Hello,

I have seen multiple sources (Lord Abbett and 72.net) state that 72t/SEPP distributions from an IRA are allowed to be converted to a Roth IRA without any issues. Here are my questions:

1. If an IRA owner has an annual 72t distribution requirement of $10k….can that amount can be converted to Roth without being considered a modification and without breaking the plan and triggering penalties?

2. If YES, can additional amounts above and beyond the $10k be converted without modifying the 72t plan as long as future distributions continue to take place?

3. I have seen other resources state this is okay if the entire IRA is converted and the 72t payments continue from the Roth. Some say the IRS might consider a partial conversion as a transfer and a modification of the plan. And some say the 72t payments are not rollover eligible and not eligible for conversion. Curious to know your thoughts? Thanks!

In case it’s helpful, here is what 72t net referenced:

L2: Roth Conversions and 72(t)
Following is a copy of IRS Reg 1.408A-4, Q 12:
>>>>>>>>>>>>>>>>>>
Q12. Can an individual convert a traditional IRA to a Roth IRA if he or she is receiving substantially equal periodic payments within the meaning of section 72(t)(2)(A)(iv) from that traditional IRA?
A12. Yes. Not only is the conversion amount itself not subject to the early distribution tax under section 72(t), but the conversion amount is also not treated as a distribution for purposes of determining whether a modification within the meaning of section
72(t)(4)(A) has occurred. Distributions from the Roth IRA that are part of the original series of substantially equal periodic payments will be nonqualified distributions from the Roth IRA until they meet the requirements for being a qualified distribution,
described in 1.408A6 A1(b). The additional 10-percent tax under section 72(t) will not apply to the extent that these nonqualified distributions are part of a series of substantially equal periodic payments. Nevertheless, to the extent that such distributions
are allocable to a 1998 conversion contribution with respect to which the 4-year spread for the resultant income inclusion applies (see A8 of this section) and are received during 1998, 1999, or 2000, the special acceleration rules of 1.408A6 A6 apply.
However, if the original series of substantially equal periodic payments does not continue to be distributed in substantially equal periodic payments from the Roth IRA after the conversion, the series of payments will have been modified and, if this modification
occurs within 5 years of the first payment or prior to the individual becoming disabled or attaining age 59 1/2, the taxpayer will be subject to the recapture tax of section 72(t)(4)(A).

Thank you.