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#329716 - 03/05/05 12:01 AM Interest Penalties on CDs within an IRA Plan
el guapo Offline
Gold Star
el guapo
Joined: Jul 2004
Posts: 345
I just wanted to see how different financial institutions handle this situation. What is your general policy regarding waiving interst penalties on CD's when a customer is taking their mandatory distribution? Do you completely waive all interest penalties for any distribution amount if the customer is over 70 1/2? Do you only waive the interest penalty for the actual minimum distribution amount at your institution? Do you waive it for their aggregate distribution amount if they can provide proof? Is there a huge difference between what your actual policy is and what is practiced at the branch level?

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General Discussion
#329717 - 03/05/05 12:33 AM Re: Interest Penalties on CDs within an IRA Plan
HRH Dawnie Offline
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HRH Dawnie
Joined: Aug 2002
Posts: 7,353
Anchorage Alaska
This became an issue when I was with another bank. We beat the H E Double Toothpicks out of anyone at branch level who waived CD penalties and it was taken up to a higher level for approval. So, in answer to how is it done at the branch, they took that ability away, which was good.

We waived all interest penalites for distrubutions if the customer was over 70 1/2. The reason we did this was because we had many clients who not only had minimum's to deal with, but we had many who needed the money for emergency medical situations. Treating a 72 year old badly when their wife is in the nursing home won't get your bank and good publicity!

You'd be suprised how little we really did have to waive. Most didn't want the minimum distrubution and we had to force that on them the few who wanted more really did need it.

The reason we went to the higher level though for waivers was that we had a rash of staff waiving penalties to allow the product to be moved into a non-fdic insured investment. Most often an annuity. This is a HUGE red flag NO NO in the investment world when you combine it with banks who sell investments. If you do, be very careful who and when penalties can be waived!
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Dawn Coursey VP/CRA Queen

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#329718 - 03/05/05 02:07 AM Re: Interest Penalties on CDs within an IRA Plan
Banker Boy Offline
Member
Banker Boy
Joined: Oct 2003
Posts: 69
Florida
At my bank, the penalty is always waived for those 70 1/2 and older.

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#329719 - 03/05/05 04:17 AM Re: Interest Penalties on CDs within an IRA Plan
Anonymous
Unregistered

We waive the penalty for all RMDs and most other withdrawals after 70 1/2 but do not waive it if the money is being withdrawn for transfer to another bank.

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#329720 - 08/30/05 03:11 PM Re: Interest Penalties on CDs within an IRA Plan
Anonymous
Unregistered

Dawnie, can I ask why you indicate the penalty waivers as a HUGE red flag NO NO in the investment world? This is the scenario when we DO waive the IRA penalties if the customer is under 70-1/2.

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#329721 - 09/06/05 11:26 PM Re: Interest Penalties on CDs within an IRA Plan
el guapo Offline
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el guapo
Joined: Jul 2004
Posts: 345
Quote:

You'd be suprised how little we really did have to waive. Most didn't want the minimum distrubution and we had to force that on them the few who wanted more really did need it.




Have you actually run the numbers for the years in which penalty waivers were out of hand? We ran the numbers here last year to show those higher up the food chain just how much money we are talking about. The dollar amount we failed to collect due to penalty waivers, not including those that would be allowed by our policy, was almost at the $500K mark. Not exactly chump change. Even with the figures out there it is an uphill battle to get our branch personnel in line because from their perspective they only waive the penalty every so often and many of them forget that it is not an IRS requirement that we waive the penalty.

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