SEPP/IRA account balance question

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L1: SEPP/IRA account balance questionI apologize if the answer to this is buried in the forum already, but I got confused today after reading Fidelity’s guidance on determining the account balance to use for the SEPP calculation. Here is what they say –

Estimated Retirement Account Balance

SEPPs are calculated using the market value of your retirement account as of December 31 of the prior year and adjusted for any pending transfers or rollovers. For example, if you had withdrawn an amount or initiated a transfer from an IRA at another institution within the last 60 days of the prior calendar year then transferred or rolled all or a portion of that distribution into a Fidelity IRA this year, you would have to add the amount of the transfer or rollover to the prior year’s December 31 balance in your Fidelity IRA.
I would have thought that the account balance to use would be the grand total of the IRAvalue mid-year after the 401k funds were rolled over and reflected in the total on what ever date in the year it happens to occur on. They seem to be saying that the total to use for the calculation is the IRA total from Dec 31st of the previous year, PLUS the total of the 401k funds added to that whenever it occurs in the year. Which is right – or are they both OK? I plan on doing a calculation perhaps this June or July after my 401k is rolled over, and I need to use the proper account balance mid year, however that is properly determined. Thanks.

2009-03-06 18:10, By: mikex, IP: []

L2: SEPP/IRA account balance questionFidelity may be correct in theory, but the bottom line to their point is that a SEPP should not be initiated until all incoming rollovers are complete, and you have a daily or monthly statement to document your opening balance for the SEPP. It would not be wise to take your first distribution based on a figure that did not actually arrive in the account until later and try to explain that to the IRS. Your plan is much more practical since it does that. Some 401k rollovers are not done in a single transfer and a dividend payment could trail the main rollover and arrive in the IRA a few weeks later. Use a balance after you are sure that all transfers to the IRA are complete. After that, you can use any daily balance within a reasonable time before your first SEPP distribution, not more than 6 months prior, and also not for a day when your balance bears no reasonable estimation of your current balance. For example, going back 6 months now would not fly because that balance could easily be 30% of more higher than today’s.2009-03-06 20:51, By: Alan S., IP: []