Planning Issue For New SEPPs in 2002

L1: Planning Issue For New SEPPs in 2002As many of you are aware, the IRS issued Rev. Rule 2002-62 on 10/3/02 which effectively replaces the old Notice 89-25 regards SEPP methods as well as interest rates to be used and mortality tables.This new revenue ruling is conditionally usable from now to 12/31/02 and becomes mandatory on 1/1/03.As a result, anyone planning to launch a new SEPP program in the next several months should be aware of the differences; particularly those wanting to maximize the SEPP distributions which is usually achieved using the annuitization method.Under old Notice 89-25, one might have used UP-1984 as the mortality table and 120% of the long-term applicable federal rate. For a 55 year old, this results in an annual distribution of $8,118.62 per $100,000 of IRA value using the October, 2002 LT/AFR.Commencing 1/1/03, UP-1984 is abolished and in its stead is substituted a new mortality table (in which people die later) found in IRC Reg. 1.409(a)(9)-9. Further, the interest rate assumption gets limited to 120% of the mid-term AFR which is usually 1% to 2% less than the long-term AFR. As a result, the same 55 year old with the same $1000,000 of IRA value will compute to an annual distribution of $5,898.55; 12% or so less than the old computation.Planning Point —- those taxpayers intending to launch a new SEPP program in the near future with the intent of maximizing the annual distribution should do so on or before 12/31/02 and should not wait until 2003.TheBadgerwjstecker@wispertel.net2002-10-04 10:59, By: TheBadger, IP: [127.0.0.1]
L2: Planning Issue For New SEPPs in 2002The mortality table mentioned above is what we refer to as the Annuity 2003 table – it is the same table released as part of the final Minimim Distribution regulations and can be select from most all of our calculators.Using the example above, based on the UP1984 table, at age 55 your life expectancy was 22.7 years. Now through the stroke of a pen and the Annuit 2003 table, your life expectancy at age 55 increased to 29.6 years2002-10-05 05:11, By: Gfw, IP: [127.0.0.1]