Payments are treated as “substantially equal periodic payments” if the amount to be distributed is determined by dividing the taxpayer’s account balance by an annuity factor (the present value of an annuity of $1 per year beginning at the taxpayer’s age attained in the first distribution year and continuing for the life of the taxpayer). The annuity factor is derived using a reasonable mortality table (the mortality table in Appendix B of Rev. Rul. 2002-62 is required for 2003 and later) and using an interest rate that does not exceed a reasonable interest rate on the date payments begin.
The annuity factors calculated for the Annuitization Method (previously known as the Annuity Factor Method) are adjusted for the frequency of payments based on the table you have selected in the Pre-59½ Distributions window.
When using the Annuitization Method, you need to select an Annuity Factor Table, and you need to enter a “Reasonable” Interest Rate.
