Choosing the Right Life Expectancy Table
L1: Choosing the Right Life Expectancy TableHow do you determine which table to use?
Rev. Rul. 2002-62 section 2.02(a) paraphrased says the life expectancy tables that CAN be used to determine periods are (1) Uniform Life, (2) Single Life or (3) Joint and Last Survivor.Û I can’t find anything else that provides a clearer definition. The problem with this is that CANÛ doesn’t preclude other requirements from applying. It means that from the entire universe of taxpayers electing 72(t) treatment there are some who CAN choose single life and others who CAN choose uniform life. But what it doesn’t say is that everyone is free to choose any of the three tables.
For example, if I have designated my wife, who is 4 years younger, as my primary beneficiary the rules explained in Pub 590, page 38, would require me to use the Uniform Life table if I were computing the minimum distribution from an IRA. Why doesn’t the same requirement logic apply to 72(t) ?
Essentially, what I am saying is that you must choose the right table for your facts out of the 3 tables you CAN choose from. I would like to be wrong about this and welcome any criticism which actually cites a different authoritative position. But please don’t just say I’m wrong because no one else does it that way.2009-09-25 14:24, By: KJ, IP: [220.127.116.11]
L2: Choosing the Right Life Expectancy TableMost people, myself included, have used the single life table to calculate our SEPP payment. If you use the joint table, it reduces the payout, and it is not required. In all the discussions I have read on this site over the years,I do not recall anymention of other requirements that cause specific people to have to choose one table over the other, when calculating a SEPP. In Denise Appleby’s dictionary (linked from this site) I found the following:
The number of years that a participant is expected to live, as defined by regulations. Life expectancies are provided in the life-expectancy tables, which include the following:
The Single Life Table, which is used only by beneficiaries to calculate RMD amounts after the death of the participant.
The Uniform Lifetime Table, which is used to calculate RMD amounts for the participant. This is used in all cases, except where the Joint and Last Survivor Table can be used
The Joint and Last Survivor Table, which is used to calculate RMD amounts for the participant, but only if the spouse of the participant is the sole primary beneficiary and is more than 1-years younger than the participant
For substantially equal periodic payments (SEPP), the Single Life , Uniform Lifetime or the Joint and Last Survivor Table may be used to calculate SEPP amounts
The life expectancy tables can be found in IRS Publication 590 and Revenue Ruling 2002-62
Treas. Regs. 1.401(a)(9)-9, Revenue Ruling 2002-62.
KEN2009-09-25 16:04, By: Ken, IP: [18.104.22.168]
L3: Choosing the Right Life Expectancy TableKen is correct. In a nutshell, anyone choosing to start a 72t plan CAN choose any of the 3 table options as spelled out in Notice 2002-62. The taxpayer has the choice of including a beneficiary in the calculations or not. If not, use of the single life table will produce a larger dollar distribution per dollar of initial account balance. If the taxpayer does choose one of the 3 tables, the table must be applied correctly according to 2002-62. These rules add complexity, particularly in the event of a beneficiary change on the IRA or if the IRA has multiple beneficiaries and the RMD method is being used.
FYI, the Uniform Table in Pub 590 is abbreviated to start at age 70.5 because Pub 590 includes Appendices related only to RMDs. The full Uniform Table included in 2002-62 starts at age 10, so could be used by a 72t plan participant. 2009-09-25 22:26, By: Alan S., IP: [22.214.171.124]