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Periodic vs. Nonperiodic Distributions


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Plan document says that, among other options, a participant can elect nearly equal installments over a specified period of years (with remaining payments to a beneficiary if participant dies before full distribution), or non periodic installments.

My base question is, when do payments rise from the level of being nonperiodic to becoming periodic?

A participant wants to receive $1,000/month.  But, he wants it to be subject to change (like if he needs more or less for a specific time period).

Can the participant go the Plan each month for a distribution?  Or would that rise to the level of periodic?  Or am I just reading way too far into this?

Thanks.

You cannot bash in the head of an American citizen without written permission from the State Department.

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 This is a matter to be determined by the plan administrator (as to whether the plan permits a varying stream of payments month after month).  It does not sound as though the participant is looking for nearly equal installments over a specified period of years.  So the first question is can they make such an arrangement?

Is the participant over 59 1/2?  If so, it might not matter much -  all payments would be ordinary income.  If not, if there is any variation, the payments might be subject to the early distribution excise tax.  Is that a factor here?

 

Always check with your actuary first!

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Plan document says that, among other options, a participant can elect nearly equal installments...

Really?!  Is this in the regular distribution section?  Sound like someone may have been trying to qualify payments for the exception from the 10% early distribution penalty.  If the plan allows for a continuous right of withdrawal, then process each payment under that and the participant can do whatever he wants.  Otherwise...not sure what to say but these do not sound like nearly equal installments.

Ed Snyder

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