Age 59.5 Trigerring event
An individual was trying to transfer an Oppenheimer Individual 401(k) to a TD Ameritrade IRA. She turns 59.5 on August 21, 2009 and therefore Oppenheimer denied the request saying she had not met the triggering event. Is Oppenheimer correct or should she be able to transfer her funds based on this being the calendar year in which she turns 59.5?
She was also considering claiming disability. What criteria would she have to meet to be able to transfer the funds due to disability and what type of proof would she need to provide to Oppenheimer? I know the proof may be specific to Oppenheimer and she may have to call them but I am just asking generally in case someone may know.
Thanks very much for your input!
Permalink Submitted by mk foss on Sat, 2009-07-11 20:28
I’m not sure what Oppenheimer is getting at. Normally the impediment to transferring or rolling over a plan is on the existing custodian’s part and not the IRA custodian. Triggering events are associated with lump sum distributions – you’d need a lump sum distribution for ten-year averaging or NUA treatment. Since 1992, you no longer need a lump sum distribution for an IRA rollover.
I wonder if there is some communication misunderstanding or terminology gap – a rollover from a qualified plan to an IRA does not require a triggering event. Does Oppenheimer think she’s looking for a new home for the individual 401(k) instead of a rollover?
Permalink Submitted by Alan Spross on Sat, 2009-07-11 23:38
Perhaps the solo K agreement specifies age 59.5 as a requirement for an “in service distribution”, although proof of permanent disability should also suffice. Since 59.5 is only another month away, probably easier to just wait for that date to pass.
Permalink Submitted by steve harper on Sun, 2009-07-12 03:34
Thanks for all the info. The problem for her waiting until the end of August is that she is in a hurry to get the money transferred into the IRA and then make a withdrawal as she is involved in some real estate transactions for her business where she needs the funds ASAP. And I told them I didn’t know if the IRS would consider fibromyalgia a permanent disability?
For future reference if the plan document does not state age 59.5 specifically is it a general rule that transfers from a qualified plan or IRA can be taken “during the calendar year in which someone turns 59.5”– and not having to wait until the actual day on which they turn 59.5?
Permalink Submitted by Alan Spross on Sun, 2009-07-12 03:45
There is no general rule, however it is fairly common for a plan document to specify that in service distributions are allowed at 59.5. It may also have disability provisions. This would be upon actually attaining 59.5, not just anytime in the same year. I am not sure for a solo K participant what is needed to establish termination of the business and/or the plan.
Other possibilities to check into with Oppenheimer are plan loan provisions or hardship distributions, but that won’t work if she needs the entire balance. Note that “for her business” also raises the possibility that this investment could be a prohibited transaction, and that would be a disaster.
Permalink Submitted by steve harper on Sun, 2009-07-12 05:53
I apologize for the unclear info I listed re the business. She has a few different LLC’s and partnerships. My understanding is the solo k is from a partnership that was created for a real estate transaction. Some of the profit from the transaction funded the solo K a few years ago. The partnership does not really have any activity to my knowledge but I was told her husband does not want to end it at this time as they may have some use for it in the future. The objective was to get the funds transferred to an IRA so they could withdraw the funds which could then be used for purchasing real estate with one of their other LLC’s.
Is there anything wrong with that type of transaction once she reaches age 59.5?
Permalink Submitted by Alan Spross on Sun, 2009-07-12 17:21
No problem if funds are distributed from the IRA in what would be a taxable distribution. These funds are then free of the IRA and any exposure to a prohibited transaction.