SEPP starting date
L1: SEPP starting date
I started receiving SEPP monthly distributions on 7/1/2009. At the time I was 58 years old (birthday 4/6/1951). I received twice the calculated monthy amount for the remaining 6 months of 2009 after being advised by my BD compliance area that for the
first partial year one had to take a full year of distributions.
My first question is does the 5 year clock start ticking on 7/1/2009, the date of my first SEPP distribution or 1/1/2009 the effective date of the SEPP?
My second question is can I use the market value decline exemption for the 10% excise tax to change my monthly distribution amount? I was recently laid off and may soon need to increasemy monthly distribution.
2011-12-11 14:20, By: Tom, IP: [188.8.131.52]
L2: SEPP starting date
The plan starts with the date of the first distribution – if the 1st distribution was made on 07/01/2009, then the “clock starts ticking” on 07/01/2009. You may want to review a previous post on the 5-year rule
here. You may also want to use our “First
Modification Date” calculator.
>>My second question is can I use the market value decline exemption
>>for the 10% excise tax to change my monthly distribution amount?
There is no exception for a market value decline. You can take advantage of the one time switch to the Minimum Distribution method, but that usually results in a reduction of payments not an increase. Other than that, changing the distribution amount would
result in a 10% penalty of distributions that occurred prior to age 59.5 plus interest on past due penalties.
2011-12-11 14:39, By: Gfw, IP: [184.108.40.206]
L3: SEPP starting date
THANKS FOR THE QUICK RESPONSE. So 4/6/2014 is the first date that I can change or stop SEPP distributions.
Also, please confirm that I can change custodians and investments for my SEPP without penalty and that I should liquidate and transfer the proceeds electronically. Also, I need to confirm that the new custodian has the capability to continue the SEPP distributions.
2011-12-11 14:50, By: Tom, IP: [220.127.116.11]
L4: SEPP starting date
No, if you use the calculator you will see that your modification date is 7/1/2014 because you have a 5 year plan. You have a 5 year plan because the 5 years is later than the date you reach 59.5.
I think there is a question exactly what your options are between 1/1/2014 and 6/30/2014. The question is whether you are limited to taking nothing because you have already taken out 60 months worth as of 12/31/2013 OR if you
have the same options as you would under a plan ending at 59.5, ie taking out either a full year distribution or 6 months worth at anytime between 1/1/2014 and 6/30/2014. The answer apparently relates to interpretation of the Arnold vrs Commissioner case.
The second part of your question has a more definite answer. You can change custodians either by indirect 60 day rollover or by direct transfer, but direct transfer is by far the best method to use because there is no limit on
the number of direct transfers you can complete and they do NOT generate a 1099R forcing you to report a rollover. Your plan is between you and the IRS and the only thing a custodian can do is to not recognize your plan on Form 1099R, and most custodians do
not offer the exception code anyway. If you are getting a code 2 so far, that will probably change after you change custodians, but it is not any reason for concern. Just attach Form 5329 to your return and enter exception code “02” if you get a 1099R showing
code 1. Once you reach 59.5, you may get 2 1099R forms, with distributions taken after 59.5 coded as 7. If you get a 7, leave it alone as there is no need to change it.
2011-12-11 18:15, By: Alan S., IP: [18.104.22.168]
L5: SEPP starting date
I think we would all like to know who your broker-dealer is. You stated that the “BD COMPLIANCE OFFICE” told you that you were required to take ” A FULL YEAR’S DISTRIBUTION IN THE FIRST CALENDAR YEAR”, even though it was a partial year.
Since this is obviously incorrect, everyone should be forewarned about this firm which is either misinformed or incompetent.
2011-12-11 19:47, By: dlzallestaxes, IP: [22.214.171.124]
L6: SEPP starting date
I would definitely like to know the name of the B/D. If it happens to be mine I would love to have an “educational meeting” with them.
2012-01-03 20:59, By: Jim F, IP: [126.96.36.199]