization calculation based on the beginning of the year – the way the IRS did the examples in IRS Notice 89-25.
We use an amortization at the end of the year which is the way that the IRS did their sample calculations for Rev.Rul. 2002-62.
Either one is probably acceptable, but we chose to match the IRS calculations. See…
2012-09-22 16:01, By: Gfw, IP: []

L3: Fidelity calculation doesn’t match 72t.netThank you. The rep did say something about beginning of the year vs end of the year but she said I had to wait until Monday to talk to someone and get a copy of their calculation for my file. Fidelity took down their calculator so I to wait to get it the old fashioned way-in the US mail. Thanks again.2012-09-22 16:34, By: sepp092712, IP: []

L4: Fidelity calculation doesn’t match 72t.netI think with Fidelity and some other IRA custodians we have also seen their calculators consider the distribution pattern you elect (eg monthly, quarterly or annual). Taking monthly distributions would in theory remove the IRA funds sooner than an annual year end distribution and result in a slightly lower annual figure from their calculator. We feel that the distribution pattern is immaterial and should not be considered and this is not a factor in the calculators here.
I agree that the IRS apparently does not object to either initial calculation as long as you take the indicated amount each year. If they did, the difference in the calculators would quickly be eliminated.2012-09-23 01:00, By: Alan S, IP: []

L5: Fidelity calculation doesn’t match 72t.netSepp927- If your IRA balance has increased quite a bit over the last 9 months, and you would like a higher payment, I would ask them to use a more recent (documentable in hard copy for your records) month end balance, than the one from 9 months ago, and redo the calcs. I think the 8/31/2012 balance would make a lot more sense. It wouldn’t hurt to see what they say. Ken2012-09-23 03:30, By: Ken, IP: []

L6: Fidelity calculation doesn’t match 72t.netKen makes a good point.
If your 8/31 or more recent account value has increased from the 12/31/11 value, you should definitely use it. Not only will you get a higher distribution, but if you account value has appreciated considerably, it will be a safer value to select because the value you select should be close to your current account value. In addition, 9 months is pre dated a considerable time to use for your initial account value.
Further, if using the higher value provides more than you think you will need, then partition the IRA and use one of the IRAs for emergency needs to provide some insurance against having to bust your plan if you incur unexpected expenses.2012-09-23 04:21, By: Alan S, IP: []

L7: Fidelity calculation doesn’t match 72t.netI am taking annual payments so that wasn’t the problem. The $199 difference is the beginning of the year vs end of year calculation that Fidelity uses as posted in the earlier response. They only accept the 12/31/11 balance in their 72t program. I just opened the IRA this month so I had to give them my 12/31/11 balance from my old 401(k)s in order for them to calculate the 72t. They also would not allow me to take my future annual payments in February-I had to stay with September. In order to change the payout month, they said I have to ask for a recalculation. Sounds like more complications than it is worth. Anyway, the payment is being processed on 9/27 so I have accepted this as final. Thanks everyone for being so helpful. This is a great forum.2012-09-24 23:48, By: sepp092712, IP: []

L8: Fidelity calculation doesn’t match 72t.netSince this IRA was just established, pretty sure you cannot go back to an amount prior to the date this account was established. Hopefully the experts herecancomment on this.2012-09-25 00:26, By: meb24, IP: []

L8: Fidelity calculation doesn’t match 72t.netObviously Fidelity is interpreting the rules to fit the inflexibility of their system. The IRS regulations allow you to change the timing and frequency of distributions from SEPP T2-T plans, as well as IRAs. The only requirement from IRS is that the annual distributions must be identical, except for the first calendar year for which you can take a prorated distribution.
In addition, the IRS regulations indicate that the account balance to be used should be “reasonable reflection of the value” and “be relatively recent”. In most situations the balance should not be more than 6 months ago. In your situation, I would not be comfortable with using a valuation from almost 10 months ago. Furthermore, since the 8/31 or a date in September probably has a higher valuation, I would use this higher value to either generate a higher distribution, or to permit you to segregate a portion of your IRA to a second IRA for use in the case of future emergencies. ( I’m not even sure if the regulations allow you to use a 401-k balance for a subsequent SEPP 72-T from an IRA account, as opposed to using the initial IRA balance, especially when it comes long after 12/31.)
I would never allow my clients to use Fidelity for SEPP 72-T plans because I doi not believe that they understand the regulations. I would not want my clients to be possibly subjected to an IRS audit and disalowance, with significant negative financial consequences.2012-09-25 00:27, By: dlzallestaxes, IP: []

L9: Fidelity calculation doesn’t match 72t.netMy Sepp is going on 4 years now, and I have Fidelity, and they were very helpful from the beginning.2012-09-25 00:38, By: Chris, IP: []

