7 Day Penalty for Withdrawing CD (Revoke IRA)

Answered by:

Question:

If a customer decides to revoke their IRA within 7 days how do we handle the 7 day penalty for withdrawing funds within the first 6 days of a CD?

Answer:

Footnote 1 from Reg D:

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 1.408â€“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401(k); Provided that the depositor forfeits an amount at least equal to the simple interest earned on the amount withdrawn;