72(t) 401k rollover

Submitted by ShipsnGiggles on Mon, 2023-12-18 15:52

Are there additional requirements (besides the plan allowing) to a participant taking a 72(t) distribution from a 401(k) plan?

Can a 72t SEPP (from a 401k) be rolled into an IRA – without the rollover being deemed a modification?

Permalink Submitted by Alan - IRA critic on Mon, 2023-12-18 16:56

72t requirements are the same from a 401k or IRA, but it is riskier to use a 401k because the participant has no control over plan changes including late corrective distributions due to discrimination testing failures detected late, employer added contributions (QNECs), inability to rollback a 72t contribution in excess of the calculation, change of recordkeepers, etc. If the participant has separated from service, it is advisable to roll the 401k to an IRA, and the start the plan from the IRA.
A rollover of a plan balance to a different type of plan during a 72t plan is a modification and will bust the plan. An exception to that limitation is a conversion of an IRA 72t plan to a Roth IRA 72t.