Options in final year
L1: Options in final year
existing plan, 1st distribution was in 12/2013
1st mod date: 10/21/2019
does reaching 59.5 before the end of the 2019 calendar year allow the option to take a
$0 distribution prior to the modification date or is a distribution required in 2019 prior to
the modification date in order to not bust the plan?
2018-07-23 13:11, By: cj, IP: [22.214.171.124]
L2: Options in final year
A distribution of 0 in 2019 is one of the options. The others are distributions of a full annual amount or a pro rated amount (75% of annual) prior to the modification date.
2018-07-23 16:18, By: Alan S, IP: [126.96.36.199]
L3: Options in final year
Thanks for the prompt reply, Alan.
What is the foundation for these options in the final year? I searched prior to posting earlier but was unable to find any formal written rules.
So a 0 distribution will not cause any issues with the IRS? Will they ever question why no distribution was taken for 2019 if I choose that option?
2018-07-23 17:38, By: cj, IP: [188.8.131.52]
L4: Options in final year
A SEPP plan ends when you turn 59.5. There is nothing that states when the annual distribution must occur and since the plan ends at 59.5, no distribution need to be made in that year.
2018-07-23 18:28, By: gfw, IP: [184.108.40.206]
L5: Options in final year
Do not contact IRS for info about SEPP 72-T.
99% or more at IRS don’t even know what it is.
Sadly, 90% or more of tax practitioners do not know either.
2018-07-23 20:53, By: dlzallestaxes, IP: [220.127.116.11]
L5: Options in final year
thanks for the replies, however I am still confused so please bear with me on this as I
want to make sure I do not bust my plan.
As I stated above, 1st distribution was in 12/2013. Full distribution.
Full distributions were than taken in the following years:
2014-Atn age 54
2015-Atn age 55
2016 Atn-age 56
2017 Atn age 57
2018 Atn age 58
These distributions fulfill the 5 year requirement, but my confusion is with the 59.5 rule
which governs my plan.
The calculator on this site show a payment is required for year 7, Atn age 59, which would be in 2019.
Ideally I would like to take 0 prior to 10/21/19, but feel if I do I am not meeting the longer
requirement of continuing at least one payment until I am 59.5.
2018-07-26 17:08, By: cj, IP: [18.104.22.168]
L6: Options in final year
L2 and L4 above have both already answered this question, i.e. -0- is required. If you do not want to follow the answers here, you are free to hire a professional who you might trust more, but make sure that they have similar experience and expertise to those who respond to postings on this website.
2018-07-26 17:24, By: dlzallestaxes, IP: [22.214.171.124]
L7: Options in final year
With respect to the calculator examples, a plan which ends at 59.5 will have 3 options for the final stub year. Since a full annual distribution is one of those 3 options and probably the most commonly elected one, that is what the calculator shows. It would be extraneous to show examples of all 3 options.
The modification date is the date prior to which a non SEPP distribution is not allowed as such a distribution would bust the plan. What we are lacking here is a specific ruling that clearly states that taking out 0 prior to the mod date is an acceptable SEPP option. Perhaps there is an old PLR that does that. However, SEPP participants that have selected the 0 distribution option for many years have not experienced any IRS issues with that choice.
A SEPP plan is inherently a calendar year plan. A distribution is not required until the last day of any such plan year, therefore if the modification date occurs prior to year end (final stub year), it makes sense that the requirement for a mandatory distribution is erased.
2018-07-26 20:09, By: Alan S, IP: [126.96.36.199]