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Subject:  Re: 401K Success Tax Date:  2/24/1998  12:58 PM
Author:  snoopy33 Number:  1945 of 99395

Hello again,

Earlier I asked:

<<On my quest to become Foolish, I've been thinking
about the Fed's 'Success Taxes' ...

Has this been discussed here with possible
approaches to Foolish 401K/IRA planning
with regards to minimizing/eliminating the
success tax?>>

TMFPixy was kind enough to reply:

The "success" tax was a 15% excise tax on what used to be called "excess" distributions
from or accumulations of retirement monies in IRAs or plans. Those taxes were repealed in
the Taxpayer Relief Act of 1997 and are no longer a planning issue or concern.

But correct me if I'm wrong here but I recently read:


The limits on how much money you can withdraw from your retirement plan without incurring a
penalty have been suspended for 1997, 1998 and 1999. For several years there has been a limit on the
amount of money you can withdraw each year from your retirement plan(s) without getting hit with
an "excess distribution" penalty of 15% on the excess amount. For 1996 the limit is $155,000 for
IRA distributions and non-lump sum distributions ($775,000 for qualifying lump-sum
distributions), beyond which you'll pay the penalty.

In the last year or so, however, some taxpayers whose plan assets were invested in stocks have seen a
sharp increase in the amounts accumulated in their retirement accounts, causing many people to
potentially be subject to excess distribution penalties when they withdraw the minimum required
distribution. The suspension of the excess distribution penalty will allow taxpayers to withdraw
funds for the next three years in sufficient amounts to allow reduction of the retirement account
balances to a level where penalty imposition will be avoidable when the penalty is reinstated in the
year 2000.


Has the excess distribution tax been eliminated or has
it only been 'put on hold' for the next three years and
will resume again in the year 2000?

Since I'm still a fair number of years of retiring,
I'm interested in this.

Thanks in advance


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