Select a Distribution Method. According to IRS Notice 89-25, 1989-1 C. B. 662, to make pre-59½ distributions, the payments must be “substantially equal periodic payments.” When using the Pre-59½ Distributions calculator, there are three methods for calculating these “substantially equal periodic payments”: Minimum Distributions Method, Amortization Method, and Annuitization Method. The Distribution Method determines the results of the Pre-59½ Distributions report. For distributions starting in 2002 and later, the Minimum Distributions method is based on the life expectancy tables from the final regulations on the required distributions that were published on 4/17/02. For distributions starting prior to 2001, the Minimum Distributions method is based on the life expectancy table from the §1.72 (1983) table.
At this point, you can also create the Pre-59½ Comparison report, a report that compares all three distribution methods. To include the Minimum Distributions Method in the Comparison report, you must select Min. Distributions for the Distribution Method input. If you do not select the Min. Distributions for the Distribution Method input, the Comparison report will show only the Annuitization Factor and Amortization methods. To create the Pre-59½ Comparison report, you need to enter a “Reasonable” Interest Rate, and you need to choose a Annuity Factor Table, no matter which Distribution Method you choose.
If you are already taking distributions and want to switch to the new minimum distribution method, select “Switch: Min. Distrib” as a Distribution Method. This causes the distribution calculation to be based on the balance in the plan as of the point that the distributions begin (rather than the balance at the end of the previous year).