LSD rollover and subsequent 72t SEPP

You are here:
< Back

L1: LSD rollover and subsequent 72t SEPPI will be taking a LSD and rolling over to possibly 3 separate IRA”s and setting up SEPP on one or more of the accounts. My question(s) is/are:I want to be able to direct the investments of these accounts and need to know if this is possible and if so, what type of IRA does this account have to be? I have read the forum andsaw something about a custodian account but wonder if I incurred brokerage fees would this amount have to come from monies other than the IRA as to not “bust” the SEPP? BTW, I have a TDAmeritrade account and wonder if anyone has had SEPP dealings with them as I do not have an IRA currently with them justa standard brokerage account.2008-07-17 18:35, By: retiremeister, IP: []
L2: LSD rollover and subsequent 72t SEPPA normal discount brokerage IRA presents no inconsistency with a SEPP plan. Commissions are taken directly from the IRA and are not considered distributions. Another possible setup is a wrap account structure under which all costs are billed as a % of assets. Again, if these costs are deducted directly from the IRA, they are not considered as distributions and therefore do not affect your SEPP amount. You could also elect to pay the wrap fee from non IRA funds and the payment would again not affect your SEPP because the payment would not be considered an IRA contribution per PLR 2005 07021. Payment from non IRA funds could result in a misc itemized deduction for the wrap fee once these deductions exceed 2% of AGI.
Your main concern would be to set up your IRAs in a way that you elect which ones will contain the beginning balance that will result in the SEPP distribution you need. Other IRA accounts can be kept outside the SEPP and can be used for emergency needs and flexibility to prevent the need to bust the SEPP by taking extra distributions from the accounts designated as your SEPP accounts.
You should not have IRA fees deducted from your SEPP accounts that pay for costs incurred in a different IRA or a taxable account.
I have not heard of any comments that Ameritrade presented any particular problems to executing a SEPP plan. The majority of these custodians now code your distributions as “early” resulting in the need for you to attach Form 5329 to claim your penalty exception.
2008-07-17 19:44, By: Alan S., IP: []

L2: LSD rollover and subsequent 72t SEPPRetiremeister:
All of the fees required by your SEPP custodian can be taken from the SEPP IRA with no problem as regards busting the SEPP. They are a cost of doing business and are allowed. Changes in account value due to market moves up and down are also allowed and do not cause any problems with busting a SEPP.
SEPPs are usually busted when people take more or less money from them than the exact amount calculated when setting up the SEPP. One way that this can happen is if your custodian sends you a dividend or interest payment from one of the mutual funds in your SEPP account. This recently happened to me but by working with the custodian I was able to have that distribution put back into the SEPP IRA where it belongs. Since the SEPP distribution amount is calculated on an annual basis, there will be no problem with busting my SEPP due to this event. Had I not noticed that this money came from my SEPP account, this probably would have busted my SEPP. It pays to be watchful.One word of advice that I would offer here is that it is best to set up your SEPP in as simple a way as meets your needs. Overly complex SEPPs can be more difficult to administer correctly which can lead to a busted SEPP. If you can do with 2 IRAs, say a large one for SEPP and a small one for emergencies, that may be better than having 3 or more IRAs to deal with.Ed2008-07-18 23:33, By: Ed_B, IP: []