89-25 vs 2002-62

L1: 89-25 vs 2002-62Dear GFW, I started my 72t withdrawl in 2002 prior to 2002-62, instead relying on 89-25. It appears that I”m “grandfathered” for the use of 89-25 for the remaining five years. I”d like to adjust my 2003 withdrawl based upon the 2002 YE account value. Here”s the question: I am using the annuity method. I know I can switch to MD per 2002-62, but it looks like I want to stay under 89-25. Can I do a recalculation staying with the annuity method for 2003? Thank you very much. How do you make any money on this site? You should charge. Thanks again, Drew2003-04-17 17:35, By: Drew, IP: [127.0.0.1]
L2: 89-25 vs 2002-62In order to use an annual recalculation method under 89-25 (relying on previously issued PLRs) you needed to have adoptedthe recalculation when the plan was implemented. You cannot add recalculation after the fact. Best bet was that there was a written plan and a copy was sent to your IRA Trustee/Custodian.2003-04-22 04:28, By: Gfw, IP: [127.0.0.1]

L2: 89-25 vs 2002-62It is my understanding that if your calculation method was selected to be annuitization when the SEPP was started, that you do not have the option of “doing the math” each year with a new 12-31 balance per 89-25. I know that the “recalculation” of an SEPP distribution amount each year is now not an option per 2002-62,for amortization or annuitization methods, and is manditory for minimum distribution method.
Is this correct?2003-05-02 08:48, By: Doug, IP: [127.0.0.1]

L2: 89-25 vs 2002-62Actually there are PLR’s (pre 2002-62) that allowed recalculation on both the amortization and the annuitization methods. But, the recalculation must have been implemented as part of the original plan. I would also say that if the plan wasn’t reduced to writing and sent to the IRA Trustee/Custodian at implementation, using the annual recalculation would be a little risky.2003-05-04 13:51, By: Gfw, IP: [127.0.0.1]

L2: 89-25 vs 2002-62Hello Drew:
Actually, there were some 8-9 PLRs issued in the 1998-2000 era that allowed “annual recalculation” to be used in conjunction with the amortization or annuitization mehtods. As a result, because there was some discrepancies amongst the PLRs as to what got recalculated, when & how; the Sercice issued what is called an Information Letter (but you had to be smart enough to ask for it). The IL laid out exactly how the Service believed was the proper way to perform annual recalculation (essentially all three variables are updated at the same time each year) along with some additional technical detail. So, through 12/31/02, annual recalculation with either method was permitted. After 12/31/02, it is (currently) not permitted.
Now, the question that arises is what should someone do who adopted a plan (lets say in 2002) who thought, when adopting, that annual recalc was not allowed and therefore didn’t built it in to their plan; but subsequently learns that such a feature is allowed? To be truthful there are really two answers:
1. Be 100% above board & either leave the plan the way it is or seek a PLR to be permitted to somehow retroactively adopt a plan feature not originally thought about.
2. Be less than 100% above board, particularly if the original plan is undocumented and retroactively create the documentation to match one’s desires.
Essentially, we are in an arena of “taxpayer intent” which is further complicated in that no one “files” their SEPP plans with the IRS & more often than not, taxpayers don’t even file their plans (via good documentation) with themselves; despite our continued advice to do so.
You are essentially left to your own devices.
TheBadger
wjstecker@wispertel.net

2003-05-04 14:19, By: TheBadger, IP: [127.0.0.1]