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Unaware of holding period, rolled, custodian did not withhold 25% pena


Guest Kuryan Thomas
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Guest Kuryan Thomas

I was not aware of the 2-year holding period on SIMPLEs and rolled my SIMPLE from my previous employer when I left. I thought it was like a 401k and I could roll as soon as I left my employer.

Merrill Lynch, holder of the SIMPLE, did not tell me about the 2-year hold - indeed, the broker was not aware of it even today when I called.

Neither did they withhold the 25% penalty when they released the funds. Should they have done so?

Do I have any recourse now?

Am I on the hook only for the 25% penalty or for income tax plus penalty? The money was rolled into an IRA at Vanguard.

Thank you.

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  • 3 weeks later...

You can always request that the penalty be abated for the reasons you stated. Didn't the IRA trustee/custodial provide you with a disclosure notice that contained information about the holding period and penalties(?).

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