Substantially Equal periodic payments

[Guest Michelle M]

Once the substantially equal periodic payment is calculated AND assuming ypu have calculated it to be an amount that must be taken ANNUALLY, does it matter how many "distributions" are taken from an IRA to equal the Annual Amount??

[Guest gfweis]

The answer to your question is definately open to intrepretation, especially after yesterday. There have been some PLRs that have Ok'd varyaing the payments (monthly, etc.) but it appears that all past PLR's and Notice 89-25 will soon be history.

Best bet, post the question to the Trustee/Custodian of your IRA plan, they do the reporting.

[Guest Pat Matthews]

The answer may depend on the method used to calculate the distributions. If you're using the "Minimum Distributions Method", it's a fairly safe bet that the money can be taken out in any manner during the year - as long as the total amount taken each year matches the calculation.

If you're using the Amortization or Annuitization methods, however, it's not as clear. In other calculation areas (GRATs, CRATs, etc.) annuity factors are modified based on the frequency of payments - so one would expect that a different annuity factor would be used depending on how frequently the distributions are made. And amortizing, of course, would yield a different total annual payment if you took into account the frequency of payments. So for those two methods, there's an argument to be made that the calculation of the distribution has to take into account the frequency of the payments.

Unfortunately, Rev. Rul. 2002-62 only speaks in terms of annual distributions. Hopefully some clarification will be forthcoming.

- Patrick Matthews

Brentmark Software

[Guest gfweis]

Thanks for the clarrification. In addition, there have also been several past PLRs that have allowed the monthly to be merely the annual divided by 12 and in PLR 8919052 (if I remember right) changing payments modes from annual to quarterly or monthly in any given year was also Ok and didn't constitute a modification.

It will be interesting to see what the future brings...

[Guest Michelle M]

Thank you both for your input.

[Appleby]

Most calculators that I have used do allow for calculations to be done, not only annually, semi-annually, quarterly and monthly. For amortization and annuitization, the percentage rate used to perform the calculation ties frequency in with the applicable federal rate provided by the IRS.

In any event, the revenue ruling states that the payment must not be taken “less frequently than annually”, which suggest that they can be taken MORE frequently… as long as the annual amount is taken for the year