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Hello, All:
Yesterday was a great day for me. After 5 years of doing the SEPP thing, it is finally over and done. I can now do anything I want with my t-IRA. I don’t plan on making any changes for a while but it is nice to know that I can if I wish.
On another note, Vanguard is at it again. All of my 2009 quarterly SEPP payments were distributed AFTER I turned age 59.5 on 2/6/2009. This should have resulted in a code of 7 in box 7 of my 2009 1099-R… but it did not. It still shows a code of 1. I spoke with a Vanguard rep via telephone and he informed me that I should have received a code of 7 for 2009 but that “our system just doesn’t work that way”. Interesting. I doubt that the IRS would accept that if a certain date were to affect a client’s taxation… such as the age 70.5 mark. Further, the rep stated that the only way to change this was to stop my current distributions and restart them. That seems a really odd way to run a computer system to me but what do I know? I’m just a client. I have done a fair amount of computer and database programming, however, and it does not seem at all difficult to have the database actually update the code cell for showing an accurate 1099 code that actually changes as is appropriate for the client’s age. So… for tax year 2009 it will be yet another form 5329 to correct yet another 1099-R.
2010-03-16 16:14, By: Ed_B, IP: []

L2: SEPP ENDSEd,Well, as they say “it’s not over till it’s over” ………..Seems like VG should have a way to override their system if they can’t get the system corrected. The IRS does not know the date distributions were made, but VG does so this is a case of GIGO.At least you have the control of using the 5329 to change the distribution code to a 7. Then you have to hope that the IRS does not think that VG coded the 1 with good reason. But even if they further question you it will be easy to put together the info needed to document your position. But you will not be happy if you have to go through this unnecessary work had they coded it correctly.Not to be overly cynical, but the IRS often works well in arrears, so even though your SEPP is technically over and you can do as you please going forward, you still shouldretain all your documentation for another 3 years at minimum, 7 to be even safer.2010-03-17 00:19, By: Alan S., IP: []

L3: SEPP ENDSHello, Alan:
Yes, I understand that the IRS can review anyone’s situation for years after they have filed or events in their lives have changed. There’s nothing I can do about that but, as you suggest, hang on to the documentation. Not to worry there. I have really good docs in a 3″ thick 3-ring binder. It has a place on my bookshelf and I do not need that space for anything else. It will be with me for at least the next 5 years, if not longer.
I agree that a computerized system ought to have sufficient flexibility to handle this seemingly minuscule problem. Vanguard is a good custodian and I have been happy with them for the most part. Perhaps they are good enough that their few problems seem all the more glaring?
In spite of the silliness of the method, I am tempted to reset the Vanguard computers by stopping my distributions and then immediately starting them again. The rep assured me that doing this would reset the 1099 coding because it would see it as a new distribution, it would know that I am over 59.5 years old, and it would use the correct 1099 coding right from “the start”.
In any case, I would like to thank you, The Badger, and all the other great folks on this web site for sharing the information that made me aware of the SEPP option and how to set it up so that it would pass IRS muster. I had other sources, of course, but this web site was an excellent resource for sure.
Best regards,
2010-03-17 04:20, By: Ed_B, IP: []

L4: SEPP ENDSI can see once instance in which Vanguard, or any custodian, might not change the coding after 59 1/2 when the SEPP 72-T account has been transferred from another custodian. They might not know for sure that the plan had beenin existence for at least 5 years prior to 59 1/2.On the other hand, if the plan had been with the custodian for at least 5 years, then I do not see any reason why they could not have their programmed to code the distrib utions properly for 2 1099-R forms in the year you reach 59 1/2.2010-03-17 14:04, By: dlzallestaxes, IP: []

L5: SEPP ENDSHello, Dlz…
My SEPP has been with Vanguard for all 5 years. Even after filling out their multi-page SEPP application form and them sending me EXACTLY the same amount of money each year, they still refuse to acknowledge that I, or any client, even has a SEPP. I once asked them why they did not acknowledge a client’s SEPP and they spluttered and tried to explain that it was because of IRS regulations and they could not guarantee that the SEPP was legitimate. When I asked them to cite the specific regulation so I could have my attorney review it, they spluttered ever more and lost interest in the conversation. That pretty much told me that there is no specific regulation, rule, or law on this and that they had merely interpreted the situation to be of least harm / most benefit to themselves. Oh, well… whatever.
They also do not send out 2 1099-Rs for the year in which a person reaches age 59.5. I thought that they would, with one reporting the pre-59.5 distributions and one for the post-59.5 distributions and both coded correctly but they don’t do that either. This is yet another place where a computer could spit out the requested document quite easily but apparently it is of no concern to Vanguard, so why should they do it?
I am not picking on Vanguard in this, although it may seem that way. Vanguard is handling this in the same way as many other custodians these days. If anyone reading this has gotten better treatment from their custodian on this issue, then that is all to the good and well worth mentioning.
Ed_B2010-03-17 15:56, By: Ed_B, IP: []