Transfer part of SEPP to another IRA

L1: Transfer part of SEPP to another IRAIf you have set up a SEPP with one trustee, can you transfer part of the money to new IRA held by a different trustee without violating the SEPP?
For example, a SEPP is set up at Fidelity worth $300,000. I take $100,000 and transfer it toa newIRA withLicoln Benefit Life. Then, each year take 10% from the LBLIRA and transfer it back to Fidelity. This does not violate the SEPP right?2004-12-15 20:09, By: Spacntime7, IP: [216.135.180.146]

L2: Transfer part of SEPP to another IRAYou are correct; inter-trustee transfer of assets (even repeatedly) are just fine and do not relate to the SEPP program itself.
TheBadger
wjstecker@wispertel.net
2004-12-15 21:27, By: TheBadger, IP: [66.250.23.21]

L3: Transfer part of SEPP to another IRASection 2.02(i) of 2002-62 states “any addition to the account balance other than gains or losses…” results in a “change tothe account balance” resulting in a “…modification to the series of payments”
Section 2.02(ii) states “any nontaxable transfer of a portion of the account balance to another retirement plan (which is defined to include section 408(a) accounts, among others)…” results in a “change to the account balance” resulting in a “…modification to the series of payments”
Based on this information, I’m confused by your opinion that “inter-trustee transfer of assets (even repeatedly) are just fine and do not relate to the SEPP program itself.” The person asking the question stated that they transferred a portion of the account balance to another retirement plan, and that they subsequently made additions to the account balance other than gains and losses.
Please provide me with some guidance that substantiates your opinion as this issues is eerily similar to one that I am currently dealing with.
2004-12-22 12:39, By: IRA Custodian, IP: [63.103.206.10]

L3: Transfer part of SEPP to another IRAHello IRA Custodian:
Admittedly the sections of RR 2002-62 you cite are confusing; potentially some of the worst language I’ve seen in a while. To help you through this confusion, I makethree points:
1. Go to Articles of Interest (at this webiste) and read the 3rd article published on 1/11/04. It provides a rather detailed explanation.
2. IRC 72(t) and RR 2002-62 ONLY APPLY when a distribution (or other transaction) creates a taxable event. A rollover or trustee-to-trustee transfer are non-taxable events; therefore 72(t) & RR 2002-62 do not apply.
3. Taking (2) above step further, Congress enacted IRC 408(d)(3) some 20 years ago — that portion of the IRC that permits rollovers. Congress tends to get its nose (rightfully) out-of-joint whenever the IRS attempts to usurp Congressional authority; e.g. a rollover, permitted by IRC 408(d)(3) can not invalidate a 72(t) plan as long as the taxabilityof distributions remains unchanged; conversely, using a rollover to as some kind of a blocking mechanism that would change the taxability of the distributions or modify the distributions would invalidate the 72(t) plan.
TheBadger
wjstecker@wispertel.net
2004-12-22 13:05, By: TheBadger, IP: [66.250.23.21]

L2: Transfer part of SEPP to another IRASection 2.02(i) of 2002-62 states “any addition to the account balance other than gains or losses…” results in a “change to the account balance” resulting in a “…modification to the series of payments”
Section 2.02(ii) states “any nontaxable transfer of a portion of the account balance to another retirement plan (which is defined to include section 408(a) accounts, among others)…” results in a “change to the account balance” resulting in a “…modification to the series of payments”
Based on this information, I’m confused by your opinion that “inter-trustee transfer of assets (even repeatedly) are just fine and do not relate to the SEPP program itself.” The person asking the question stated that they transferred a portion of the account balance to another retirement plan, and that they subsequently made additions to the account balance other than gains and losses.
Please provide me with some guidance that substantiates your opinion as this issues is eerily similar to one that I am currently dealing with.2004-12-22 13:14, By: IRA Custodian, IP: [63.103.206.10]

L2: Transfer part of SEPP to another IRAHello IRA Custodian:
Admittedly, some of the language in RR 2002-62 (and specifically the portions you cite) are poorly drafted; potentially some of the worst language I have seen in some years. That said, to answer your question, I offer three points:
1. Go to Articles of Interest & read the 3rd article down; originally puvlished on 1/11/04; it porvides a detailed explanation.
2. IRC 72(t) & RR 2002-62 ONLY APPLY when a distribution is taxable; e.g. a normal distribution; 72(t) & RR 2002-62 do not apply if a transaction does not create a taxable event — rollovers, when properly done and trustee-to-trustee transfers are not taxable events; therefore they do not apply.
3. Taking (2) above a step further, IRC 408(d)(3) the “rollover provision” was enacted by the US Congress some 20 years ago. Congress tends to get its nose out of joint (rightfully) whenever the IRS attemtps to usurp COngressional authority.
With this in miind let’s look at two transactions:
A. Taxpayer does a transfer to assets from IRA A (the SEPP IRA) to IRA B & continues the SEPP plan taking assets out of A & B periodically to satisfy the distributions. All that happened here was a trustee-to-trustee transfer & the taxability of the distribution stream remained unchanged; therefore no problem.
B. Taxpayer does a transafer orom IRA A to XYZ Employers Profit Sharing plan and ceases SEPP distributions becuase the plan administrator of the XYZ plan says that he can not make distributions while employed by XYZ as they are not permitted by the plan document. Here we have bad news and a violation of 72(t)(4); e.g. a modification has occurred.
TheBadger
wjstecker@wispertel.net
2004-12-22 13:40, By: TheBadger, IP: [66.250.23.21]

L2: Transfer part of SEPP to another IRACompliance with IRC doesn’t bother mebut the reason for making the moves strikes me as something called ‘churning the account.’ Granted there is little information and no logic for the moves presented,but on the surface it sounds like this is a commission generating machine.
If the original poster is the client, then may I suggest you ask your rep / agent some questions about why.
If the original poster is the rep / agent, then I suspect this action would raise more red flags than you can imagine.
Jim2004-12-22 14:09, By: Jim, IP: [68.1.157.228]