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Pre 87 after tax contributions


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#1 Retirement4Life

Retirement4Life

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Posted 29 April 2008 - 02:43 PM

Is there a reg that states that pre 87 contributions must be taken out first? Participant has a large balance of which a small portion around 10k is pre 87 after tax. Participant wants to distribute only part of his total balance (which is allowed under plan terms) and that the partial distribution be only pre-tax money. Record keeper is stating that they can't process the request because the rules state that pre87 money has to come out first and that since the participant has pre87 that he must distribute that amount even if he wants only pre tax money. What rule is this? The plan document is silent on this issue and this is the first time such a request has ever come through. Other participants with pre87 money elect to just take a total distribution.

#2 jevd

jevd

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Posted 29 April 2008 - 03:10 PM

Is there a reg that states that pre 87 contributions must be taken out first? Participant has a large balance of which a small portion around 10k is pre 87 after tax. Participant wants to distribute only part of his total balance (which is allowed under plan terms) and that the partial distribution be only pre-tax money. Record keeper is stating that they can't process the request because the rules state that pre87 money has to come out first and that since the participant has pre87 that he must distribute that amount even if he wants only pre tax money. What rule is this? The plan document is silent on this issue and this is the first time such a request has ever come through. Other participants with pre87 money elect to just take a total distribution.


See Pub 575 page 15 for Non-Periodic distributions from a Qualified Plan

Here: PUB 575
JEVD
Making the complex understandable.