Notice 2008-51 HSA transfer with SEPP

L1: Notice 2008-51 HSA transfer with SEPP
Following copied from the IRS Notice:>>>>>>>>> >>>>>>>>>>>
A qualified HSA funding distribution is not subject to the 10 percent additional tax
under 72(t). However, if the qualified HSA funding distribution results in a modification
of a series of substantially equal periodic payments that, prior to the modification, qualify
for the exception to the 10 percent additional tax under 72(t)(2)(A)(iv), and such
modification results in the imposition of the recapture tax under the rules of 72(t)(4),
the recapture tax applies to the payments made before the date of the qualified HSA
funding distribution.>>>>>> >>>>>>>>>>.I regard this verbiage as another vague IRS interpretation on this subject that is not particularly helpful. My problem is with the use of “IF” the transfer busts the SEPP or not. It would be helpful to indicate that either itDOES or does not modify the SEPP. The first such IRA transfer to a non retirement account was the qualified charitable contribution, but 70 year olds are not participating in a SEPP. Now we have the HSA transfer, which would appeal to SEPP age participants wanting to maintain tax deferral. The HSA is presumably NOT a retirement plan, and in theory would not bust the SEPP, but since it is reported on Form 1040 as a rollover distribution on line 15, it has major potential to trigger a troublesome debate with the IRS. For those who do not relish such a debate with a retroactive penalty hanging in the balance, I think it would be best to refrain from becoming the test case until the IRSactually clarifies this issue.
Anyone else have a different take on this?

2008-06-09 16:48, By: Alan S., IP: [24.116.165.60]