72t transfers
Can you transfer a IRA account that is under the 72t distribution rule to another institution without busting the 72t.
Example: a client was 50 years of age when she started her distributions under 72t back in 2011 and is now 55 years old. She has to continue the 72t payments up until 59.5 but wants to move the large account from one institution to another and continue her planned payments until she reaches age 59.5. We are considering setting up 1 spia that will satisfy her planned payments for the next 5 years and putting the remaining amount into a growth account at the same institution that will not be touch for 5 years. Is this possible or will it bust the 72t?
Thank you
Permalink Submitted by Alan - IRA critic on Thu, 2015-04-30 02:58
No way to tell for sure. Thousands of 72t participants have done partial transfers without a problem, but on a couple occasions the IRS has busted the plan for a partial transfer (See PLR 2007 20023). The IRA rationale for busting the plan did not make much sense, but there is a small degree of risk involved in doing a partial transfer. However, a full transfer of the 72t IRA account to a new custodian has not created a problem, other than perhaps added reporting and coordination work to make sure the exact amount is distributed in the transfer year.
Permalink Submitted by James Foulk on Thu, 2015-04-30 20:48
The full IRA will be tranafered and the spia will continue with the exact payments while the other accts will sit untouched.
Permalink Submitted by Alan - IRA critic on Thu, 2015-04-30 22:31
The risk of a problem is very low, and because the entire IRA was transferred this is a different situation than the one in the cited PLR with the partial transfer. That said, the IRS never revealed how they would define a “partial transfer”. I suppose it is very unlikely, but possible that the IRS could have an issue with a full transfer, but an additional account being established with the distributions no longer applying to the additional account. As stated, the risk is very low but perhaps should still be disclosed to the client.