Private Letter Ruling Request
L1: Private Letter Ruling RequestI am 48 5/28/66 and will retire this January after 28 yrs. I have a defined benefit pension and a deferred retirement account that has a fixed interest rate of 5%.
i was hoping to supplement my pension by taking 5-6% out of my drop account annually (starting this January) but according to the federal mid-term cap rate I would be violating the IRS rules and subject to an additional 10% penalty.
if the intent of the 72t is to make sure I have money for retirement when I reach 59 1/2 years old I would think leaving my principle in my account and taking out the guaranteed fixed rate annually should not be an issue and I would assume be a reasonable interest rate. Basically, I will have the same principle in the account I have now when I reach 59 1/2.
Does this make sense to anyone and in anyone’s opinion worth getting a private letter ruling request?
Any opinions or advice will be much appreciated.2014-08-19 23:40, By: Bend Bound, IP: [220.127.116.11]
L2: Private Letter Ruling RequestYourplan may make financial sense, but it is not consistent with any of the PLRs released by the IRS on 72t plans. Interest rates would have rise considerably for the distribution to reach your target amount. RR 2002-62 dictates that the 120 mid term rate at the time the plan begins will apply(or the rate on the recalculation date if you adopt a recalculated plan as approved by the IRS).One optionwould be to start a currently approvedrecalcplan at the much lower annual payout and hope that interest rates rise substantially in the near future and remain there. Or roll it over to an IRA and invest in stocks which may return more than 5% and result in an increased account balance each year for a recalculated plan. And your age increase each year would also generate a somewhat larger payout. But there is a good chance that neither of these options gets you that close tothe payout you want. I think seeking a PLR allowing you to base your plan on the interest rate the plan pays out rather than the mid term rate would result in loss of your fees with no benefit.2014-08-20 04:55, By: Alan S, IP: [18.104.22.168]
L3: Private Letter Ruling RequestThank you for your input. It is much appreciated2014-08-21 19:44, By: Bend Bound, IP: [22.214.171.124]
L4: Private Letter Ruling RequestJust so that you will understand, the IRS charges $ 10,000 just for you to file a request for them to consider a Private Letter Ruling (PLR). The you usually have to retain a taxattorney who specializes in filing PLR’s to “represent you in dealing with the IRS”. This fee is usually an additional $ 7,500 – $ 10,000.
Even though your reasoning makes sense, the IRS regulations often “defy logic”, and that is the case in your situation. I would not recommend that you take this appoach if you were my client.2014-08-21 19:57, By: dlzallestaxes, IP: [126.96.36.199]
L5: Private Letter Ruling RequestThat is crazy amounts of money to get their official position on an issue of this nature. I just hate the fact I am being forced to comply with a rule that really does not apply to my retirement goals nor really meets any of their logic for applying this rule.
Bend Bound2014-08-22 15:30, By: Bend Bound, IP: [188.8.131.52]