72t
Just reached 591/2 and also 5 years with the plan. My custodian advised me that my 72t plan would terminate in October. The company that I have my money in is not doing that well and am concerned it will not make it till the end of year. I wanted to wait until 2010 to transfer my traditional IRA to another custodian, but am getting nervous and would prefer to do this ASAP.
will this cause any problems.
Permalink Submitted by Alan Spross on Thu, 2009-11-05 20:25
With respect to your 72t plan, a full transfer will not cause a problem with your plan. A partial transfer could be problematic however, based on a couple adverse IRS rulings.
If at all possible do the transfer by a direct trustee transfer rather than an indirect rollover for the following reasons:
1) A direct transfer is not reported and you will avoid having to report a rollover on your tax return along with the 72t taxable distributions.
2) You may not even be eligible for an indirect rollover, if you have done one within the 12months prior to the distribution; there is a 12 month limitation.
3) By doing a transfer, you save your indirect rollover for any emergency needs to correct an over distribution from the IRA.
You will still end up with two 1099R forms for the year unless you time the transfer for year end. You may already been filing Form 5329 to claim the 72t exception, but if not the transfer will make that need more likely. Most custodians now do not provide the proper code for a 72t plan.
With respect to your plan termination, what month and year was your first distribution taken, and have you taken out 5 years of distributions yet? Wanted to check on that October termination date….was it last month or next October?
Permalink Submitted by daisy solano on Thu, 2009-11-05 23:36
In regards to plan termination my first distribution was september 27th 2004 and my birthdate is 4-22-1950. after that the only transfer i did was
a direct transfer from within the same brokerage acount , this was on 12-27-2007 and was initiated by my brokerage account,which said because i did my own trades, i would have to be on another type of account within there brokerage firm.
Then in august of this year from my brokerage who said my 72t would terminate on 10-22-09. So, since I stopped getting a distribution monthly I requested a check on 11-02-09 for the rest of the year. (probably will get two 5329 already with different codes)
Now I want to have my credit union to initiate a transfer . If my brokerage does go under i would be sent a check which would have to be rolled over. ( I guess that’s what you mean) by indirect rollover.
Thank you,
Permalink Submitted by Alan Spross on Fri, 2009-11-06 01:59
OK – the 72t modification date of 10/22/2009 is correct. Anything you choose to do after that date does NOT affect your plan in any way.
No telling what the 1099R will look like. A direct T to T transfer should not even be reported. But if the 1099R does not show your exception code of “2” in Box 7, just use a 5329 to report the exception, particularly if you did another indirect rollover is the prior 12 months.