recalculation

L1: recalculationMy sepp started in 01/01/05 and Ichose the amortization method and used the 12/31/04 account balance. I used an interestno morethan 120% of the fed mid term rate. If I recalculate on 01/01/06 can I use an interest rate no more than 120% of the mid term rate or must it be exactly 120 % ?- My initial rate was somewhat less than 120%.- John2005-06-16 00:45, By: J, IP: [63.195.119.175]
L2: recalculationHello J:
The secret to correct annual recalculation is in the consistency of the annual recalculations; e.g. recalculate on the same date in you case on each 12/31; value your account(s) as of that date; use a new life expectancy using the same table as you did on 12/31/04 AND use the same relative interest rate assumption as you did on 12/31/04. Therefore, if on 12/31/04 you used exactly 120% of the MT/AFR from 12/04 you would do so again using 120% of MT/AFR from 12/05.
Instead, if you used 119.5% of MT/AFR from 12/04 then you would similarly use 119.5% of MT’AFR from 12/05.
TheBadger
wjstecker@wispertel.net
2005-06-16 20:08, By: TheBadger, IP: [66.250.23.23]

L2: recalculationCan you switch to the recalculation method on any anniversary date? How about if it increases the distribution because the account balance is up(WOW, we can ask that question again!)? Once switched to recalc, must it remain recalc thoughout the entire required period?
Can you switch from amortization method to annuity or RMD method without going to recalc. Can the payment thusly be increased (i.e from RMD to amortization) or must the payment be decreased?
Finally, is there a waiting period to switch?
Thanks, and GREAT SITE!2005-07-26 13:37, By: Jacko, IP: [70.56.34.26]

L2: recalculationYou can’t actually switch to the re-calculation method. The annuity and amortization methods both allow re-calculation as part of the initial setup when the plan is established. You will see posts here that say you have until the end of the 2nd year to initiate a re-calculation, but in reality it should be part of the plan when initiated. It is just that you can’t really know that a plan is using re-calculation until the 2nd year.
When the plan is initiated, we (as an IRA Custodian)get a copy of the assumptions up front and if the assumptions are reasonable and we agree then we’ll use a code of 2′ on the 1099. If there is no re-calculation mentioned in the assumptions and the amount changes in year 2, we merely code the 1099 with a 1′ and then the owner can file 5329 to claim the exemption in other words, don’t tell me after the fact and then expect me to agree. How does your IRA Custodian/Trustee code after the fist year if the withdrawal change? You’ll have to ask them.
You are allowed a one time change from the annuity or amortization methods to the Minimum Distribution method. Once changed, you must continue to use the Minimum Distribution method for all remaining years. 2005-07-26 13:47, By: Gfw, IP: [172.16.1.73]