Recalculating

L1: RecalculatingI’m confused about posts I’ve seen regarding ‘re-calculating’ a 72t.
If one is able to re-calculate, it the recalc based on an individual’s current balance at the time of recalculation? Also, if interest rates drop, must the relcalc be based on that at well? Once reclac begins, is one required to recalulate annually or can a year be ‘skipped’ in favor a more advantageous interest rate?
People I’ve talked to, including those who are financially ‘savvy’, say that the only way to change a 72t distrubution amount, once begun, is to go from annualization or annuitization to the minimum distribution method, and that can be done only once during the ‘life’ of the 72t.
Any plain-English commentswould be most appreciated!
Thanks
2006-02-08 12:21, By: francis3, IP: [151.203.197.199]

L2: Recalculating>> it the recalc based on an individual’s current balance at the time of recalculation? After a the first year, it would typically be the balance as of 12/31 of the previous year.>>Also, if interest rates drop, must the relcalc be based on that at well?Yes.>> Once reclac begins, is one required to recalulate annuallyYes.>>or can a year be ‘skipped’ in favor a more advantageous interest rate?No.>> go from annualization or annuitization to the minimum distribution methodThis change is a change in methods. Recalculation is not a change of payment or methods. It is a plan that is adopted at plan implementation and the annual benefit is predetermined (like a defined benefit pension plan) based on the assumptions. Recalculation must be done annually and include adjustments to age, interest rates and balance.2006-02-08 12:35, By: Gfw, IP: [172.16.1.70]

L2: RecalculatingRecalculation is not a change of payment or methods. It is a plan that is adopted at plan implementation and the annual benefit is predetermined (like a defined benefit pension plan) based on the assumptions. Recalculation must be done annually and include adjustments to age, interest rates and balance.

At the risking of sounding ignorant or repetitive, would not the end result of annual recalculation effectively change the amount of the annual distribution up or down? Is not this a ‘change of payment’ or am I missing something?

When my 72(t) was set up, I was presented with three methods to choose from, andrecalculation was never presented as an ancillary option.

Thanks again for the great site!2006-02-11 14:47, By: francis3, IP: [151.203.197.199]

L2: RecalculatingRecalculation may (or may not) result in change in the annual payment it is merely one of the assumptions that may (or may not) be used when the plan (using the amortization or annuity methods) is first implemented.
Each year, there is a recalculation of the annual benefit using the Minimum Distribution method it probably will change annually, but the method and the payment plan doesn’t change, only the payment amount.
>>recalculation was never presented as an ancillary optionUnfortately the time to plan is before the event, not after. And after the plan is implemented, it really can’t be added. Perhaps you should have done a little self-study so that you would have known the right questions to ask. And, it is also possible that when you adopted your plan, recalculation may not have been an option – at least not unless you and your advisors were willing to file a PLR for your plan.2006-02-11 15:45, By: Gfw, IP: [24.148.5.55]