clarification on payment recalculations

L1: clarification on payment recalculationsIn your FAQ’s it’s stated that payment recalculation based on account balance is only allowed under the minimum distribution payment method. However, in some replies in this forum I’ve seen statements like ‘unless your plan is set up for recalculation’. I’m not clear on when payment recalculation is allowed. I’d like to set up a SEPP plan using the amortization method and recalculate the payment annually. Possible? Also, the following is offered as a guide to determining the account balance:”For example, with a first distribution taken on July 15, 2003, it would
be reasonable to determine the account balance based on the value of
the IRA from December 31, 2002 to July 15, 2003. For subsequent years,
the same valuation date should be used.”Can this be interpreted as any documented account balance value during that period? Or should it be some sort of average or other? And would this acct. balance value apply for any of the payment methods?Thanks very much for any advice.2009-01-09 04:57, By: christo, IP: [76.229.89.184]

L2: clarification on payment recalculationsThere have been a few PLRs that have allowed annual recalculation. See the PLRs of Interest page for the details. Recalculation should be outlined as part of the plan before implementation. The plan should also outline the recalculation date – for example, January 1 of each year. Also outline the interest rated that would be used – for example, the higher of the 120% rate for the previous November of December of before the recalculation date. Then each year on that date, the recalculation would be done with using the assets as of 12/31, the attaine age in the current year and the interest rate outlined in the plan.Remember that while recalculation may increase future benefits, it may also decrease future benefits and once started,it must continue for the life of the plan.You may also want to review our sample formlocated at http://72t.net/Sepp/Irc72tSampleForm.aspx2009-01-09 11:20, By: Gfw, IP: [216.80.125.206]

L3: clarification on payment recalculationsThe date used for the account balance for any of the calculation methods must be “reasonable based on facts and circumstances” per Notice 2002-62.In times of normal marketfluctuation, you were probably safe using any date up to 6 months prior to the month of first distribution. The account value of the particular date would be used, although an average of a various dates within 6 months would certainly appear to be reasonable as well.However, the recent market volatility that has shaved 40% plus off accounts in the last few months is an example where the facts and circumstances are such that using a value that much higher than current value is unlikely to be considered a reasonable representation of the value of your account upon inception of the plan. In general, I would say you should seek a date within 6 months on which the value is no more than 15% different than the current value when you start the plan. The IRS has not suggested any such percentage, this is just my guess with respect to a safe valuation differential. Exceeding that number increases the chance that the IRS may deem your account balance unreasonable.This would be true regardless of the calculation method used. In addition, if you are planning a recalculated plan, the timing of your account balance for each year must be consistent.2009-01-09 19:19, By: Alan S., IP: [24.116.165.60]