72t and change of custodian
I have seen conflicting opinions on this issue. If an IRA from which a 72t series is being taken is transferred in full to a new custodian, if the series continues as it was, is the 72t “busted”?
I have seen conflicting opinions on this issue. If an IRA from which a 72t series is being taken is transferred in full to a new custodian, if the series continues as it was, is the 72t “busted”?
Permalink Submitted by Alan Spross on Thu, 2009-06-04 19:03
No, a full transfer does not bust a 72t plan. The only pitfall is that change of custodian could result in confusion over the total amount distributed for the year and increase the chance for error. It might also result in having to file a 5329 to claim the penalty exception if either custodian issues their 1099R with an “early” code (1) in Box 7.
A partial transfer is incrementally more risky, since a letter ruling in 2008 (PLR 2007 20023) busted a plan for doing a partial transfer. However, there has been no IRS follow up, so this is now considered to have been an aberration. Thousands of partial transfers have been done, and only this one adverse ruling to date. So a partial transfer should also be OK, but with any 72t plan, the fewer moving parts the better just so IRA owners or their custodians do not get confused.