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SIMPLE IRA Distribution ?


Guest EAS
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I have some questions concerning what happens if a SIMPLE IRA provider decides to cut some expense and close out accounts <$100 that have been open for more than a year. The SIMPLE IRA provider is forcing the closing of these accounts. Participants are not voluntarily closing their own accounts.

1. When the provider sends a check for the balance of the account (<$100) to the address of record how is this reported on the 1099-R.

2. Is the distribution cosidered premature with exception? Does the participant have to pay a 10% premature penalty, or 25% penatly if they have not contributed to the SIMPLE for more than 2 years.

3. Is there a $ threshold that a distribution can be under, and not have to be reported?

If anyone can point me to an IRS publication or notice that can help clear up these questions it would be greatly appreciated.

Thank You

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EAS

I assume the IRA agreement includes provisions for these involuntary distributions??

These would be reported as distributions depending on the age, and if under age 59 ½-depending on whether it has been at least two years since the first contribution was deposited to the SIMPLE IRA. The 10 percent excise tax would apply- and would be increased to 25 % for distributions that do not meet the 2-year requirement.

Life and Death Planning for Retirement Benefits by Natalie B. Choate
https://www.ataxplan.com/life-and-death-planning-for-retirement-benefits/

www.DeniseAppleby.com

 

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I have some questions concerning what happens if a SIMPLE IRA provider decides to cut some expense and close out accounts <$100 that have been open for more than a year. The SIMPLE IRA provider is forcing the closing of these accounts. Participants are not voluntarily closing their own accounts.

1. When the provider sends a check for the balance of the account (<$100) to the address of record how is this reported on the 1099-R.

2. Is the distribution cosidered premature with exception? Does the participant have to pay a 10% premature penalty, or 25% penatly if they have not contributed to the SIMPLE for more than 2 years.

3. Is there a $ threshold that a distribution can be under, and not have to be reported?

If anyone can point me to an IRS publication or notice that can help clear up these questions it would be greatly appreciated.

Thank You

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The reporting threshold is $10.

There is a code (S) to indicate an early distribution from a SIMPLE. I believe the penalty applies, even if the money is forced out.

This is in the 1099-R instructions.

I think I'd be asking the provider for their authority to do these force-outs. And also asking them how they're doing the reporting.

Ed Snyder

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  • 2 weeks later...

Generally the trustee/custodian has reserved the right to resign. What does the documents say in regard to this event? Generally, they will make a distribution, but provide notice that the Simple IRA funds can generally be transferred or rolled over to another Simple-IRA (or after two years to a traditional IRA).

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