Transfer of assets to a new IRA and my SEPP

L1: Transfer of assets to a new IRA and my SEPPThis forum has been a wealth of information for me. I read it weekly just to stay on top of the issues and often learn, or relearn something. Now I have a situation that I need some advice on.I’m 58 and currently have two IRA’s with Fidelity, with the larger one having a SEPPtied to it that is about half way into the 5yr./59.5 rules. This has gone well without any issues until now.I have been paying Fidelity to manage the underlying IRA. Due to market conditions this year I had decided to change the investment direction significantly and have done so on two occasions. We have agreed to disagree and my latest change has resulted in ending the IRA being actively managed by Fidelity, effectively firing them as the manager for now. Now they want to me to open a new IRA and do a direct rollover to that IRA so that I can continue the SEPP.From what I recall, this should not be an issue as far as busting the SEPP, but prior to doing this I want to be positive. I know we need to be careful to make sure that the annual draw remains identical. My rep says he is very familiar with this process and does not forsee any issues. I think that Imay can expect an additional 1099 related to this. I am familiar with the 5239 and expect to file them again this year. AndI certainly plan on documenting this well. Is there anything that I’m missing here? I do not want to bust the plan and result in the penalties.As always, your advice will be appreciated.2008-10-16 08:34, By: larry, IP: [75.137.244.206]
L2: Transfer of assets to a new IRA and my SEPPGood morning Larry:I believethat I understand your situation but I would like for you to confirm my thinking. Your SEPP IRA is in a “managed account” and you are paying an annualized fee for management and transaction costs for this account. For whatever reasons you have decided to terminate the “managed account” arrangement and change to a “commission-based” arrangement … even if you are using “no-load” funds. How am I doing so far?If the above is true, then you will have to change from the “fee-based” account platform to a “non fee-based” or “commission-based” type of account. Fidelity has both types.You shouldn’t have any problems letting Fideltiy process the “trustee-to-trustee transfer” from the fee account to the non-fee account, and everything should work smoothly. I see this as more of an administrative issue than something sinister. You’ll get a new account with a new account number, and you’ll get two Form 1099-R’s. Since you’re already familiar with Form 5329, you shouldn’t have any problems.Alan, Bill or Gordon may have some other ideas.Jim2008-10-16 09:09, By: jim, IP: [70.167.81.119]

L2: Transfer of assets to a new IRA and my SEPPJim,I appreciate yourquick response.You are correct in your assumptions about the fee based and non-fee based accounts. We will be moving the assets from the fee based to a non-fee based account, where I will manage the direction, just like I do in the second IRA. There will be no comingaling of funds or accounts or changes in the annual draw. I do take monthly draws and I will watch this very closely to make sure that there are no issues.I didn’t think that this was an issue, but just wanted to be 100% positive prior to doing this. The only reason I can see for the move is the managed account numbers begin with a letter, while other accounts do not. I suppose it just an internal issue for Fidelity and would expect the same from many other institutions.I’ll watch for other replies today before I make this move.Again, thanks for the response and the advice.2008-10-16 09:37, By: larry, IP: [75.137.244.206]

L2: Transfer of assets to a new IRA and my SEPPI agree with Jim that this should not present a problem as long as the transfer is being made to a new IRA with no prior balance. Moreover, this would be a complete transfer, not a partial transfer like the one that caused the issue with PLR 200720023.The transfer should be done directly and that will preserve the rollover option in case it needs to be used to correct an inadvertant error in the next 12 months. A same custodian transfer should not even generate a 1099R, meaning that it need not be reported on Form 1040.2008-10-16 22:24, By: alan+s., IP: [24.116.165.60]

L2: Transfer of assets to a new IRA and my SEPPAlan:Thanks for your comments. I know you track the PLR universe and have a better handle on how Larry’s situation will fit with the rules governing that “wonderfully clear” (haha) IRS rulling. His move should not be a problem, especially when he follows your advice.I believe he will receive two Form 1099-R’s for 2008, and here’s my logic.A separate Form1099-R and Form 5498will be generated for each account number. Durning the year Larry completes the transfer from the fee-based account to the non fee-based account, eventhough it’s with the same custodian, he will have distributions from each, separate account. The only exception would be if he took all of his required distribution for 2008 from the fee-based account in 2008 and did not begin making distributions from the non fee-based account until 2009. Since he’s going to use the “trustee-to-trustee” method for moving the money to the new account, that won’t generate form 1099-R reporting, only the Form 5498 reporting which is basically a “non-event.”Jim2008-10-17 08:37, By: jim, IP: [70.167.81.119]