Periodic Payment calculation -- Fixed Installment Amount

[Guest andmik]

A DC Plan allows participants to take a fixed amount installment (i.e. $12,000/month = $144,000/year). The participant's account balance is currently $1.2 million.

Participant wants to elect 0% withholding, under the elective withholding rule.

The question at hand is when determining if the payments will exceed 10 years, is the initial account balance used exclusively ($1.2 million), without any consideration to the possibility of gains and losses?

If this is the case then the above scenario would payout in 8.3 years, not reaching the 10 year threshold necessary for a periodic payment, and thus the ability to electively withhold 0%, rather the mandatory 20% would be required.

[Mike Preston]

As I recall, it is based on reasonable expectation. Since the interest rate would need to be less than 3.5% for it to be less than 10 years, I think you are pretty safe. If you are really concerned about it, you could submit a PLR. Seems like overkill to me, though.