L1: Final distributionMy SEPP has been in place for over 5 years. Each year I recalc the annual amount based on the prior 12/31 balance. I withdraw that amount as a single payment once during the year.
I will be 59 1/2 on April 26, 2010. Can I perform the same process in 2010 as I did in each of the prior years without breaking the SEPP? Does it matter if my withdrawal is before or after April 26, 2010? Is it necessary to withdraw a specific portion of the total annual amount before April 26, 2010?2009-07-30 15:54, By: Rob, IP: [18.104.22.168]
L2: Final distribution2010 is your final stub year, and you state that by year end 2009 you will already have distributed at least 60 months of payments under your plan. Your 2010 options are:
1) Take therecalculated full annual amount out prior to 4/26/2010.
2) Take out nothing prior to 4/26.
3) Take out a pro rated distribution of 25% of your recalculated annual amount (Jan-March).
Your plan will end on 4/26/2010. After that date and before RMDs begin,you can take out as much or as little as you wish, and no penalty will apply.2009-07-30 18:34, By: Alan S., IP: [22.214.171.124]
L3: Final distributionThanks, Alan,for the crystal-clear reply!
I’m just curious – is there an IRS document that delineates these options for the stub year? Or are these options that have arisen in private letters? Or the result of court cases? Or what? I’ve been searching (unsuccessfully)for some time – before running across this great site today.
Rob2009-07-30 19:13, By: Rob, IP: [126.96.36.199]
L4: Final distributionRob,
Excellent question, and I do not have a very complete answer. This conclusion is based on past posts made here by Bill Stecker (aka The Badger) and perhapsgfw.
There is no IRS Reg, tax code provision or IRS Pub that addresses this issue, and therefore the conclusion must rest on some combination of IRS letter rulings over the last 20 years along with actual IRS acquiesence to use of these options over the years.
A closely related issue is the option to distribute either the full annual or the pro rated amount in theFIRST stub year of a 72t plan, and I don’t know where the IRS has authorized that one either.
Certainly, with the amount of dollars on the line in the final stub year, a taxpayer would be wise to elect the option that poses the least amount of risk. That option would probably track as closely as possible to the distribution pattern of prior years, ie if monthly distributions have been taken, just continue them until the modification date month. But I do not think the others do pose much additional risk, if any.
I would be as interested as you are in any cites that corroborate all these options.2009-07-31 19:42, By: Alan S., IP: [188.8.131.52]
L5: Final distributionAlan,
Thanks. I’ll just make sure to take the standard annual distribution next year, although before or after April 26 is still up in the air. It sounds as if that’s not really critical.
In the meantime I’ll continue to look for some official word from the IRS and if I find anything I’ll post it here.
Rob2009-07-31 20:21, By: Rob, IP: [184.108.40.206]
L6: Final distributionIf you wish to take the standard annual distribution next year because you consider it “safer” with respect to your SEPP, you would take it prior to 4/26. What you do after your SEPP ends has no affect whatsoever on the SEPP plan.2009-08-01 16:50, By: Alan S., IP: [220.127.116.11]
L7: Final distributionWill do. Thanks.2009-08-01 17:13, By: Rob, IP: [18.104.22.168]