L10: Fidelity calculation doesn’t match 72t.netYours may have been a more straight-forward plan, started from IRA accounts during the first 6 months of the year.2012-09-25 00:49, By: dlzallestaxes, IP: []

L11: Fidelity calculation doesn’t match 72t.netmeb24 was correct.
The larger error here by Fidelity is that the balance for a 401k account cannot be used as the opening balance for a SEPP plan from an IRA. These are two totally different types of retirement plans. It is surprising that Fidelity even suggested this. Perhaps you need to elevate this discussion to their SEPP resource people, because the people you have been talking to do not understand the account balance rules.
Accordingly, your account balance must use the balance of your IRA after the entire rollover was completed. Sometimes amounts do not always arrive at the same time in the IRA. You can also use an IRA balance later than the arrival of all the funds but not later than any distribution you might have taken from the IRA account. There is no restriction on the latest date you can use other than it must be no later than the day on which you order your first distribution.
While it would be better to have Fidelity up to speed on this, they probably are not going to provide the exception code 2 in Box 7 of your 1099R anyway. You will have to file a 5329 to claim the exception. This does not mean you cannot use Fidelity if they do not come around, even though it would be better if they did.
The accuracy of your plan is ultimately between you and the IRS.
2012-09-25 01:15, By: Alan S, IP: []

L12: Fidelity calculation doesn’t match 72t.netBased upon Alan’s, and other, comments, I would recommend that you cancel your planned first distribution on 9/27 until all of these problems can be worked out.
If you were planning to take an ANNUAL DISTRIBUTION for 2012, then delaying your start until October will have no effect, and might allow you to withdraw more because of having a higher account balance for the calculation.
If you were planning to take a prorated distribution, then the change from 4/12 ( 33 1/3%) to 3/12 (25%) of the annual amount might not be significant enough to jeopardize the tax consequences of the entire plan, and the difference could be reduced by the increase from a higher balance oin the calculation with a recent balance rather than the incorrect use of your 12/31 balance in the 401-K.2012-09-25 01:40, By: dlzallestaxes, IP: []

L13: Fidelity calculation doesn’t match 72t.netSEPP- Please re-read Alan S’s posting “L-11”. This needs to be pointed out to a Fidelity “higher up”, since they have set you up with an invalid plan by using the balance from a different source than the IRA you are using for this SEPP plan. If they issue the check in Sept, and you are proven correct, I think you can tell them to quickly recalulate it using same interest rate, and the correct starting balance of the IRA, and then promptly issue you another 2012 check (assuming payout will be higher) to make up the error in first calculation not being the right total.
On another note, I had a SEPP with Schwab from 2006 till 2008, when I moved the entire account to another broker, and in 2006 and 2007 I had them issue semi annual payments in March & September, then asked them to start paying me in monthly amounts (that added up to the 2 semi annual pmnt total over the course of the year) in 2008, and there was no problem. Each year, I was paid the same amount, which was the key. I started a second SEPP with different IRA thru Vanguard, in May 2007, and had them pay me 5 months worth of payments in May 2007, then switch me to monthly payments starting in June and going forward, so I got full year payment in first year, and they had no problem. It is amazing that Fidelity can tell you once you pick an annual payment date you cannot change it. JMO.
KEN2012-09-25 03:32, By: Ken, IP: []

L2: Fidelity calculation doesn’t match 72t.netWhile Fidelity is a good custodian they know little about the IRS 72T exception. Go towards the bottom of the home page here, and click on Planning Pointers. From there, go to the second paragraph from the bottom, and click on SEPP Form. Use this as a basis for your plan.
Post your results here, and ask for a check of your calculation. Walk, or call Fidelity and request your distribution. Even if you allow them to help you will be coded 1. You will still have to file a 5398, so they are really useless in the 72T process. As has been said here, it is ultimately between you and the IRS.
In my humble opinion, this website and forum is the single greatest resource pertaining to the 72T SEPP exception, and has some of the greatest minds in the country available at no cost! Thanks to Gordon, and all who participate.2012-09-25 14:14, By: Scott, IP: []

L3: Fidelity calculation doesn’t match 72t.netSorry for the delay. I’ve been busy stopping the 9/27 payment. Thanks to all your kind letters, I got to the correct person at Fidelity and they will use a current date IRA balance for the calculation. They were going to still get it out for Sept. but now I see it is online for 10/2-so the rate will change from 1.10 to 1.06. I have to talk to them tomorrow to see when they finalize the amount,date, and rate as I just faxed them this afternoon. So, now it is $231,907.87, age 54, single life, int rate 1.06%. amortization, annualpmt. Currently they show $8772.91 vs $8938.64 here. I will update you later when I have the final info. Thanks again for your support. 2012-09-26 22:35, By: sepp092712, IP: []