72T – 10% penalty
Client has a variable IRA rollover annuity. Established 72T account 3 yrs ago.
Client wants to [u]transfer[/u] a portion of the original annuity to a fixed annuity at the same insurance co. There are sufficient monies to pay the 72T distribution.
Client will still continue to receive the same amt. of 72T distribution from the original annuity. The 72T payments will not be altered.
The transfer is taking place at one ins. co., therefore, the retirement plan is not changing.
Question: Can the client complete this transfer without the 10% penalty being assessed on the 72T periodic payments?
Permalink Submitted by Alan Spross on Tue, 2009-02-03 21:42
This should be a permitted partial transfer to an new IRA account. These have always been allowed, but it also needs to be disclosed that there was one adverse IRS letter ruling that busted a plan for doing this. This was PLR 2007 20023. To date, the IRS has failed to rationally explain this ruling, have not busted any other plans, and therefore this ruling is probably an aberration that can be ignored. Still, the existence of this ruling should be disclosed to a client.