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IRA Certificate of Deposit Interest Penalty

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Question: 
If a customer has in IRA Certificate of Deposit and makes withdrawals within six days of one another, is this a Reg D violation unless a minimum seven day interest penalty is assessed? Is there different treatment if the customer is more or less than 59 1/2? Prior responses on this site are somewhat contradictory: Q&A - "Limit of Distributions on IRA accounts" and "IRA Client CD Deposit-Exception to Penalty (Reg D)" both answered by Randy Carey. In the first he states "Any withdrawals within six days of one another would require an automatic seven day interest penalty under Reg D." There is no differentiation based on age in the response. In the second he states "Any withdrawal from an IRA is exempt once the person reaches 59 1/2"." Which really applies?
Answer: 

Footnote 1 to 12 CFR 204.2(c)(1)

A time deposit, or a portion thereof, may be paid during the period when an early withdrawal penalty would otherwise be required under this part without imposing an early withdrawal penalty specified by this part:

(a) Where the time deposit is maintained in an individual retirement account established in accordance with 26 U.S.C. 408 and is paid within seven days after establishment of the individual retirement account pursuant to 26 CFR 1.408–6(d)(4), where it is maintained in a Keogh (H.R. 10) plan, or where it is maintained in a 401(k) plan under 26 U.S.C. 401(k); Provided that the depositor forfeits an amount at least equal to the simple interest earned on the amount withdrawn;

(b) Where the depository institution pays all or a portion of a time deposit representing funds contributed to an individual retirement account or a Keogh (H.R.10) plan established pursuant to 26 U.S.C. 408 or 26 U.S.C. 401 or to a 401(k) plan established pursuant to 26 U.S.C. 401(k) when the individual for whose benefit the account is maintained attains age 59 1/2 or is disabled (as defined in 26 U.S.C. 72(m)(7)) or thereafter;

First published on 05/10/2020

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