Changing frequency of distribution

L1: Changing frequency of distributionThis might be duplicated, since it didn”t appear to post the first time I did it….
If I”m currently taking SEPP distributions quarterly (original calculation and arrangement based on this frequency) and I want to now change to monthly distributions will this cause a problem if I take the “same” amount of four quarterly distributions over a 12 month period? Would this be considered a modification to the arrangment and subject me to 10% penalty and accrued interest? I”m thinking that my 1099 would show the same amount being taken in distributions. Anyone have thoughts, opinions or a definitive answer? Thanks in advance for your replies2006-12-27 09:40, By: joe, IP: [69.53.83.82]

L2: Changing frequency of distributionChanging the frequency should create no problems if when you did the initial calculations you used the annual version of the 120% Mid-Term rate and divided the annual distribution by 4 to determine the quarterly distributions. 2006-12-27 10:11, By: Gfw, IP: [24.148.85.129]

L2: Changing frequency of distributionThanks for your reply and info. The calculations for original distribution were done by accountant and used tool that actually showed distribution frequency as being quarterly. I don”t recall anything “being divided by four” at that time. Hence, the reasoning behind my question. My copy of the information shows a “reasonable interest rate” of 4.20%, and I recall it being mentioned this was “pre-determined” (not selected at random).
Would you still have the same thoughts about changing to monthly distributions if I take the total of the 4 quarterly ones and divide that amount by 12? Thanks2006-12-27 11:35, By: joe, IP: [69.53.83.82]

L2: Changing frequency of distributionThe frequency does not matter. Unless you are doing annual recalculation, and it doesn”t sound like you are, the annual amounts need to be the same.
2006-12-27 14:05, By: GRT, IP: [24.145.246.83]

L2: Changing frequency of distribution
What I was getting at is that when you make an adjustment to the interest rate for other than annual distributions and then do the calculation, the mode times the distribution never equals the actual annual distribution.

I have asked several individuals who are proponents of using the modal rate what the proper procedure would be at a future date for changing the distribution mode unfortunately, I have never received a reply. There are PLRs that have been issued using the periodic rate and just as many that merely divide the annual distribution by the mode. However, I have never really found anything that clearly indicates how to change the mode when a periodic interest rate was initially used.

With that said, you may want to ask the accountant who did the calculations or the IRA Trustee/Custodian for their thoughts especially if they were using a 1099 code of 2′ – if you change the mode, how will your next 1099 be coded?.2006-12-28 07:41, By: Gfw, IP: [24.148.85.129]