Trustee to Trustee transfer with 72(t) in force
L1: Trustee to Trustee transfer with 72(t) in force
Can you do a trustee to trustee transfer with an IRA that has an inforce 72(t). If so, where can I find it in the regs. I have checked 2002-62 and it states a “portion of the account balance”. I am interested in doing 100% of the account balance.
2011-08-18 15:35, By: Maverick, IP: [18.104.22.168]
L2: Trustee to Trustee transfer with 72(t) in force
The entire SEPP subject suffers from a notable lack of Regs or tax code specifications. 2002-62 is the largest single source of reference, but still leaves much to interpretation found in IRS letter rulings and in many cases
collective patterns of IRS actions.
Here is a copy of the 2002-62 reference to transfers:
(e) Changes to account balance. Under all three methods, substantially equal periodic payments are calculated with respect to an account balance as of the first valuation date selected in paragraph (d) above. Thus, a modification
to the series of payments will occur if, after such date, there is (i) any addition to the account balance other than gains or losses, (ii) any nontaxable transfer of a portion of the account balance to another retirement plan, or (iii) a rollover by the taxpayer
of the amount received resulting in such amount not being taxable.
Note that “another retirement plan” is considered to be a different type of retirement plan, ie you could not start a plan with a 401k and then roll it to an IRA because the IRA is a different type of plan. However, specific
IRS Regs allow the conversion of a TIRA to a Roth IRA within the plan evidently because both are IRA types.
The other issue is what the IRS means by “portion of the account balance”. There has never been a question regarding a total T to T transfer or even an indirect rollover of an entire IRA account to another IRA account, but the
IRS has on a couple occasions busted a SEPP plan due to a partial transfer, where some amount is left in the original IRA account and a part of the balance is transferred to a new IRA account, quite often an IRA annuity account. That said, there have been
thousands of these done without problems from the IRS vrs only a couple partial transfers that were busted. I think the partial transfer problem is an aberration, but cannot be ignored either.
But for your question, a 100% transfer is not a problem. You may get two 1099R forms for the year on your distributions, and you must be sure that they total to the exact annual calculation for your plan. Form 5329 is needed
in most cases with or without the transfer.
2011-08-18 16:28, By: Alan S., IP: [22.214.171.124]
L3: Trustee to Trustee transfer with 72(t) in force
Very concise. Thank you for sucha detailed response.
2011-08-18 16:52, By: Maverick, IP: [126.96.36.199]