72t Partial Rollover after Distributions Begin
If someone has started their distributions already, taking two so far but have 5 more to go until the age of 59 1/2, can the keep enough in account at the current brokerage account to fulfill the requirement and then roll the difference to another investment or IRA account outside the current brokerage? Specifically, into the stock of a startup C Corp that they are looking to set-up.
Permalink Submitted by Alan - IRA critic on Fri, 2015-06-19 03:39
Do these plans fall under the following IRS Releases: http://www.irs.gov/Retirement-Plans/Employee-Plans-Compliance-Unit-(EPCU)-Completed-Projects-Project-with-Summary-Reports-%E2%80%93-Rollovers-as-Business-Start-Ups-(ROBS).If so, if any prohibited transaction results, the costs are more severe than just busting a 72t plan. With the 72t plan all you risk is the 10% retroactive penalty, although the IRS has also in the past busted 72t plans for doing partial transfers in creating a new IRA by rolling only a portion of the balance of a 72t plan IRA into a new IRA. See PLR 2007 20023.
Permalink Submitted by Fran Shovlin on Fri, 2015-06-19 12:57
Thank you! Yes, the plan would fall under the ROBS release you sent me. I believe since the time of the release organizations assisting with the transfers and contining assistence provided in their packages would keep the plan in compliance and all yearly reporting will be done appropriately. I’ve done extensive research with the process of this type of business creation and funding of it’s retirement plan. With respect to PLR 2007 20023, I see much grey area and non resolution. My plan is to keep enough in my current investment to more than handle future distributions. The amount taken each year for the next 5 years will be enough. My principle will stay intact and with the little interest should be fine. If for some reason it is deemed to not be in accordence with regs, the 10% penalty would not be a problem. As long as the distribution and transfer reporting continues and is complete, I will complete my taxes with the assumption that it falls favorably under 72t regs. This information was exactly I was looking for and couldn’t find myself. Again, thank you so much!