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Posted by A.G. Kalman on August 27, 2007, 2:12 am
Please log in for more thread options Daniel P. B. Smith wrote:
> IRS Publication 575 for 2006, page 26, describing what
> payments are eligible for rollover to an IRA says:
> "Except... Any of a series of substantially equal
> distributions paid at least once a year over... c. A period
> of 10 years or more."
>
> What is "a period of 10 years or more?" In particular, how
> does the IRS regard a series of ten annual installments,
> each falling on the same calendar day of a different tax
> year (so that the elapsed time of the whole series of
> payments is nine years and one day?)
>
> I, like hundreds of thousands of others, have a TIAA
> "Traditional" retirement account. Assets in this account
> cannot be liquidated as a lump sum, but only via a "transfer
> payout annuity," which takes the form of ten annual roughly
> equal installments, each made on the same calendar day.
>
> The transfer payout annuity is described in a TIAA brochure
> available online at
> https://www3.tiaa-cref.org/bookstore/detail.do?id=59
>
> "Tax Issues" on page 9 says "CAN I ROLL OVER MY CASH PAYMENTS TO AN IRA?
> Yes. If cash payments from a TPA are available to you, you can make
> direct rollovers to an IRA."
>
> Two TIAA reps have told me that there is no problem because
> the payout period is only 9 years and one day. Both have
> noted (and I have confirmed) that a TPA once consisted of 11
> installments and was shortened to only 10; they said this
> was done precisely to avoid the IRS restriction.
>
> But when queried about the issue, the brokerage that will be
> receiving the payments said:
>
> "The client is correct that the TIAA brochure mandating
> transfers over a 10 year period appears to be in direct
> contradiction to the IRS determination in Publication 575
> that Transfers taking 10 or more years are not eligible as a
> rollover distributions.
>
> As the ultimate question refers to an IRS determination, we
> would suggest that the you request a 'Written Determination'
> (also referred to as a 'Private Letter Ruling') from the
> IRS."
>
> Two IRS telephone representatives, the second of whom called
> me back several days after the initial inquiry and I assume
> to have been a higher echelon than the first, believe that
> the TPA schedule would be considered by the IRS to be "a
> period of ten years." Neither of them could point me to any
> clarification or official definition of what exactly is
> meant by "a period of ten years." One of them said all she
> could do was read me the actual language of the tax code,
> which says simply "a period of ten years" without any
> further clarification of what exactly is meant by that. They
> too suggested a "private letter determination" but this
> appears to be a very expensive process, not something anyone
> can get just by making a simple request.
>
> I am, of course, pursuing this with the TIAA, as I can't
> believe they didn't get such an IRS determination
> themselves, but with no results so far. (Told they'd send me
> something but that I should wait a month... waited a
> month... told that the query seemed to have gotten lost and
> they'd re-initiate it... etc. etc.)
>
> I can't quite believe this isn't a straightforward question,
> as it must have come up literally thousands of times before.
> I keep thinking there must be some detailed description
> somewhere of just how the IRS counts "a period of ten
> years."
>
> Thoughts?
My original reply seems to have been lost in the ether....
My analysis of TIAA TPAs tells me that they are not
substantially equal periodic payments. As such, they are
eligible for rollover. It doesn't matter whether they are 9
years or 10 years.
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