72t based on revised annual account balance

L1: 72t based on revised annual account balanceClient started taking 72t 5 years ago. We based it on 7% of her account value at that time. Obviously, with the recent markets, that percentage is now more like 11%. She has a friend who started at the same time, however, her adviser has been changing her annual distribution every year based on the year end balance. First of all – can this be done???. Also, wouldn’t the new rules dramatically change how much her distribution can be? 2003-07-28 15:08, By: Kim, IP: [127.0.0.1]
L2: 72t based on revised annual account balanceHello Kim:
Pre-1/1/03, the Service regularly approved “annually recalculated” SEPP plans & even issued an information letter in 2000 on exactly how they thought it should be done. Needless-to-say, this practice stopped on new plans commencing 1/1/03 or later.
Lastly, because this friend started their SEPP program in 1998 or thereabouts; RR 2002-62 does nto apply.
TheBadger
wjstecker@wispertel.net
2003-07-28 15:21, By: TheBadger, IP: [127.0.0.1]

L2: 72t based on revised annual account balanceThanks so much for your fast response. The reason I was thinking the new rules would apply to the friend who is “recalculating” based on revised account values every year is…………….wouldn’t the “recalculation” based on revised account balances have to fall within the new guidelines, i.e., 120% of the then current mid-term rate even though they started 5 years ago – or – if she started at, let’s say a 7% distribution, it would still be 7% of the new revised year-end balance? Come on – work with me here Badger. I’m trying to convince my client that we did the absolute right thing by NOT recalulating every year :). Thanks again. Kim2003-07-28 15:41, By: kim, IP: [127.0.0.1]

L2: 72t based on revised annual account balanceKim… New rules apply to new plans, not plans adopted prior to 01/01/2003.
If the original plan was designed with an annual recalculation, then (and only then)should ithave occured. If the original plan did NOT contemplate an annual recalculation then there should be no annual recalculation.
Just because it’s allowed doesn’t mean it can, or should, be done!
2003-07-28 15:49, By: Gfw, IP: [127.0.0.1]

L2: 72t based on revised annual account balanceHello Kim:
Gordon is correct. One looks to the law “in force” when a SEPP plan begins (defined as the 1st distribution) and then effectively ignore all law passed/issued since then. As a result, the “friend” designed their plan using Notice 89-25 applicable back then, ignores RR 2002-62 and continues their existing plan in stride.
TheBadger
wjstecker@wispertel.net
2003-07-28 15:58, By: TheBadger, IP: [127.0.0.1]