Rollovers

L1: RolloversIf someone starts a SEPP using a given set of IRAs and years later decides to open a totally new IRA and roll funds from one of his SEPP IRAs into a new account will this break the SEPP exception? In this case he closes the old SEPP IRA and opens a new one and continues taking distributions from the new account in place of the old one.2006-04-10 18:02, By: dwh, IP: [207.255.4.61]
L2: RolloversHello dwh:
A rollover as you have described it is fine. The new IRA must be held separate & discrete meaning that no additional withdrawals are made and no contributions are made.
TheBadger
wjstecker@wispertel.net

2006-04-10 18:14, By: TheBadger, IP: [66.109.211.254]

L2: RolloversWhile your SEPP is still in compliance, you might run into a problem getting the second custodian to code you 1099R with a “2” for early withdrawal exception. You might have to supply documentation to them to convince them, but in the end they might insist on coding the distribution as early (code 1). If this happens you can still file a 5329 and claim the exception, but this also increases the chance of IRS questions. In other words, IRA custodians are getting picky about offering the “2” code, and that destroys the first line of defense against an IRS inquiry. Bottom line, if you are getting a 2 code from the first custodian, better be sure you are on solid ground with your calculations and documentation before deciding to change custodians. And if/when you do change, it”s better to do it with a direct transfer than a rollover, as that eliminates another 1099R.2006-04-10 22:10, By: Alan S., IP: [24.116.165.157]