FAQs Discuss Requirements for Withdrawals, Distributions, and Rollovers Involving IRAs The IRS has posted frequently asked questions (FAQs) on its website on withdrawals from individual retirement accounts (IRAs), simplified employee pension (SEP) plan, and a Savings Incentive Match Plan for Employees (SIMPLE). The FAQs address timing, penalties, required minimum distributions (RMDs), and qualified charitable distributions (QCDs). CCH Take Away. SEPs and SIMPLEs are viewed as simpler types of retirement plans for employers to maintain. For a SEP-IRA, only the employer can make contributions. The employee is 100 percent vested in the contributions and can withdraw funds from their account at any time. In a SIMPLE IRA, the employer must make a contribution each year, and employees may also contribute. Employees are 100 percent vested in their account. Amounts can be withdrawn at any time, but a distribution within the first two years of participation may be subject to a 25-percent penalty. In-service distributions and penalties Participants can withdraw funds from an IRA, SEP-IRA, or SIMPLE-IRA at any time, whether working or retired. There is no hardship requirement. However, if the participant is under age 59½, the participant may have to pay a 10 percent early distribution tax, in additional to income taxes, unless an exception applies. Participants in a SIMPLE-IRA have to pay a 25-percent tax in their first two years of participation. Distributions that are excepted from the 10-percent penalty include permissive withdrawals from a SIMPLE IRA with automatic enrollment features, distributions after death or permanent disability of the owner, distributions to a former spouse under a qualified domestic relations order (QDRO), higher education expenses, first-time homebuyers, and unreimbursed medical expenses. Required minimum distributions Participants must take RMDs each year beginning with the year they turn age 70½. The RMD equals the IRA account balance at the end of the previous year, dividend by the distribution period or life expectancy. The distribution period can be determined using tables in Appendix C of Publication 590. The RMD requirement applies even if the participant is still working. Roth IRAs are not subject to the RMD requirements. Qualified charitable distributions A QCD is an otherwise taxable IRA distribution by an individual who is age 70½ or older. The distribution must be paid directly from the IRA to the charity. QCDs cannot be made from SEPs on SIMPLE IRAs. The law allowing QCDs expired at the end of 2013 but may be extended by Congress. The amount of the QCD can be applied against the RMD. If the RMD for 2013 was $12,000, and the participant distributed $5,000 in a QCD, the participant has to withdraw $7,000 to satisfy the RMD requirements, the IRS explained. Single distribution treatment The IRS also posted material on the new single distribution rule for retirement plans. Under Notice 2014-54 and NPRM REG-105739-11, participants who roll over a retirement plan distribution to multiple destinations (such as a traditional and a Roth IRA) can treat the rollovers as a single distribution. As a result, the IRS will allow the participant to allocate pre- and post-tax amounts as they choose. Thus, all pre-tax amounts can be allocated to the traditional IRA and will not be taxable.