Minimum Distributions Method (Pre-59½ Distributions)

[Kathleen Reynolds]

#3271

NOTE: If the payments commence in 2022, the IRS does allow for the corresponding table that was used under Rev. Rul. 2002-62 to be used. However, for sake of this program, if the payments commence in 2022, the software assumes the mortality table in effect as of 1/1/2022.

When you select the Minimum Distributions Method, there are several input fields that may appear, asking you for more information. These additional pieces of information are needed to do the calculations. Specifically, you may be asked for:

The balance as of the end of the year before the starting date.
If the beneficiary is the spouse of the owner (only for cases where the distributions started prior to 2002).
Whether to recalculate the owners (and/or spouses) life expectancy each year. These options were available under the old 1987 Proposed Regulations for required minimum distributions. These options will only appear for cases where the distributions started prior to 2002.

Revenue Ruling 2002-62 allows for a one-time switch to the Minimum Distributions method of calculating pre-59½ distributions. The software allows you to illustrate this switch. Enter the date the client started taking distributions as the Starting Date and the year of the switch as the Distribution Year. Select Switch: Min. Dist. as the Distribution Method. The illustration will start in Distribution Year, illustrating the Minimum Distributions method from that year through the end of the calculations.

For distributions starting in 2022 and later, the Minimum Distributions method is based on the Single Life Table (1/1/2022), Joint Life Table (1/1/2022), or the Uniform Lifetime Table (1/1/2022).

For distributions starting in 2002 through 2021, the Minimum Distributions method is based on the Single Life Table, Joint Life Table, or the Uniform Lifetime Table.

For distributions starting prior to 2002, the Minimum Distributions method is based on the life expectancy table from the §1.72 (1983) table.

The final regulations for required distributions from retirement plans that were published on 4/17/02 notes the following:

“These new tables also may be used to determine an employees (or IRA owners) life expectancy, or the joint life and last survivor expectancy of an employee (or IRA owner) and designated beneficiary, for purposes of calculating the amount of substantially equal periodic payments under section 72(t)(2)(A)(iv) when applying a method permitted under A-12 of Notice 89-25 (1989-1 C.B. 662, 666). One of these methods allows use of the methodology underlying the minimum distribution calculations for separate accounts in which the account balance in the prior year is divided by life expectancy or joint life and last survivor expectancy. Under this method, the payments are not equal but are treated as substantially equal if the life expectancy is determined in a consistent manner. A series of substantially equal periodic payments under section 72(t)(2)(A)(iv) determined under this methodology will not be considered to have been modified merely because the new tables are used in the future to determine the annual periodic payments rather than the tables in the regulations under section 72.”

Rev. Rul. 2002-62 adds the option of using the Uniform Lifetime Table.

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