SEPP IRA consolidation
Client has a large IRA from which he recently started taking monthly distributions under 72(t). The monthly distributions were calculated using the amortization method, if that matters.
He has another small IRA which he would now like to transfer into his large 72(t) IRA, just to consolidate assets. The monthly amortized distributions would continue in the same amount after the small IRA is consolidated into the big 72(t) IRA.
Does this cause any tax problems? Thanks!
Permalink Submitted by Alan - IRA critic on Fri, 2016-06-17 18:26
It would bust his plan unless the small IRA was included in the initial IRA balance used to calculate the SEPP distribution. Otherwise, if it was not included in that balance it is not part of the plan and transferring it into the account used for the distributions will be a disallowed contribution to the plan.
Permalink Submitted by chris erickson on Fri, 2016-06-17 18:37
But if after the required SEPP timeframe has expired (60 months in this client’s case), even if he continues taking the same monthly amount, then the other IRA could be consoldated without causing problems? Thanks again!
Permalink Submitted by Alan - IRA critic on Sat, 2016-06-18 02:11
Yes, once the modification date (termination date) for the plan has passed, consolidation can take place. In fact any changes can take place after the plan ends. It is also OK to continue the same distributions if desired.