Age 55 Exception
In regards to the 55 or older exception form an employer retirment plan.
If you roll IRA into the plan before leaving would these funds also qualify for the expection or would it only be for the monies contributed by EE and ER?
Is there a clear ruling on this?
Thanks in advance
Permalink Submitted by Alan Spross on Mon, 2012-04-02 18:20
Nick,
The exception applies to all plan distributions including rollovers from IRAs. Sec 72t includes various qualifications and limitations with respect to the early withdrawal penalty, and there is no limitation with respect to balances in qualified plans received from other such plans including IRAs. Reinforcing this conclusion is the fact that 72(t)(9) DOES include such a limitation with respect to 457 plans.
A 457 is not a qualified plan and therefore has no early withdrawal penalty at anytime. However, this specific provision indicates that any 457 plan balance that includes rollovers from qualified plans or IRAs is treated as a QUALIFIED retirement plan balance with respect to the penalty. This provision illustrates that if there are limitations with respect to various balances in plans, they would be specifically listed in Sec 72(t). It is also logical to conclude that if an IRA tranferred to a 457 plan is treated as a qualified plan balance (not a 457 balance), an IRA transferred to a qualified plan would also be treated as a qualified plan balance.
Therefore, any distribution from a qualified plan in or after the year 55 is reached should be coded with a “2” on the 1099R. And if the code shown is 1 instead of 2, the taxpayer can override it by filing Form 5329 and listing the exception code “01”.
Permalink Submitted by Nick Pappas on Tue, 2012-04-03 15:05
Alan,
I cant thank you enough. It seems like 3-4 times a year I have a question I would like verified and you always to do that for me.
If you every come to Georgia let me know and I’ll buy dinner 😀
Thanks Again
Nick