QDRO and IRA distributions

[Guest DDDlump]

John began 72(t) distributions at age 56, now age 58, he is divorced and 1/2 of his IRA rollover will go to his spouse. What are the rules about changing substantially equal payments now that his value is 1/2 what it was when he began?

[Appleby]

QDRO applies to qualified plans. For IRAs it is a divorce decree.

In a recent private letter ruling (PLR), the IRS ruled that the reduction in the annual distribution from the IRA will not constitute a subsequent modification in his series of periodic payments, and will not result in the imposition of the 10 percent additional income tax imposed by section 72(t)(1) , when this reduction is as a result of the IRA balance being significantly reduced due to a “transfer due to divorce”.

Note that a PLR is directed only to the taxpayer who requested it and may not be used or cited as precedent. However, most of the rules regarding 72(t) substantially equal periodic payments are based on PLRs, since they are hardly addressed elsewhere.